Swiss system of carbon trading faulted

Pro environmentalists demonstrate in Geneva for more limits on industrialised carbon dioxide emissions Keystone

More than a decade ago, the Swiss government began exploring carbon trading to address climate change. But on Thursday, the Federal Audit Office (FDC) said the Swiss carbon trading system does not encourage companies to reduce their emissions, and that setting goals is a more effective measure.

Rather than cut their own carbon emissions, industrialised nations use the scheme to typically buy the credits which then pay developing countries to cut their greenhouse gases instead. But among industralised nations there is trading, too, and the Swiss began looking into setting up an emissions trading platform similar to what the European Union launched. Britain was first with one in 2002.

Such a system depends, essentially, on making industrial emissions of carbon dioxide an artificially scarce commodity. The system can become complex when figuring out how C02 cuts should be allocated across industries, and how greenhouse gas emissions should be noted in company accounts.

Not exactly as planned

In the EU scheme, power companies were included whereas the British trading scheme was open to all sectors of the economy except transport and power sectors. In Switzerland, the C02 tax has since 2008 been the main instrument for reducing greenhouse gas emissions. But companies that generate a lot of them can be exempted.

In exchange, they must participate in the Swiss emission trading system or commit to reducing their emissions by setting a target. The system lets companies keep polluting up to a certain limit, after which they must offset their emissions. They can then buy back the surplus rights of a company that pollutes less.

The auditors found, however, that a large number of emission allowances were available free of charge, to prevent companies from relocating their production. Half of the 55 companies that participated since 2013 have so far not had to buy emission rights.