November 2, 2021 | News

Should Switzerland do something to curb global warming and, if so, what can it do?

The first question takes up the often-heard remark that we are too small, that our CO2 emissions, which account for only 0.2% of global emissions, do not count. But the same could be said for each of China’s 2,800 or so districts, which would thus be exempt from any effort given their small contribution to global emissions.

In fact, every ton of CO2 counts. To understand, imagine twins climbing a mountain. They both carry the same backpack, but Tom’s is empty, while Jerry’s is full of rocks. You have a rock that you can put in either bag. If you put it in Tom’s bag, he will hardly notice it, but if you add it to Jerry’s bag, he will feel the extra burden. The implication of this little parable is that it is precisely because the big emitters are not doing enough to reduce their emissions, because they continue to fill our children’s backpacks with greenhouse gas emissions, that we must try to avoid any additional burden. The less other countries reduce their emissions, the more we have to reduce ours!

Of course, it is even better if we can encourage other countries to stop loading the backpacks of the world’s children. Switzerland holds one big lever for this: finance. Our financial institutions manage a quarter of the world’s cross-border assets for private clients and are thus in first place. Our insurers are also among the largest in the world. When these players all stop financing new infrastructure that extracts or uses fossil fuels and support the energy transition, it will make a real difference on a global scale.

Switzerland could also test measures that the European Union is still debating among its 27 members. There is, for example, a particularly ambitious proposal in the “Fit for 55” package presented by the European Commission on July 14: to include CO2 emissions from motor and heating fuels in a new emissions trading system.

Of course, it is not a question of obliging the millions of car drivers and homeowners to buy rights corresponding to their annual emissions at auction. The “tax warehouses” – the wholesalers who already pay the various taxes on petroleum products – would be required to do so as of 2026. Rationing the quantity of CO2 emission rights means de facto rationing the quantity of these fossil fuels that can be sold. The system therefore amounts to forcing wholesalers to buy the right to sell a maximum quantity of fossil motor and heating fuels. It is similar to what we know well, the customs quotas for the import of wine, meat, cereals and about fifty other agricultural products. It would therefore be very easy to implement in Switzerland.

Each year, importers would buy quotas of fossil fuels (oil, gasoline, diesel, methane gas) at an auction. The total volume of these quotas would gradually decrease until it reaches zero in 2050. If this system were to be implemented as early as 2023, the cap would decrease each year by 3.57% of the 2022 volume. Market players would have the freedom to align demand with this declining supply. Managing scarcity is the great strength of the market economy. The Swiss government could use the proceeds from the sale of quotas to facilitate the transition and cushion the social impacts. The CO2 tax would of course be abolished, as would the motor fuel surcharge that finances compensation, the few cents per liter that caused so much opposition to the new CO2 law last June.

By experimenting with this solution, Switzerland could not only keep its commitment to reduce its emissions as much as possible, but also provide valuable experience for the EU and other countries and contribute to the decarbonization of the world.

Philippe Thalmann, professor of environmental economics at EPFL and member of the E4S Center

This article was originally published in French in Le Temps. Read the original.