How will the Climate & Innovation Act and CBAM affect Swiss business?

Stay informed on the latest domestic and European sustainability developments likely to impact your business.

In brief

• Switzerland has passed its Climate and Innovation law to become carbon neutral by 2050.
• CBAM’s first mandatory reporting starts in October 2023. 
• Join our CBAM webcast on September 5th to learn more. 

Switzerland's Climate & Innovation Act

On Sunday, 18 June 2023, Swiss citizens approved the climate initiative setting a legally binding goal for the entire country to achieve net zero emissions by 2050 (Climate & Innovation Act). The new law stipulates that all companies must have reduced their emissions to net zero by 2050 at the latest. Net zero, defined by the regulation, entails the greatest possible reduction in greenhouse gas (GHG) emissions and the absorption of remaining GHG through negative emission technologies in natural or engineered reservoirs.

The voted upon initiative imposes no new taxes (‘the stick’). Instead, to ensure a fair and economically viable transition, the Confederation will provide financial incentives (‘the carrot’). The government encourages innovation by assisting businesses in their roadmap towards net zero with the help of financial aid to transform their operations into durable alternatives. Every year until 2030, a maximum of 200 million francs will be made available, pushing companies to start the transition as soon as possible to benefit from the support given by the government. For proper implementation, the government has set interim targets to ensure a smooth and progressive transition to achieving net zero ambitions. Should you wish to know more on this topic and/or discuss how to build an integrated roadmap, please do not hesitate to reach out. 

CBAM for Swiss businesses

CBAM (Carbon Border Adjustment Mechanism) reporting obligations will begin in October 2023, with the first mandatory filing in January 2024. CBAM is a policy tool intended to address concerns about carbon leakage and unfair competition caused by various global carbon pricing systems. The goal is to help countries reduce GHG emissions while encouraging a level playing field in international trade by requiring importers to report – and gradually pay for – the GHG emissions embedded in imported CBAM-covered goods. The new compliance obligations and phased-in CBAM charges following the transitional period will result in an increase in the overall cost of doing business.

To enable proper reporting and understand the financial implications, businesses must implement appropriate internal processes to assign responsibility for management of the regime, assess the EU import footprint and review required information. CBAM will impact Swiss companies that have their procurement, manufacturing and distribution activities within the EU and which operate within sectors that use carbon-intensive products such as iron and steel, cement, fertilisers, aluminium, electricity and hydrogen, as well as some precursors and a limited number of downstream products.

The EU CBAM is live and will impact businesses globally, i.e., importers into the EU and suppliers to the EU market. Although financial impact will gradually kick-in from 2026, businesses need time to plan and revisit their supply chains and operating models, making it ever so important for immediate decisive action. In addition, reporting under the CBAM transition implementing rules released in draft form in June 2023 will have an direct impact. Starting October 2023, this will require importers and suppliers to be ready for various data elements, including manufacturer information at the plant level, quantity of imported goods per installation into the EU and their embedded emissions.