Essential criteria For the EU For Switzerland

1. Mandatory nature of the participation in the ETS Participation in the ETS shall be mandatory for aviation activities in accordance with the criteria listed below. Participation in the ETS shall be mandatory for aviation activities in accordance with the criteria listed below.

2. Coverage of aviation activities and GHG and attribution of flights and their respective emissions according to the departing flight principle as set out in: — Directive 2003/87/EC, as amended by Regulation (EU) 2017/2392 of the European Parliament and of the Council of 13 December 2017 to temporarily derogate enforcement in respect of flights to and from countries with whom an agreement pursuant to Article 25 of Directive 2003/87/EC has not been reached — Articles 17, 29, 35 and 56 of, and Annex VII to, Commission Regulation (EU) No 389/2013 of 2 May 2013 establishing a Union Registry pursuant to Directive 2003/87/EC of the European Parliament and of the Council, Decisions No 280/2004/EC and No 406/2009/EC of the European Parliament and of the Council and repealing Commission Regulations (EU) No 920/2010 and (EU) No 1193/2011, as in force on the date of the entry into force of this Agreement. 1. Scope of coverage Flights which arrive at, or depart from, an aerodrome situated in the territory of Switzerland, except flights which depart from an aerodrome situated in the territory of the EEA. Any temporary derogations as regards the scope of the ETS, such as derogations in the sense of Article 28a of Directive 2003/87/EC, may apply with regard to the ETS of Switzerland in accordance with those introduced in the EU ETS. Only CO2 emissions shall be covered for aviation activities.

As from 1 January 2020, flights from an aerodrome situated in the territory of the European Economic Area (“EEA”) to aerodromes situated in the territory of Switzerland shall be covered by the EU ETS, while flights from aerodromes situated in the territory of Switzerland to aerodromes situated in the territory of the EEA shall be excluded from the EU ETS, pursuant to Article 25a of Directive 2003/87/EC. 2. Limitations of coverage General coverage mentioned in point 1 shall not include: 1. Flights performed exclusively for the transport on an official mission of a reigning monarch and his/her immediate family, heads of State, heads of Government and Government ministers, where this is substantiated by an appropriate status indicator in the flight plan. 2. Military, customs and police flights. 3. Flights related to search and rescue, fire-fighting flights, humanitarian flights and emergency medical service flights. 4. Flights performed exclusively under visual flight rules as defined in Annex 2 to the Convention on International Civil Aviation of 7 December 1944.

5. Flights terminating at the aerodrome from which the aircraft has taken off and during which no planned intermediate landing has been made. 6. Training flights performed exclusively in order to acquire or maintain a licence, or a rating in the case of cockpit flight crew where this is substantiated by an appropriate remark in the flight plan, provided that the flight does not serve for the transport of passengers and/or cargo or for the positioning or ferrying of the aircraft. 7. Flights performed exclusively for the purpose of scientific research. 8. Flights performed exclusively for the purpose of checking, testing or certifying aircraft or airborne or ground-based equipment. 9. Flights performed by aircraft with a certified maximum take-off mass of less than 5 700 kilograms.

10. Flights of commercial aircraft operators with total annual emissions lower than 10 000 tonnes on flights covered by the ETS of Switzerland or fewer than 243 flights per period for three consecutive four-month periods within the scope of the ETS of Switzerland, if the operators are not covered by the EU ETS. 11. Flights of non-commercial aircraft operators covered by the ETS of Switzerland with total annual emissions lower than 1 000 tonnes in accordance with the respective derogation applied in the EU ETS, if the operators are not covered by the EU ETS. These limitations of coverage are provided for in: — Article 16a of the CO2 Act — Article 46d and Article 55(2) of, and Annex 13 to, the CO2 Ordinance, as in force on the date of entry into force of this Agreement.

3. Exchange of relevant data regarding the application of the limitations of coverage of aviation activities The two parties shall cooperate regarding the application of the limitations of coverage in the ETS of Switzerland and the EU ETS for commercial and non-commercial operators in accordance with this Annex. In particular, both parties shall ensure the timely transfer of all relevant data to enable correct identification of the flights and aircraft operators that are covered by the ETS of Switzerland and the EU ETS.

4. Cap (total quantity of allowances to be allocated to aircraft operators) Article 3c of Directive 2003/87/EC, as in force on the date of entry into force of this Agreement. Article 3c of Directive 2003/87/EC initially allocated allowances as follows: — 15 % auctioned — 3 % set aside in a special reserve — 82 % allocated free of charge. Allocations were amended by Regulation (EU) No 421/2014 whereby the allocation of free allowances was reduced in proportion to the reduction of the surrender obligation (Article 28a(2) of Directive 2003/87/EC). Regulation (EU) 2017/2392, as in force on the date of entry into force of this Agreement, has extended this approach until 2023, and applies the 2,2 % linear reduction factor from 1 January 2021. The cap shall reflect a similar level of stringency as the one in the EU ETS, in particular with regard to the reduction percentage rate between years and trading periods. The allowances in the cap shall be allocated as follows: — 15 % shall be auctioned — 3 % shall be set aside in a special reserve — 82 % shall be allocated free of charge. This allocation may be reviewed in accordance with Articles 6 and 7 of this Agreement.

Up to 2020, the quantity of allowances within the cap shall be calculated bottom-up on the basis of the allowances to be allocated free of charge in accordance with the cap distribution as mentioned above. Any temporary derogations as regards the scope of the ETS shall require the corresponding proportional adjustments to the amounts to be allocated. As of 2021, the quantity of allowances within the cap shall be determined by the cap in 2020, taking into account a possible reduction percentage rate in accordance with the EU ETS. This is provided for in: — Article 18 of the CO2 Act — Article 46e of, and Annex 15 to, the CO2 Ordinance, as in force of the date of the entry into force of this Agreement.

5. Allocation of allowances for aviation through auctioning of allowances — Article 3d and Article 28a(3) of Directive 2003/87/EC, as in force on the date of the entry into force of this Agreement. Swiss emission allowances to be auctioned shall be auctioned by the Swiss competent authority. Switzerland is entitled to the revenues generated from the auctioning of Swiss allowances. This is provided for in: — Article 19a(2) and (4) of the CO2 Act — Article 48 of, and Annex 15 to, the CO2 Ordinance, as in force of the date of the entry into force of this Agreement.

6. Special reserve for certain aircraft operators — Article 3f of Directive 2003/87/EC, as in force on the date of the entry into force of this Agreement. Allowances shall be set aside in a special reserve for new entrants and fast growers, except that up to 2020, given that the reference year for the acquisition of data for Swiss aviation activities shall be 2018, Switzerland will not have a special reserve. This special reserve is provided for in: — Article 18(3) of the CO2 Act — Article 46e of, and Annex 15 to, the CO2 Ordinance, as in force of the date of the entry into force of this Agreement.

7. Benchmark for free allocation of allowances to aircraft operators — Article 3e of Directive 2003/87/EC, as in force on the date of the entry into force of this Agreement. The annual benchmark is 0,000642186914222035 allowances per tonne-kilometre. The benchmark shall be no higher than the one in the EU ETS. Up to 2020, the annual benchmark shall be 0,000642186914222035 allowances per tonne-kilometre. This benchmark is provided for in: — Article 46f(1) and (2) of, and Annex 15 to, the CO2 Ordinance, as in force of the date of the entry into force of this Agreement.

8. Free allocation of emission allowances for aircraft operators — Article 3e of Directive 2003/87/EC, as in force on the date of the entry into force of this Agreement. Adjustments shall be made pursuant to Article 25a of Directive 2003/87/EC, to the issuance of allowances in proportion to the corresponding reporting and surrendering obligations resulting from the actual coverage under the EU ETS of flights between the EEA and Switzerland. The number of emission allowances allocated free of charge to aircraft operators is calculated by multiplying its reported tonne-kilometre data performed in the reference year by the applicable benchmark. This free allocation is provided for in: — Article 19a(3) and (4) of the CO2 Act — Article 46f(1) and (2) of, and Annex 15 to, the CO2 Ordinance, as in force on the date of entry into force of this Agreement.

9. The qualitative limits for international credits shall be at least as stringent as those set out in: — Articles 11a and 11b of Directive 2003/87/EC — Commission Regulation (EU) No 389/2013 of 2 May 2013 establishing a Union Registry pursuant to Directive 2003/87/EC of the European Parliament and of the Council, Decisions No 280/2004/EC and No 406/2009/EC of the European Parliament and of the Council and repealing Commission Regulations (EU) No 920/2010 and (EU) No 1193/2011, as in force on the date of entry into force of this Agreement. — Articles 5 and 6 of the CO2 Act — Article 4 and Article 4a(1) of, and Annex 2 to, the CO2 Ordinance, as in force on the date of entry into force of this Agreement.

10. Quantitative limits for the use of international credits — Article 11a of Directive 2003/87/EC — Commission Regulation (EU) No 389/2013 of 2 May 2013 establishing a Union Registry pursuant to Directive 2003/87/EC of the European Parliament and of the Council, Decisions No 280/2004/EC and No 406/2009/EC of the European Parliament and of the Council and repealing Commission Regulations (EU) No 920/2010 and (EU) No 1193/2011 — Commission Regulation (EU) No 1123/2013 of 8 November 2013 on determining international credit entitlements pursuant to Directive 2003/87/EC of the European Parliament and of the Council, as in force on the date of entry into force of this Agreement. The use of international credits shall be 1,5 % of verified emissions up to 2020. This is provided for in: — Article 55d of the CO2 Ordinance, as in force on the date of entry into force of this Agreement.

11. Acquisition of tonne-kilometre data for reference year — Article 3e of Directive 2003/87/EC, as in force on the date of entry into force of this Agreement. Without prejudice to the provision below, the acquisition of tonne-kilometre data shall be done at the same time and using the same approach as the acquisition of tonne-kilometre data for the EU ETS. Up to 2020 and in accordance with the Ordinance on the Acquisition of Tonne-Kilometre Data and the Preparation of Monitoring Plans relating to Distances covered by Aircraft, as in force on the date of entry into force of this Agreement, the reference year for the acquisition of data for Swiss aviation activities shall be 2018. This is provided for in: — Article 19a(3) and (4) of the CO2 Act — the Ordinance on the Acquisition of Tonne-Kilometre Data and the Preparation of Monitoring Plans relating to Distances covered by Aircraft, as in force on the date of entry into force of this Agreement.

12. Monitoring and reporting — Article 14 of, and Annex IV to, Directive 2003/87/EC — Commission Regulation (EU) No 601/2012 of 21 June 2012 on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council — Commission Implementing Regulation (EU) 2018/2066 of 19 December 2018 on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council and amending Commission Regulation (EU) No 601/2012 Monitoring and reporting provisions shall reflect the same level of stringency as in the EU ETS. This is provided for in: — Article 20 of the CO2 Act — Articles 50 to 52 of, and Annexes 16 and 17 to, the CO2 Ordinance, as in force on the date of entry into force of this Agreement.

— Commission Delegated Regulation (EU) 2019/1603 of 18 July 2019supplementing Directive 2003/87/EC of the European Parliament and of the Council as regards measures adopted by the International Civil Aviation Organisation for the monitoring, reporting and verification of aviation emissions for the purpose of implementing a global market-based measure, as in force on the date of the entry into force of this Agreement.

13. Verification and accreditation — Article 15 of, and Annex V to, Directive 2003/87/EC — Commission Regulation (EU) No 600/2012 of 21 June 2012 on the verification of greenhouse gas emission reports and tonne-kilometre reports and the accreditation of verifiers pursuant to Directive 2003/87/EC of the European Parliament and of the Council Verification and accreditation provisions shall reflect the same level of stringency as in the EU ETS. This is provided for in: — Article 52(4) and (5) of, and Annex 18 to, the CO2 Ordinance, as in force on the date of entry into force of this Agreement.

— Commission Implementing Regulation (EU) 2018/2067 of 19 December 2018 on the verification of data and on the accreditation of verifiers pursuant to Directive 2003/87/EC of the European Parliament and of the Council, as in force on the date of the entry into force of this Agreement.

14. Administration The criteria laid down in Article 18a of Directive 2003/87/EC shall apply. To this effect and pursuant to Article 25a of Directive 2003/87/EC, Switzerland shall be considered as an Administering Member State as regards the attribution of the administration of aircraft operators to Switzerland and EU (EEA) Member States. In accordance with the CO2 Ordinance, as in force on the date of entry into force of this Agreement, Switzerland shall be responsible for the administration of aircraft operators: — with a valid operating licence granted by Switzerland, or — with the greatest estimated attributed aviation emissions in Switzerland under the linked ETS.

Pursuant to Article 25a of Directive 2003/87/EC, the competent authorities of the EU (EEA) Member States shall be responsible for all the tasks related to the administration of aircraft operators attributed to them, including the tasks relating to the ETS of Switzerland (e.g. the reception of verified emission reports covering both EU and Swiss aviation activities, the allocation, issuance and transfer of allowances, compliance and enforcement). The European Commission shall agree bilaterally with the Swiss competent authorities on handing over the relevant documentation and information. Swiss competent authorities shall be responsible for all the tasks related to the administration of aircraft operators attributed to Switzerland, including the tasks relating to the EU ETS (e.g. the reception of verified emission reports covering both EU and Swiss aviation activities, the allocation, issuance and transfer of allowances, compliance and enforcement). The Swiss competent authorities shall agree bilaterally with the European Commission on handing over the relevant documentation and information.

In particular, the European Commission shall ensure the transfer to aircraft operators administered by Switzerland of the amount of free allocation of EU allowances. In case of a bilateral agreement regarding the administration of flights operating in relation to the EuroAirport Basel-Mulhouse-Freiburg not involving any amendment to Directive 2003/87/EC, the European Commission shall, as appropriate, facilitate the implementation of such agreement, provided that this does not result in double counting. In particular, the Swiss competent authorities shall transfer to aircraft operators administered by the EU (EEA) Member States of the amount of free allocation of Swiss allowances. This is provided for in: — Article 39(1bis) of the CO2 Act — Article 46d of, and Annex 14 to, the CO2 Ordinance, as in force on the date of entry into force of this Agreement.

15. Surrendering When assessing compliance of aircraft operators on the basis of the amount of surrendered allowances, the competent authorities of the EU (EEA) Member States shall first account for emissions covered by the ETS of Switzerland and use the remaining amount of surrendered allowances to account for emissions covered by the EU ETS. When assessing compliance of aircraft operators on the basis of the amount of surrendered allowances, the competent authorities of Switzerland shall first account for emissions covered by the EU ETS and use the remaining amount of surrendered allowances to account for emissions covered by the ETS of Switzerland.

16. Legal enforcement Parties shall enforce the provisions of their respective ETS in relation to aircraft operators that do not fulfil the obligations in the respective ETS, regardless of whether the operator is administered by an EU (EEA) competent authority or by a Swiss competent authority, in case enforcement by the authority administering the operator requires additional action.

17. Administrative attribution of aircraft operators Pursuant to Article 25a of Directive 2003/87/EC, the aircraft operator’s list published by the European Commission, in accordance with Article 18a(3) of Directive 2003/87/EC, shall specify the administering State, including Switzerland, for each aircraft operator. Aircraft operators attributed to Switzerland for the first time after the entry into force of this Agreement shall be administered by Switzerland after 30 April of the year of attribution and before 1 August of the year of attribution. The two parties shall cooperate on sharing relevant documentation and information. The attribution of an aircraft operator shall not affect the coverage of that aircraft operator by the respective ETS (i.e. an operator covered by the EU ETS that is administered by the Swiss competent authority shall have the same level of obligations under the EU ETS alongside its coverage under the ETS of Switzerland, and vice versa).

18. Modalities for implementation Any further modalities needed for the organisation of the work and cooperation within the one-stop shop for aviation account holders shall be developed and adopted by the Joint Committee after signature of this Agreement, in accordance with Articles 12, 13 and 22 of this Agreement. These modalities shall apply from the date that this Agreement applies.