TCH-GEM-ES: The role of innovation and policy design in energy and environment for a sustainable growth in Europe

• Research unit: EU RFP
• Project number: 99.0186

Key words (English)

GEM-E3; general equilibrium modelling; social accounting matrix; Switzerland

Alternative project number (English)

EU project number: ENG2-1999-00002

Research programs (English)

EU-programme: 5. Frame Research Programme - 1.4b.2 Economic and efficient energy for a competitive Europe

Short description (English)

See abstract

Partners and International Organizations (English)

KUL (B), NTUA (EL), ZEW (D), ERASME (F), BUES (HU), MERIT (NL)

Abstract (English)

The purpose of PSI's participation in the TCH-GEM-E3 project was to integrate the database of GEM-E3 Switzerland within the database of the European version of GEM-E3, and then to perform policy analyses for Switzerland with the new version of GEM-E3. Both tasks have been successfully completed.
The first task (database integration) has required the databases of GEM-E3 Switzerland to be updated from a 1990 to a 1995 base year. The economic database of GEM-E3 consists mainly of a Social Accounting Matrix (SAM). Due to time and data availability restrictions, a 1995 Swiss SAM, compatible with the GEM-E3 format, has been constructed using: i) structures from the 1990 GEM-E3 Swiss SAM; and ii) 1995 data from the Swiss Federal Statistical Office (Swiss National Accounts and other economic statistics) and from the Swiss Customs (external trade data). The environmental database of GEM-E3 consists mainly of an Energy Balance Table and of an Emission Coefficients Table. The first has been designed following the Swiss Federal Office of Energy (SFOE). The disaggregation of solid and liquid fuels, as well as of the final consumption, has been done applying to the SFOE statistics structures from the International Energy Agency. The second table has not been updated since it was already using 1995 values.
Using GEM-E3, two different policies to reduce the Swiss CO2 emissions have been evaluated. In the 'tax only' strategy, Switzerland imposes a domestic carbon tax to meet its reduction target. The entire tax revenue is then redistributed to reduce social security charges. In the 'permits & tax' strategy, the reduction target is met by combining a lower carbon tax with the acquisition of CO2 permits on an international market. Part of the tax revenue is here used for buying permits and the remaining to reduce social security charges. According to GEM-E3, both policies lead to a 'double dividend' for Switzerland namely an increase of its overall employment level (societal benefit) and a reduction of its CO2 emissions (environmental benefit). This double dividend results from an increase in energy prices in combination with a decrease in labour costs that yield substitutions in the economy in particular away from energy (hence fewer CO2 emissions) and in favour of labour (hence higher employment level). In the 'permits & tax' strategy, which implies a lower carbon tax, less money is domestically recycled. Consequently, this policy yields a lower increase of the employment level. On the other hand, this strategy results in a lower reduction of the gross domestic product and smaller impacts for the different sectors of the economy. From this point of view, Switzerland should consider combining national and international economic instruments by imposing a low domestic carbon tax together with the use of the Kyoto flexibility mechanisms.

References in databases (English)

Swiss Database: Euro-DB of the
State Secretariat for Education and Research
Hallwylstrasse 4
CH-3003 Berne, Switzerland
Tel. [phone]
Swiss Project-Number: 99.0186