Carbon pricing

We consider four alternative CO2 pricing designs:

  1. Economy-wide CO2 tax: Models should implement an uniform carbon tax across the whole economy
  2. ETS and uniform CO2 tax: Non-ETS sectors emissions are priced by a uniform carbon tax
  3. ETS and differentiated CO2 tax: Non-ETS sectors emissions are priced by a carbon tax that differentiates between motor and thermal fuels
  4. EU ETS and uniform CO2 tax: Assume a coupling of the EU ETS and the Swiss ETS after 2020. Models that do not cover the permit market in the EU ETS shall assume the permit price in the EU ETS to be exogenous and the price level to be according to the following Table:
  5. EU ETS permit price
    2010 2020 2035 2050 Reference
    EU ETS permit price (Euro2010/tCO2) 15 15 57 239 Scenario "energy efficiency" of the impact assessment for the EU Energy Roadmap 2050 (page 37)


  • The ETS has a cap from 2013 onwards. The cap in year t can be derived from ETS emissions in 2013 (emiETS2013):
    cap(t) = emiETS_{2013} \times \left(1 - 0.0174 \cdot (t-2013) \right)
  • For scenarios where the ETS is assumed to be present, the overall emission targets is assumed to be met if non-ETS emissions are not greater than the annual overall emission target minus the ETS emission cap and industries included in emissions trading comply with the ETS rules.
  • GHG emitters in the electricity sector are, in line with EU regulation, included in the ETS.
  • Gas power plants: According to the CO2 Act, gas power plants compensate their emissions with a minimum share of 50% for domestic compensation, i.e. obtained from the other sectors. The rest can be compensated by using international emission reduction units. Assume that CO2 emissions from gas power plants are taxed by a tax equal to 0.5*(Foreign price) + 0.5*(Domestic CO2 tax).
  • Emissions from aviation are assumed not to be covered by the ETS.

Differenciated taxes

The current political discussion reveals a preference for not having a CO2 tax on transport fuels. This is motivated by the preexistence of considerable mineral oil tax rates on transport fuels. In order to compare the economic efficiency of a uniform CO2 tax on all fossil fuels and a tax system with lower CO2 tax on transport fuels than on thermal fuels, additional policy scenarios with differentiated CO2 taxes by fuel type are introduced. The CO2 taxes on thermal and transport fuels (taxthermal and taxtransport) are related by:

tax_{transport} = 0.25 \times tax_{thermal}

The tax rate on mineral oils is assumed to remain at current levels, i.e. at 73.12 Rappen per litre for gasoline and 75.87 Rappen per litre for diesel oil.

Revenue recycling

The design of climate policy is assumed such that the revenue of the Swiss government remains constant across different baseline and policy scenarios for any given year. This is achieved by recycling the difference between government revenue under climate policy and the revenue in the baseline. The revenue is to be recycled via per-capita lump-sum transfers. Models that recycle ETS permit revenue and revenue from taxing emissions in the industry via reductions in the social contributions bill may continue doing so. ETS permit revenue is the revenue the Swiss government obtains from selling the emission allowances according to cap(t) at the current periods ETS permit price.

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