Urban Sila
Erik Frohm
OECD Economic Surveys: Switzerland 2024
OECD Economic Surveys: Switzerland
4. Towards a decarbonised economy
Abstract
Switzerland as an Alpine country is strongly impacted by climate change. Growth has decoupled from emissions and energy use, but emission reductions will have to accelerate markedly if Switzerland is to meet the net-zero target by 2050. The existing comprehensive policy mix including pricing, regulation and incentives/subsidies needs to be strengthened to reach net zero.
Emission reductions must accelerate
Switzerland is one of the top OECD performers in terms of greenhouse gas (GHG) emissions per unit of GDP and energy supply per unit of GDP (Figure 4.1). Over the past two decades, Switzerland has successfully decoupled economic growth from domestic GHG emissions and energy use. GHG emissions have been declining, despite a more than 40% rise in real GDP since 2000. The economy’s low carbon intensity stems from high shares of renewable energy resources – mainly hydropower – and nuclear energy in the energy mix (to be gradually phased out) as well as an economy dominated by services (OECD, 2017 and 2020). Fossil fuels account for less than half of the total primary energy supply, well below the OECD share of 78% (Ritchie, 2023).
Nevertheless, environmental pressures are significant, due to a high standard of living and correspondingly high consumption and resource use. Demand- (consumption-) based indicators point to higher environmental pressures and slower progress in tackling environmental challenges than production-based indicators (Figure 4.1, panel A).
As an Alpine country, Switzerland is impacted by climate change more strongly than many other OECD countries. For instance, annual mean temperatures have risen by at least 2 °C since monitoring began in 1864, twice as much as the global mean (Federal Council, 2018 and 2022). The snowline is expected to rise, while winter snow reserves and glacier volumes will decline further, with implications for tourism, water management and agriculture (Eriksen and Hauri, 2021).
The Federal Council set the net-zero greenhouse gas emissions target by 2050 and adopted an ambitious “Long-Term Climate Strategy for Switzerland”. The strategy set out climate policy guidelines and established strategic targets for key sectors. In addition, under the Paris Agreement, Switzerland has committed to reducing greenhouse gas emissions by 50% by 2030 (compared to 1990), and by an average of at least 35 % over 2021–2030, with emission reductions through projects abroad and accountable carbon sinks (forest and wood) considered. In 2050, according to the long-term Strategy, some hard-to-avoid GHGs will still be emitted (from cement production, waste combustion and agriculture), but will need to be offset by natural and technological removal or through emissions-reducing measures abroad (Federal Council, 2021). Due to the low emission intensity of the energy sector, Switzerland has the largest potential for emission reductions in the transport (30% of all emissions) and buildings (26%) sectors (Figure 4.2). The long-term climate strategy envisages 100% emission reductions in the two sectors by 2050. However, further emission reductions in industry and agriculture will also be necessary.
Switzerland narrowly missed its national emission target for 2020 (to be achieved entirely through domestic measures), despite a milder winter and reduced emissions due to the COVID-19 pandemic. Emissions were reduced by 19.6% compared to 1990 instead of 20% as targeted. In 2021, total emissions increased back to the 2010 trend. For 2020, only the industry sector met its reduction target, while emissions in the buildings and transport sectors exceeded the target (FOEN, 2022a). On the other hand, Switzerland successfully met its international target under the Kyoto protocol for an average reduction by 15.8% over 2013–2020, thanks to emission compensation projects abroad. Switzerland’s 2030 and 2050 emission reduction targets are aligned with its international commitment under the Paris Agreement.
Figure 4.1. Switzerland performs well in terms of emissions and energy efficiency
Source: Green Growth Indicators, OECD Environment Statistics (database); IEA World Energy Statistics and Balances (database); Greenhouse gas emissions, OECD Environment Statistics (database); Material Resources, OECD Environment Statistics (database); OECD Economic Outlook database.
Figure 4.2. The largest potential for emission reductions is in the transport and buildings sectors
Note: Energy industries include electricity and heat production, petroleum refining and manufacturing of solid fuels.
Source: Greenhouse gas emissions, OECD Environment Statistics (database).
A Climate Protection Act (effective from 1st January 2025) was passed in September 2022 and confirmed by the referendum of June 2023, embedding in national law the net zero target for 2050 and defining the 2030-2050 emission reduction paths (overall and sector-level). The law has also committed CHF 2 billion over 10 years to support the transition to green heating systems in buildings and CHF 1.2 billion to enterprises to invest in green technologies. The passing of the law and subsequent approval by a popular vote has boosted policy certainty, which will help the capital investments that are needed to achieve future climate targets.
Measures to achieve targets rely on the CO2 Act, which details cross-sector and sector-specific policies. An ambitious revision of the CO2 Act (with the aim of achieving emission reductions targets over the period 2021–2030) that would have further increased the carbon tax and introduced a levy on air tickets was rejected at a referendum in 2021. Since then, Switzerland had to reassess the mix of policy measures to achieve its targets and the policy focus has shifted from further tax increases to incentives, including subsidies. After the 2021 referendum, emissions reduction efforts relied on an emergency extension of the pre-existing CO2 Act, valid through 2024. Beyond that date, for the 2025-2030 period, measures will have to be defined in the currently debated “third” CO2 Act (proposed by the Federal Council in September 2022), which is also set to fix in national law international commitments for emission reductions up to 2030 (cutting emissions by 50% to 2030, among others).
Switzerland will need to accelerate emission reductions if it is to meet its targets (Figure 4.3). For this, additional and more ambitious policy measures (in future CO2 Acts) will be needed. A comprehensive policy mix including pricing, regulation and incentives/subsidies will be needed to reach net zero. Policy scenarios by the Federal Office for the Environment from 2022 (FOEN, 2022b), show that under the scenario “with additional measures” – that includes implemented, adopted and planned policies and measures – Switzerland would miss its reduction target in 2030. Similarly, Dolphin (2023) estimates that under a similar “with additional measures” scenario that also includes the measures of the currently proposed third CO2 Act, total domestic emissions would only be reduced by 34% by 2030. The overall 50% target can be met through emission reductions abroad to which Switzerland has committed through numerous bilateral agreements (the proposed CO2 Act implies that 2/3 of emission reductions need to happen domestically). However, beyond 2030 and to reach the 2040 targets, additional measures will need to be put in place.
Figure 4.3. Emissions reductions will need to accelerate to reach targets
Source: Federal Office for the Environment (FOEN), 2023
Strengthening carbon pricing instruments
Switzerland prices its CO2 emissions at high rates (Figure 4.4) and has the highest effective carbon rates among OECD countries (OECD, 2021 and 2022a). A high effective carbon price provides a strong incentive for lower-emissions technology development. The OECD (2021 and 2022a) estimates that in effective terms Switzerland taxes about 65% of its emissions from energy use at EUR 60 or higher per tonne of CO2, a midpoint estimate of the carbon cost in 2020. In 2021, explicit carbon prices in Switzerland consisted of emissions trading system (ETS) permit prices and carbon taxes, which covered about 41% of greenhouse gas (GHG) emissions in CO2 equivalents (OECD, 2022b). In addition, Switzerland imposes high effective tax rates on road fuels through the fuel excise tax (Figure 4.5), but the tax level is not tied to the emission-intensity of the fuels and revenues are not earmarked for environmental purposes.
Figure 4.4. Switzerland prices its CO2 emissions at high rates
Source: OECD (2022), Pricing Greenhouse Gas Emissions: Turning Climate Targets into Climate Action, OECD Series on Carbon Pricing and Energy Taxation, OECD Publishing, Paris.
Figure 4.5. Effective carbon rates differ across sectors
Effective Carbon Rates (ECR) by sector, EUR per tonne of CO2-eq, 2021
Source: OECD (2022), Pricing Greenhouse Gas Emissions: Turning Climate Targets into Climate Action, OECD Series on Carbon Pricing and Energy Taxation, OECD Publishing, Paris, https://doi.org/10.1787/e9778969-en.
Switzerland introduced its emissions trading scheme in 2008 to give companies the opportunity to operate under the same rules as their international competitors – especially in industries with substantial emissions resulting from the use of heating and process fuels as well as from cement production. Since January 2020, Switzerland’s emissions trading scheme has been linked to the EU's Emissions Trading System (EU ETS), and the emission allowance price has since converged with the EU levels (Figure 4.6). The linking with the EU ETS implied harmonization of rules for allocation of free emission allowances and required identical sectoral coverage. The ETS covers emissions from large emitters in industry, power and internal aviation (intra-EU, EEA and the UK area).
Figure 4.6. The emission allowance price has converged with EU levels
Emission Trading System (ETS) allowance prices, Euro per ton
Source: International Carbon Action Partnership (ICAP), The Allowance Price Explorer, https://icapcarbonaction.com/en/ets-prices
Switzerland can strengthen incentives for decarbonisation within the emission trading system in step with the planned strengthening of the EU ETS under the Fit-for-55 package. Failure to harmonise rules will disadvantage Swiss exporters trading with the EU. More ambitious emission-reduction targets will be set, implying higher annual reductions of the cap. Free allocation of emission allowances to aviation will be phased out by 2026. Free emission allowances will also be phased out for selected carbon-intensive sectors over a nine-year period (from 2026 to 2034). For these sectors, to ease rising costs and avoid carbon leakage the EU envisages a carbon border adjustment mechanism (CBAM), starting in 2026. CBAM will impose a charge on the emissions embodied in carbon-intensive EU imports, based on their carbon content. The importer will be charged the EU ETS price, deducting any carbon price effectively paid in the country of origin. In June 2023, the Federal Council recommended that for now Switzerland refrain from introducing a CBAM.
The Swiss CO2 levy – an explicit carbon tax – on heating and process fuels is another important pillar of Swiss climate policy. It stands at CHF 120 per tonne of CO2 (roughly EUR 125). The revised CO2 Act had envisaged an increase to CHF 210 per tonne of CO2, but after the rejection of the revised CO2 Act at the referendum in 2021, these plans were scrapped. No further increases are foreseen for this tax until 2024 and the currently proposed third CO2 Act, for the period after 2024, also keeps it at the current level.
Carbon prices are cost-effective and efficient instruments to reduce emissions and further efforts could be made to strengthen the CO2 levy. Fixed at CHF 120, the CO2 levy is set to be eroded in real terms over time. A 2% annual inflation over 10 years would imply close to 20% erosion in real terms, which would be inconsistent with the need to accelerate emissions reductions. Moreover, surveys of various expert groups (Pahle et al., 2022) indicate that expectations about the EU ETS allowance price (carbon price within the EU ETS) range between EUR 130-160 in 2030 (CHF 125-155 at current currency values). In the Energy Perspectives 2050+ scenarios, the Swiss Federal Office of Energy considers a price of CHF 50 in 2030 and CHF 153/t CO2 in 2035. On the ground of efficiency and consistency of carbon pricing across sectors, there is rationale to increase the CO2 levy further after 2030.
Revenues from the CO2 levy are redistributed to the population and towards green investment. In 2022, the CO2 levy resulted in an annual revenue of roughly CHF 1.2 billion (0.16% of GDP). Two thirds of the revenue is redistributed directly to the population and the economy. Roughly one third of this goes to the population, redistributed uniformly to all residents of Switzerland (each person receives the same amount). The rest goes to companies, based on paid wages. The remaining third of the revenue (max. CHF 450 million) from the CO2 levy is used by the Confederation and the cantons to support energy-efficient renovations and renewable heating energy through the buildings programme. Another CHF 25 million annually are allocated to the technology fund for the promotion of innovative companies. The proposed third CO2 Act envisages to earmark a larger part (at most half instead of at most one third) of the revenues for measures in the buildings sector and innovation. This will help accelerate emission reductions in the buildings sector and boost green innovation further.
Public support for increasing environmental taxes is low. The rejection of the ambitious revised CO2 Act at a referendum in 2021 being a case in point. The authorities could consider raising the CO2 levy after 2030 while reconsidering the redistribution of the revenues from the CO2 levy to tackle acceptability concerns. For example, instead of the existing uniform redistribution, the part of the redistribution that goes to the population and the economy could target lower income households that are more affected by rising emission prices. Furthermore, strengthened communication about the goals of the CO2 levy, the redistribution and the available subsidies and their benefits could dampen the opposition to carbon prices. This could help signal the country’s commitment to achieve a fair transition toward net zero and increase the acceptability of climate policies.
Exemptions from the CO2 levy reduce the efficiency of the tool. GHG-intensive SMEs (not under the ETS) can be exempted – on competitiveness grounds – if they commit to implement measures towards uninterrupted emission reductions (negotiated reduction commitment). Between 2022 and 2024, GHG emissions must be reduced by two per cent per year within the scheme, compared to 2021 levels, but smaller companies that emit less than 1500 tonnes of CO2e per year are exempt from this predetermined emission reduction path. They are instead subject instead to individualised targets.
While emissions have been effectively reduced for companies under the scheme (negotiated reduction commitment), abatement has not been superior to what it has been in companies subject to the CO2 levy or within the ETS. In addition, the scheme comes with a high societal cost due to foregone carbon tax revenues, the subsidies for companies that overreached targets (now extinct) and monitoring (Hintermann and Zarkovic, 2021 and 2020; SFOE, 2016). Yet, the Federal Council aims to extend and strengthen the scheme beyond 2024, as proposed in the draft third CO2 Act. The new scheme will be available in all sectors and all companies – without exception – will have to commit to a decarbonisation roadmap. The scheme is planned to expire in 2040. Given the higher cost of the scheme compared to market-based mechanisms, the authorities should ensure that reduction targets and decarbonisation roadmaps are ambitious enough to exceed the 2040 target for industry (50% reduction on 1990).
Accelerating emission reductions in road transportation
The road transport sector will have to significantly accelerate the pace of emission reductions. Cars remain a major emitter (Figure 4.7). Compared to 1990, total emissions have only been reduced by 7%, missing the 1990-2020 target of a 10% reduction. Increased emission performance of road vehicles has been offset by rising road transportation. Between 2010 and 2020, emissions from the road sector decreased on average by 1.8% per year, but this pace will need to more than double to meet the 2040 target (-57% compared to 1990).
The authorities, via the proposed third CO2 Act, plan to further tighten emission regulations on vehicles, in line with EU regulations. The proposal also envisages to further strengthen the obligation for motor fuel importers to compensate for part of CO2 emissions from imported fuels by emission-reducing projects and by the obligation to put biofuels on the market. The resulting costs incurred by motor fuel importers can be passed onto the price of fuel for consumers, subject to a cap of 5 cents per litre for each obligation. Financial support is planned towards the extension of charging infrastructure for electric vehicles and the conversion of diesel-powered public buses to more emission efficient vehicles. The target of ensuring that 15% of new passenger car registrations are fully electric or plug-in hybrids by 2022 was already exceeded in 2021. By the end of 2025, this target is raised to 50% of new registrations (Federal Council, 2022). The authorities also plan to scrap mineral oil tax reliefs for public transport from 2025 onwards, which would be a step in the right direction. This opportunity should be taken to also scrap exemptions to the mineral oil tax for users in the agriculture and forestry sector that distort environmental incentives.
Figure 4.7. Cars and other road transportation remain major emitters
Note: Emissions from international aviation and navigation are excluded.
Source: Federal Office for the Environment (FOEN).
The mineral oil tax, while providing for high effective taxation of carbon in international comparison, has not risen in real terms over time. Also, the societal cost of road fuels is elevated due to impacts on climate, pollution, congestion, the need for infrastructure maintenance, etc., and the tax is estimated to be insufficient to cover the cost (Dolphin, 2023; Parry et al., 2021). Introducing a carbon price component within the mineral oil tax could efficiently raise incentives for emission reductions in the road sector. Alternatively, Switzerland could consider taking part in the planned new emission trading system of the EU for road fuel distribution and buildings (the EU ETS II). The new EU ETS II is to be established from 2025 and, as a cap-and-trade system, it will incorporate tightening caps on emissions with increasing price incentives. Revenue gathered from auctioned allowances could be used for further green investment as well as targeted redistribution, as planned in the EU Social Climate Fund or to reduce distortive taxes.
Accelerating emission reductions in the buildings sector
Heating consumption (climate-adjusted) per square meter of residential housing is above the EU average (Figure 4.8). Despite significant emission reductions since 1990, the sector missed its national target in 2020. According to the Federal Statistical Office (FSO, 2023), in 2022, two thirds of households and 57% of buildings were still heated by fossil fuels (oil and gas). 19% of buildings were heated via heat pumps, a quadrupling since 2000. The pace of emission reductions needs to rise from 4.3% per year over the 2010-2020 period, to 6% per year to reach the 2040 target of 82% reduction from 1990. Reductions so far have been achieved mostly through installation of low (or zero) emission heating systems in new constructions. Now, focus will need to shift towards renovation of the existing building stock such as replacement of fossil fuel-based heating systems and improved insulation, which will likely be more costly.
Figure 4.8. There is room to reduce emissions for housing
Source: ODYSEE-MURE; Federal Office for the Environment (FOEN).
The National buildings refurbishment programme provides subsidies to make buildings more energy efficient. It is implemented by the cantons and financed from the partial redistribution of the CO2 levy (one third of total revenue) and cantonal funds. According to the proposed third CO2 Act, the programme is planned to be strengthened by earmarking up to 50% of the CO2 levy revenues to the programme. In addition, the recently passed Climate protection Act has added another CHF 200 million per year for ten years for replacing fossil fuel-based heating systems with green alternatives in buildings. These policy steps will help make the housing stock more energy efficient. Besides, given that the CO2 levy will decline in real terms over time (see above), the authorities should consider raising the CO2 levy further in the future, or – as for the road transport sector – consider joining the new EU ETS II for the transport and building sector.
Building codes of the cantons are other instruments that regulate energy consumption standards for new and existing buildings. The Conference of Cantonal Energy Directors aims to harmonise building codes throughout Switzerland. However, these need to be implemented through cantonal energy acts, and as of 2023, only 19 (of 26) cantons have enacted them. The revised CO2 Act had aimed at introducing federal CO2 standards per square meter of heated surface, but this Act was then rejected at a referendum in 2021.
The cantons plan to continue strengthening energy-efficiency regulation in buildings, but efforts should be more uniform across the country. Some cantons have already completely banned the installation and replacement of fossil heating systems while others lag behind (FOEN, 2022b). Impact analysis has shown that regulations have had an important impact on emission reductions beyond the overall subsidies and the CO2 levy. Replacement of fossil fuel heating systems with renewable energy sources has been markedly faster in cantons with regulations in place, compared to cantons without regulations, and the pace of emission reductions has roughly doubled (FOEN, 2023).
Ensuring climate-neutral power generation and electrification
Switzerland relies almost exclusively on fossil-free sources of energy for power generation. Domestically, electricity is mainly produced using hydropower and nuclear power that together account for 90% of electricity production. In the summer, Switzerland exports surplus electricity, while it imports about the same amount over the peak-demand winter months.
The energy transition will require further electrification of the Swiss economy, notably in transport and residential heating. Electrification means replacing technologies or processes that use fossil fuels, like internal combustion engines and gas boilers, with electrically-powered equivalents, such as electric vehicles or heat pumps. Electricity demand and hence annual production of electricity is set to rise by close to 30% by 2050 (Figure 4.9) according to scenario analysis by the Federal Office of Energy (SFOE, 2023). NEA (2022) reports an increase in projected demand for electricity of close to 50% by 2050. Switzerland is currently not a highly electrified country. In 2022, about a quarter of its energy consumption stemmed from electricity. As a comparison, in highly electrified countries such as Norway almost half the energy is consumed in the form of electricity (NEA, 2022).
Figure 4.9. Annual production of electricity is set to rise
Electricity production by technologies, net-zero emissions basis scenario, TWh
Note: Lifetime for nuclear power plants is set at 50 years.
Source: Federal Office for the Environment (FOEN), Energy perspectives 2050+.
The Energy Strategy 2050 stipulates the goal of climate-neutral energy supply by 2050.This will be achieved through improved energy efficiency, an increased share of renewables and a gradual phase out of nuclear energy, while ensuring a high level of security of supply. Moreover, triggered by Russia’s war in Ukraine, in 2022, Switzerland undertook several short-term measures to address possible gas and electricity shortages. The authorities procured an energy reserve in the form of water withheld in reservoirs (hydro reserve), reserve (gas) power plants and passed emergency measures, valid until 2025, to speed up the development of utility-scale solar PV plants in Alpine areas.
The revised Energy Act – still subject to a possible referendum – prescribes that electricity production from renewables, excluding hydropower, should increase from 4 400 GWh in 2020 to 35 000 GWh in 2035, an 8-fold increase. The network surcharge of 2.3 centimes per kWh paid by all electricity consumers (amounting to ca. CHF 1.5 billion per year) helps finance needed investment for the energy transition. Investments in renewables are incentivised by floating market premia and investment aids that finance 20%-60% of the total investment costs of renewable projects. With the revised Energy Act, the financing and investment aids are ensured until 2035. The authorities also plan to speed up planning and authorisation procedures for power plants of national interest and shorten appeal procedures. Continued financing and faster approval processes will provide additional incentives and improve the business climate for the needed investment into renewables.
Greater electrification and higher reliance on renewables also require investment to upgrade and expand the capacity of the electricity grid. Switzerland’s grid is in need of renovation (SFOE, 2018). Structural congestion already exists in the transmission grid. Consequently, power plants are regularly instructed to limit their production (Swissgrid, 2023a). Furthermore, the power grid will need to be adjusted to a greater number of decentralised energy suppliers. The Federal Office of Energy estimates that under the goal of climate neutrality, about CHF 75 billion (10% of GDP) will be needed to maintain and restructure the electricity grid (SFOE, 2022). The costs of the grid will thereby rise, leading to higher prices of electricity.
Lengthy approval and authorisation procedures and the lack of transparency hamper the urgent and necessary adaptation of the network infrastructure (Swissgrid, 2023b). According to Swissgrid – the transmission grid operator – the period from the start of a project to the commissioning of the relevant line is currently around 15 years, but often gets delayed up to 30 years (Swissgrid, 2023a). Such delays are inconsistent with current needs and targets. As part of the Energy Strategy 2050 and the Electricity Network Strategy, the authorities plan to further optimise licencing procedures for transmission line projects, clarifying criteria for further grid development and for using either overhead lines or underground cables, and to improve overall acceptance of transmission line projects. Implementing such measures is necessary for Switzerland to successfully ramp up its electrification and needed adjustments to the power grid.
Following the nuclear reactor disaster of Fukushima in 2011, the Swiss authorities decided on a progressive withdrawal from nuclear energy. No licences will be given for new nuclear power plants. However, the exact phase-out date has not been determined and existing plants can continue if deemed safe. In their current policy plans, the authorities assume a technical lifetime of the newest reactors of 50 years. This would imply that in 2034 the last reactor would stop operating. Operators are currently assessing lifetime extensions of 10 years up to 2044. Such a phasing out of one third of electricity production will trigger the need for steep and costly ramping up of new renewable power generation. The Nuclear Energy Agency (NEA, 2022) analysed various scenarios for future electricity production in Switzerland and concluded that prolonging the life of two existing nuclear reactors up to 2050 – while investing to fulfil all safety concerns – and covering remaining electricity needs from renewables would be the least costly scenario to reach climate neutrality.
It is also important for Switzerland to keep its high interconnection with its European neighbours to secure a stable grid operation, strengthen security of supply and allow for a high level of mutually beneficial electricity trading. However, negotiations on an electricity agreement between Switzerland and the European Union have suffered a major setback since 2018. While EU electricity market integration is advancing, Switzerland is being increasingly excluded. In its recent review, IEA (2023) concludes that market integration with the European Union would improve the efficiency and co-ordination of transmission flows and contribute to security of supply in Switzerland as well as in EU member countries. Switzerland should align its electricity market regulations with those in the European Union, including on full market opening, to prepare for the signing of an electricity agreement with the EU.
Adapting to climate change
Climate change is impacting Switzerland. The five warmest years since 1864 were all recorded after 2010 (FOEN, 2020). Alpine glaciers have lost over 60 percent of their volume since 1850 (MeteoSwiss, 2023). Heavy precipitation events have also become more intense and more frequent. A warmer climate results in drier vegetation during the summer months, increasing the risk, frequency, and intensity of uncontrollable forest fires which in turn disrupt lives and livelihoods through associated economic impacts and the health consequences of heat and smoke particles that can travel far and wide (OECD, 2023). Swiss regions with significant tourism (such as the Alps) are especially vulnerable. Less snowfall increases the need for artificial snowmaking, putting pressure on energy and water systems (Francois et al., 2023). Additional risks arise from deteriorating slope stability leading to landslides, debris flows and rockfalls. Biodiversity will also be affected by climate change, particularly at higher altitudes (Kato et al., 2021).
Climate change may present some opportunities for energy production in winter, reductions in snow damage, income from summer tourism, and possibly from agriculture, albeit with greater variability. Yet estimates of the welfare effects of climate change (health, buildings, infrastructure, energy, water, agriculture, tourism and spill-overs to other sectors) are largely negative, at -0.4% to -1.4% of household consumption (Vöhringer et al., 2019). Existing studies likely underestimate the actual costs of climate change, as indirect effects on biodiversity and health are difficult to quantify using available data.
The Federal Council adopted a strategy for adaptation to climate change in 2012 (FOEN, 2012). The strategy sets out the goals and principles for adaptation, identifies the areas for action in nine sectors (water management, management of natural hazards, soil protection, agriculture, forestry, energy, tourism, biodiversity management, health (human and animal), and housing) and describes the cross-sectoral challenges. The updated 2020-2025 action plan identifies rising energy demand for cooling and lower hydropower generation in the summer as key challenges, to be addressed by the Swiss Federal Office of Energy (SFOE). To counter higher risks around hydropower capacity in the summer period, a further boost to renewable energies such as sun or wind is planned.
Swiss companies are also adapting to climate change to strengthen resilience. Nearly one fifth of the Swiss companies surveyed in 2023 perceive themselves to be majorly exposed to climate-related risk (Seiler, 2023). More than half of Swiss companies have already invested to mitigate the adverse effects of weather events or to cut carbon emissions in the last year. This trajectory is set to gain momentum, as almost three quarters of all companies are planning such investment in the next three years, a higher share than in most EU countries (Figure 4.10).
Switzerland should continue mitigating the build-up of heat, increasing the capacity to absorb rainwater and planning for lower snow levels in the Alps. Adaptation at a cantonal level should reduce specific risks and impacts of climate change. For example, the cantonal authorities in Ticino, in cooperation with the Swiss Federal Institute for Forest, Snow, and Landscape Research WSL, developed the concept “Forest Fire 2020” to reduce the risk of forest fires as well as their consequences (Eriksen and Hautir, 2021). Cooperation at the international level is also important in the fields of civil protection, disaster management, and environmental protection aid capacities to cope with the already unavoidable consequences of climate change.
Figure 4.10. Many Swiss companies plan investments towards climate mitigation and adaptation
Many firms are planning climate investments, % of firms
Source: KOF Economic Bulletin; European Investment Bank Investment Survey (EIBIS).
Table 4.1. Past recommendations on reaching environmental and climate objectives
Table 4.2. Recommendations
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