Is There a Rationale for Rebating Environmental Levies?

Political pressure often exists for rebating environmental levies, particularly when incomplete regulatory coverage allegedly creates an “unlevel playing field” with other, unregulated firms or industries. This paper assesses the conditions under which rebating environmental levies is justified for the regulated sector. It combines a theoretical approach based on second-best modeling with numerical simulations aimed at determining the most sensitive parameters. We find that if an adequate tax on production can be levied in the unregulated sector, no rebate is justified for the regulated sector. Moreover, even in the case of constrained taxation in the unregulated sector, a tax rebate or a subsidy in the regulated sector is not necessarily a welfare-increasing policy. The exception occurs when the goods of the competing sectors are close substitutes. We find that these kinds of policy contraints can be quite costly in terms of welfare.environmental levy, tax rebate, fiscal distortions

GEMINI-E3 , a general equilibrium model of international-national interactions between economy, energy and the environment

The purpose of this paper is to present the new version of GEMINI-E3, which is the fifth and incorporates significant changes from the previous version in particular with respect to its size and its modularity. GEMINI-E3 is a Computable General Equilibrium Model and represents now a family of models of different specifications and with several successive versions. It retains many specifications that are common to CGE models but also some specific features, mainly concerning the measurement and analysis of the welfare cost of policies and the great detail in the representation of taxation and social security contributions. The paper gives a detailed presentation of the model, its main blocks and equations, and shows how it can be adapted to specific contexts. In particular a new version is being developed jointly with the standard one, taking into account the constraints of the European Monetary Union and the unbalances in the labor markets of industrialized countries (GEMINI-EMU). This clearly shows that CGE models, beside their main virtue that is total consistency at the domestic and at the world levels, are very flexible in their specificatio

Find your way around the various flexibility mechanisms under the European burden-sharing

In July 2016, the European Commission presented its proposal for a regulation to reduce greenhouse gases emissions in sectors not covered by the emissions trading system with regard to post-2020 binding targets. The proposal extends the burden-sharing framework designed in 2008, and called the Effort Sharing Decision. This burden-sharing is based on a GDP per capita rule and aims to reflect the economic capacity of each European Member State on the basis of its relative wealth. However, several papers have pointed out that this way of allocating emissions can result in great cost-inefficiencies, as the allocations do not take Member State abatement costs into account. The proposal acknowledges this issue and proposes a range of flexibility instruments (i.e., more than 15 flexibility options) that intend to enhance cost-effectiveness. This paper evaluates the proposal and analyzes the economic impacts of each flexibility option with respect to fairness and cost-effectiveness using a computable general equilibrium model. The performed analysis demonstrates that flexibility mechanisms that allow “inter-Member state flexibility” constitute the most efficient options. Specifically, they reduce compliance costs and, simultaneously, increase fairness between low-income Member States and high-income Member States

Combining Stochastic Optimization and Monte Carlo Simulation to Deal with Uncertainties in Climate Policy Assessment

In this paper, we explore the impact of several sources of uncertainties on the assessment of energy and climate policies when one uses in a harmonized way stochastic programming in a large-scale bottom-up (BU) model and Monte Carlo simulation in a large-scale top-down (TD) model. The BU model we use is the TIMES Integrated Assessment Model, which is run in a stochastic programming version to provide a hedging emission policy to cope with the uncertainty characterizing climate sensitivity. The TD model we use is the computable general equilibrium model GEMINI-E3. Through Monte Carlo simulations of randomly generated uncertain parameter values, one provides a stochastic micro- and macro-economic analysis. Through statistical analysis of the simulation results, we analyse the impact of the uncertainties on the policy assessmen

Updated emissions scenarios without measures, 1990-2035

The goal of this study is to estimate the net impact of all policies and measures implemented in the context of the Swiss energy and climate policies on CO2 emissions from combustion processes between 1990 and 2035. The study provides a projection of CO2 emissions until 2035 under the assumption of continuation of existing measures, optionally including the strengthening as adopted by the popular vote on the first package of measures of the Energy Strategy 2050 on 21 May 2017. It contrasts these emissions with a scenario excluding all policies and measures introduced after 1990. The study does not estimate the evolution of CO2 emissions from non-combustion processes, other (non-CO2) greenhouse gas emissions and the impact of measures on these emissions. Nor does it simulate a scenario with additional measures that are currently discussed/planned but not adopted yet or that may become necessary in the future if it appears that the emission targets cannot be met with existing measures alone. This report updates an earlier report addressing the same questions (INFRAS and EPFL, 2016) by using the latest greenhouse gas inventory, the revised transportation forecasts and newer data whenever available. In addition, it incorporates the first package of measures of the Energy Strategy 2050 in a separate scenario

La Suisse sur la voie de la décarbonisation profonde

Il est possible de limiter les émissions de CO2 liées à l’énergie à une tonne par habitant et par an en 2050. Les différents scénarios montrent que les coûts engendrés sont supportables pour l’économie

Modeling the Impacts of Climate Change on the Energy Sector: a Swiss perspective

When speaking of energy production and consumption in the context of climate change, the interest usually lies in mitigation policies and measures, i.e. the energy system is seen as an emitter of greenhouse gases. This paper takes a different approach and analyzes the impacts of climate change on the Swiss energy system. We study the impacts of a changing climate on both the energy demand and supply. For the former impacts, it is predicted that higher temperatures will modify future heating and cooling demands in opposite directions. As for the supply side, changes in precipitation will affect hydro generation whereas higher temperature will impact cooling facilities and energy efficiency of thermal power plants. To undertake the analysis, we use a Computable General Equilibrium model, the GEMINI-E3 which is a standard CGE model based on the GTAP database. In the first, methodological part of the paper, we present how to integrate within the GEMINI-E3 information related to temperature and precipitation. Future changes in these climate variables are obtained from four couplings of global and regional climate models realized in the framework of the European project ENSEMBLES. This project has produced regional climate scenarios at European level for impacts assessments using the high resolution RCM ensemble system and downscaling methods. This information is generally available for the period 1961-2100 at a grid resolution of 25 x 25 km. Based on these simulation data, we show how to derive impacts via econometrically estimated functions and how to construct aggregated indicators, such as cooling and heating degree-days, that are then used as exogenous variables within the GEMINI-E3 model. After the methodological part, we present different scenarios without and with climate change and compare their outcomes for the energy demand and supply at the 2050 time horizon. Whereas detrimental impacts on the supply side seem to remain limited in 2050, partly because of adaptation, we clearly find strong macroeconomic impacts through changes in energy demand for cooling and heating purposes. Furthermore, we show that the reduced energy demand for heating has positive impacts for the Swiss economy that largely outweigh the negative ones created by the increased energy demand for cooling. These results are intimately linked to the Swiss context, where the need for heating is much higher than the need for cooling. The net impact is all the more positive that fossil fuels, which are the main energy source for heating, are entirely imported

An ex-post evaluation of the effectiveness of the Swiss CO2 levy: Final report Module B

The report analyse the impact of the CO2 levy implemented since 2008. We analyze two main scenarios. First, a historical scenario that includes the CO2 levy and the exemption regimes and replicates the historical development of the Swiss economy and in particular the resulting energy consumptions and CO2 emissions for the period 2008-2013 including a forecast for the year 2014. The second scenario is a counterfactual scenario in which the CO2 levy and exemption regimes are removed. We then compare the results of the two scenarios and thereby evaluate the impacts of the Swiss CO2 levy

Qu’est-ce que la politique climatique de la Suisse a déjà obtenu ?

La Suisse doit rendre compte des résultats atteints grâce aux mesures mises en place depuis 1990 pour réduire ses émissions de gaz à effet de serre. L’évolution des émissions est connue, mais pas les niveaux qu’elles auraient atteints sans ces mesures. Des estimations réalisées à l’aide d’un modèle riche de l’économie suisse montrent que les émissions de CO2 liées à l’énergie se seraient de toute façon stabilisées et que les mesures mises en place depuis 1990 ou déjà décidées pourraient permettre d’éviter 236 millions de tonnes d’émissions cumulées entre 1990 et 2035. Néanmoins, ces mesures ne suffisent pas pour atteindre entièrement les objectifs climatiques de la Suisse