FV-63 | Estimating the Effect of Climate Policy on Swiss Firms
Prof. Dr. Beat Hintermann, Maja Zarkovic
In der Schweiz gibt es drei Instrumente für die Senkung von Treibhausgasemissionen: Die CO2-Abgabe, das Schweizer Emissionshandelssystem (CH EHS), und ein zusätzliches «non-EHS»-System für mittelgrosse Firmen, welches auf Emissionszielen beruht. Diese Dreiteilung der Klimapolitik ist einzigartig im internationalen Umfeld. Bisher gibt es aber keine fundierten empirischen Untersuchungen über die Wirkungsweisen und die Effizienz dieser Systeme. Im beantragten Projekt wird mittels einer ökonometrischen Analyse untersucht, inwiefern sich die Auswirkungen des EHS und des non-EHS-Systems auf Firmenebene unterscheiden bezüglich Emissionen, Arbeitsplätzen und Umsatz.
In the context of several international agreements, Switzerland has committed to reduce greenhouse gas emissions. The main instrument of Swiss Climate policy is the CO2 Law (CO2-Gesetz), which, among other regulations, introduced a CO2 levy (CO2-Abgabe) on fossil heating fuels in 2008. The levy is collected by the federal government as the fuels cross the border. To protect energy-intensive firms, the law simultaneously introduced the Swiss Emissions Trading System (CH EHS) as an alternative policy instrument. The largest emitters were required to participate in the CH EHS, whereas medium-sized firms were allowed to join voluntarily. Importantly, all firms included by the CH EHS are exempt from paying the CO2 levy.
The CH EHS is a cap-and-trade system in which the included firms have to surren-der one emission allowance for every ton of CO2 they emit per year. The total quantity of emission allowances (cap) is determined in advance. Emission allowances are annually allocated to EHS firms, mostly free of charge. To achieve compliance, EHS firms can either reduce their emissions (e.g., by switching fuels or installing more efficient production technology) or buy/sell allowances on the market. The CH EHS is planned to be merged with the EU Emissions Trading Scheme (EU ETS), but negotiations have stalled along with many other Swiss-EU dossiers after the vote in favor of the initiative restricting immigration in 2014.
Because being part of a cap-and-trade system entails significant transactions costs, an additional “non-EHS”-system was introduced in 2013. This instrument was creat-ed for energy-intensive firms that are not large enough to warrant inclusion into the CH EHS. All firms within the non-EHS system are assigned a specific emissions goal, and in exchange for committing to achieve this goal, they are exempt from the CO2 levy. If firms’ emissions are below their emission goal, they may sell their extra tons of CO2 emissions in the form of credits to the Stiftung Klimarappen at a price of 100 CHF/credit, which renders the non-EHS system a hybrid between command-and-control and an emissions trading system (albeit with a fixed permit price). At the same time, up to 8% of non-EHS firms’ emissions may be covered using international carbon offsets from the Kyoto Protocol, which currently are virtually free due to a significant over-supply. Because non-EHS firms could gain significantly from over-abatement but face very low costs if their emissions (moderately) exceed their goals, all firms that were allowed to leave the EHS and join the non-EHS system did so in January 2013. However, it is not clear whether the non-EHS system leads in fact to more abatement than the EHS, and whether the two systems differ in terms of other firm-level outcomes. Whereas well over a hundred papers have been written about various aspects of the EU ETS, we are not aware of a single scientific study about the functioning of the EHS and non-EHS systems in Switzerland.
The proposed project aims to fill this gap. We will empirically exploit the simultane-ous existence of different climate policy instruments. Specifically, we will compare the trajectory of emissions, revenue and employment of firms that were part of the EHS since its start in 2008, with those by firms that started out in the EHS in 2008 but switched to the newly formed non-EHS system in 2013. This allows us to identi-fy the differential impact of the EHS and non-EHS systems on firm-level outcomes. Note that a comparison of EHS-firms (and/or non-EHS firms) with those paying the CO2-levy (the vast majority of firms in Switzerland) is not possible because there exists no emissions information about the latter.
Bedeutung und Nutzen
There is an ongoing academic debate on the relative merits of alternative instru-ments for controlling greenhouse gas emissions. Although Switzerland uses three different systems and thus provides an interesting case study, Swiss Climate Policy has received virtually no attention from the scientific community, presumably be-cause of the relatively low number of firms involved, but also because comparable data about emissions before and after 2013 are not readily available. For example, process emissions were included only after 2013, and emissions from process heat was originally assigned to the consumers rather than the producers of heat. An im-portant part of our study is to compute a stable emissions perimeter between the pe-riods 2008-2012 and 2013-2020, thus providing a basis for comparison across time. This will be useful to evaluate Swiss climate policy and to further improve it. Furthermore, understanding the CH EHS better will facilitate an eventual link with the EU ETS in the future.