Empirical evaluation of the impact of the Swiss climate policy mix on energy consumption and emissions in the service and industry sector

This paper empirically evaluates the impact of the nationwide Swiss climate policy mix introduced in 2008 on the energy consumption and greenhouse gas emissions of firms in the service and industry sector. These sectors contribute to about 35% of the final energy consumption and nearly 30% of the greenhouse gas emissions. In order to meet the Kyoto emission targets in 2020, the Swiss government employs a broad mix of different policy measures. The measures include both price-based instruments, such as emissions trading and the CO2 levy, and non-price-based instruments, such as binding emission targets or building codes. Emission trading is mandatory for companies passing a certain emission threshold. Other measures, such as the commitment to a target agreement, are optional and allow for an exemption of the CO2 levy. Companies thus face both, compulsory and non-compulsory policies with different incentives to reduce energy consumption. To test the impact of these energy policies on energy consumption, we use a unique and representative sample of 12'000 firms of the industry and service sector of Switzerland, covering the years 1999 to 2016. The survey is conducted by the Swiss Federal Office of Energy and includes yearly observations of final firm energy consumption, as well as firm characteristics. The CO2 levy is imposed on fossil heating and process fuels and has been increased from an initial rate of CHF 12 per tonne of CO2eq emitted in 2008 to CHF 96 per tonne of CO2eq in 2018. We analyse policy changes, such as increasing the CO2 tax, with binary variables indicating a treatment. An unobserved effects regression model with firm fixed effects is applied to identify the policy effects and to isolate them from time-independent, unobserved firm-specific factors. Time trends allow us to capture e.g. technological progress. Controlling for other effects such as economic sector, heating degree days or the growth rate of the economy, we are able to conclude that Switzerland's energy and climate policy has a significant impact on the energy consumption in the industry and service sector