Defining deep decarbonization pathways for Switzerland: an economic evaluation

ABSTRACT

This article simulates deep decarbonization pathways for a small open economy that lacks the usual avenues for large CO₂ reductions – heavy industry and power generation. A computable general equilibrium model is used to assess the energy and economic impacts of the transition to only one ton of CO₂ emissions per capita in 2050. This represents a 76% reduction with respect to 1990 levels, while the population is expected to be 46% larger and GPD to increase by 90%. The article discusses several options and scenarios that are compatible with this emissions target and compares them with a reference scenario that extrapolates already-decided climate and energy policy instruments. We show that the ambitious target is attainable at moderate welfare costs, even if it needs very high carbon prices, and that these costs are lower when either CO₂ can be captured and sequestered or electricity consumption can be taxed sufficiently to stabilize it.

Policy relevance

In the context of COP 21, all countries must propose intended contributions that involve deep decarbonization of their economy over the next decades. This article defines and analyses such pathways for Switzerland, taking into consideration the existing energy demand and supply and also already-defined climate policies. It draws several scenarios that are compatible with a target of 1 ton of CO₂ emissions per capita in 2050. This objective is very challenging, especially with the nuclear phase out decided after the disaster in Fukushima and the political decision to balance electricity trade. Nevertheless, it is possible to design several feasible pathways that are based on different options. The economic cost is significant but affordable for the Swiss economy. The insights are relevant not only for Switzerland, but also for other industrialized countries when defining their INDCs.

KEYWORDS:

• Carbon capture and storage (CCS)
• climate policy
• computable general equilibrium model
• decarbonization
• energy policy
• Switzerland

Acknowledgement

We would like to thank José Romero, Rolf Iten, Jürg Füssler, Almut Kirchner, Patrick Criqui, Pierre-Alain Bruchez, André Müller, Henri Waisman, the DDPP Swiss working group, and the participants of the CERE seminar (Umea University) and of the 18^th Annual GTAP Conference on Global Economic Analysis for their helpful comments and suggestions. Three anonymous reviewers are also gratefully thanked for their valuable comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. http://www.deepdecarbonization.org

Additional information

Funding

The research leading to these results has received funding from the Swiss Federal Office for the Environment.