Growth Impacts of Swiss Steering Based Climate Policies

This paper studies the growth impacts of realizing two long-term carbon targets in Switzerland with alternative steering based climate policies. For this analysis we use the Computable Induced technical change and Energy (CITE) model, a computable general equilibrium (CGE) model with endogenous growth. We find that achieving the climate targets could lead to a decrease in utility and an increase in investments through the shift of labor from manufacturing to research. Higher investments coming from higher innovation could compensate the reduction in output due to the carbon policies, leading to relatively unaffected economic output. The economic structure adjusts in favor of energy-extensive sectors relative to energy-intensive sectors. Moreover, the results from the CITE model show that a tax that differentiates the sectors regulated by the emission trading system (ETS) and non-ETS sectors does not have a significant effect on the economic growth compared to an economy-wide tax scheme