Vote on the climate law: Are the propagated measures sufficient?

On June 18, 2023, the electorate have voted on the indirect counterproposal to the Glacier Initiative. The law sets the goal of net zero emissions by 2050 as well as interim targets. Economists are skeptical.

The Federal Act on Climate Protection Targets, Innovation and Strengthening Energy Security –Climate Act for short - sets the target of net zero greenhouse gas emissions by 2050 as well as interim targets for buildings, transport, and industry. It also provides for financial assistance to promote novel technologies and processes, heating replacement and building renovation, as well as infrastructure risk mitigation. In the May 2023 economist survey conducted by KOF in collaboration with the Neue Zürcher Zeitung, Swiss economists were asked whether Switzerland can achieve the net zero emissions target for 2050 with the measures contained in the counterproposal. There is no consensus among the survey participants: while around half expect Switzerland to (probably) be able to achieve this target, the other half believe this is (rather) not possible.

Does it make sense to separate domestic and foreign emissions?

The revised CO2 law is currently being discussed in parliament. The law includes measures and requires emissions to be 50% below 1990 levels in 2030. At least two-thirds of the emissions are to be cut domestically.

Around 44% of the economists surveyed agree with this stipulation. However, one in three respondents is skeptical about such a regulation and would instead allow unlimited emission reductions to be achieved anywhere in the world. Proponents of offsetting opportunities abroad argue, among other things, for (cost) efficiency and global climate impact. On the other side of the opinion spectrum are 16% of economists who would exclusively credit domestic emission reductions, arguing for example with local environmental quality and securing local energy supply.

Are CO2 levies better than emissions trading?

Both CO2 taxes and CO2 certificates (emissions trading) can be considered as market-based instruments for reducing CO2 emissions. The economic researchers were asked which of the two instruments is more suitable.

While 39% of respondents consider both instruments to be equally suitable, the remaining respondents favor CO2 levies (35%) rather than CO2 allowances (21%). For example, CO2 levies are easier to implement and offer greater planning certainty. CO2 certificates, on the other hand, are economically flexible and can be used efficiently due to the possibility of trading. Around 4% consider both instruments unsuitable.

Should a border adjustment tax and export subsidies be introduced?

Trade with countries that pursue less ambitious climate targets than Switzerland can result in cost disadvantages for Swiss companies: As a result, on the one hand, imported goods can be cheaper in Switzerland than Swiss products, and on the other hand, Swiss export goods can be more expensive abroad than the foreign products. Against this background, Swiss economists were asked whether a border adjustment tax (CO2 tax on imports) should be introduced on the import side and export subsidies on the export side to eliminate this competitive disadvantage for Swiss companies.

With a share of 81%, the scientists are clearly in favor of a border adjustment tax on imports. Export subsidies, on the other hand, were rejected by more than three quarters of the survey participants.

Would an expansion of the emissions trading system be welcome?

Since 2008, Switzerland has had an emissions trading system (ETS) in which operators of facilities with high greenhouse gas emissions participate. These are the cement, chemical and pharmaceutical, refinery, paper, district heating and steel sectors, and since 2020 also flights between Switzerland and the EU. In the last trading period, participating companies accounted for around 10% of total domestic emissions.

Around three quarters of the participating economists would welcome an expansion of the ETS. A good 10% would maintain the current coverage and 13% would reduce it.

The joint survey of KOF and NZZ started on May 10, 2023, and ended on May 25, 2023. 853 economists were contacted for this purpose. Responses were received from 124 economists from 17 institutions.