On 13 June the people of Switzerland rejected the new Federal Act on the Reduction of Greenhouse Gas Emissions (CO2 Act). With such a lot of hype in the run-up to the vote – and so many questions still unclear – it’s difficult to discern the precise implications for businesses. Even so, we’d like to briefly outline the areas you should have on your radar so you can respond and seize opportunities as soon as more facts are on the table. Even though the CO2 Act did not go through, sustainability plays a central role in how business is conducted and is crucial for achieving economic success. Managing your business responsibly and sustainably will help you to avoid regulatory risks and catch long-term opportunities.
It’s important to bear in mind that the EU is also doing an in-depth review of its carbon pricing and energy taxation, with publication expected on 14 July. This is likely to include extending the scope of the EU Emissions Trading Scheme to include buildings and transport, reducing allowances, creating a carbon border adjustment mechanism, and increasing energy taxes. It’s not yet clear precisely what Switzerland’s status will be under the revised rules. Depending on how this pans out – and in particular how it meshes with other agreements between the EU and Switzerland that affect the treatment of Swiss companies – there could be a range of consequences for Swiss businesses. It’s also important to realise and plan for the fact that despite the No vote, Switzerland is still part of the Paris Agreement. It now has to achieve the targeted goals without the financing the CO2 Act was offering via the climate fund and the redistribution of tax revenues.
Even now that the CO2 Act has been rejected, there are so many other regulatory and business factors at play that companies still have to keep an eye on if they’re committed to reducing their carbon footprint. Whichever way developments go, it’s important to assess what aspects of your business have an impact on your carbon footprint, and how you’re going to adjust to whatever business and regulatory pressure emerge. The framework of measures originally proposed under the CO2 Act remains a useful template.
Areas to keep track of
- Climate-friendly innovation and technology: Building renovation and infrastructure investment are still key to reducing the carbon footprint. The challenges remain: Swiss companies will have to bring new technologies to the market, and local authorities will face the task of tackling the damaging effects of climate change.
- Carbon footprint of heating: There will be a need into the future still to design economic incentives that, for example, are reflected in a price on carbon. Such only ultimately allows to determine a return on investment that considers the full financial impact of carbon emissions and climate change the uncertainty in the carbon pricing could also be resolved by the industry sectors agreeing on such.
- Efficient vehicles: The Swiss car market still has to follow the trend and developments that come with an EU- and globally based automotive industry. The lack of penalty schemes and incentives that enforce a transition to low-carbon mobility and technology might slow down the pace in Switzerland and along that result in the Swiss market falling behind the surrounding countries.
- Compensation (offset) requirement: Businesses that commit to contributing to a net zero economy still have to incorporate offsetting solution. The burden of financing such in relation to fuel consumption will have to be covered entirely by the consuming businesses.
- Building-related measures: As to achieve a net zero by 2050 the almost 40% (of the total carbon balance) reduction that has to come from the buildings sector still needs to be financed and considered in investments. Such financing needs to be covered entirely by the real estate owner without financial support provided by funds and subsidies.
Gaps in the carbon-related framework still remain. After yesterday’s No to the CO2 Act, it’s now up to the market to respond to the pressing challenges. Whatever happens, the carbon issue isn’t going away. Consumers are wise to it, and investors too. If you fall short in terms of carbon footprint and disclosure, your bottom line could suffer. By the same token, there are great opportunities for companies that are quick out of the starting blocks.
So, now’s the time to think carefully about your carbon footprint so you know exactly what you’re dealing with. Regardless of the details of the law at Swiss and EU level, mastering this challenge will be good for business.
At PwC we’re following our own advice. This includes actively participating in the dialogue on effective climate policy as part of swisscleantech’s CEO4climate initiative. The goal is to facilitate Switzerland’s development as a sustainable business location. Your voice would help too.
We’re also keeping close track of developments around carbon neutrality and will be sharing any further information in the form of deep dives. So stay tuned, and feel free to contact us if you want to talk about how to prepare for what comes next in the carbon arena.
Committed to a greener Swiss economy
Decarbonisation with a net zero obligation is the Swiss economy’s concrete contribution towards a committed climate policy and a greener future. There are plenty of good reasons why Switzerland as a business location will benefit from this commitment.