Swiss energy taxation options to curb CO2 emissions

This study offers insights into the design of economically efficient policies to curb carbon dioxide (CO₂) emissions in Switzerland and in other European countries. The method uses a model of the energy system to investigate various options for taxation to reduce CO₂ emissions. This study proposes as a first option the introduction of a 'hedging tax', that balances the risks of delaying measures to reduce cO₂ emissions against those of premature reduction measures. It then assesses multinational policy options and considers as a second alternative international co-operation to curb joint cO₂ emissions by means of a uniform tax applied in different countries. The simulation of such a strategy among three European countries (Switzerland, the Netherlands and Belgium) suggests that there may be significant benefits to be gained when CO₂ reduction takes place in the countries where it is relatively cheap to do so.