Foreign trade

In GENESwIS, foreign trade is modeled such that domestic and foreign goods are imperfect substi-tutes (see section 2.2.2.4). In the CROSSTEM-CH model, international electricity trade is governed by the minimization of total system cost, taking into account exogenous import and export price assumptions. In the coupled framework, CROSSTEM-CH’s representation of foreign electricity trade is prioritized over GENESwIS’s.

For sectors other than electricity, changes in net trade as a share of output are unimportant across the different scenarios. As there are sizeable output changes in some sectors, trade volumes do change, but net trade as a share of total output generally remains unaffected (see Figure 65; for a clearer view of the graph, the non-energy sectors have been aggregated; anyway, the three lines appear almost as one single line). This indicates that within our modeling framework, the simulated policies generally do not produce large international competitiveness issues.

ATP Air and other transports CON Construction CMT Cement and Concrete ETS Rest of the sectors linked to

RTD Road transport GAS Gas transport and distribution MET Metals the ETS scheme

RLT Rail transport DHT District heating RFU Refineries ROI Rest of industry

ROS Rest of services ELE Electricity generation AGR Agriculture

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The picture for electricity trade could not be more different. This is, because CROSSTEM-CH’s optimi-zation in the Baseline and TAX scenarios uses the opportunities for reducing total system cost by achieving net revenues from foreign trade, which increase until 2035. Domestic electricity taxation in the TAX scenario reduces domestic demand (although not the wholesale price of electricity) and thus increases the share of exported electricity relative to the Baseline scenario (see Figure 65). In the NoGAS scenario, the more restricted choices for domestic generation lead to a net import of electri-city in 2035 and 2040, i.e. immediately after the nuclear phase out. By 2045, Switzerland becomes a considerable net exporter of electricity again, on the basis of newly installed solar capacity. Whether the net imports in 2035 and 2040 become necessary, is likely to depend on the rate of efficiency improvements and related capacity growth for solar generation technologies.

Figure 65: Net foreign trade (exports-imports) as a share of output for the electricity sector for the Baseline, TAX and NoGAS scenarios.

3.1.3.9 CO² emissions

CO2 emissions from the electricity generation sector for all the scenarios are given in Figure 66, for the different scenarios. For both the Baseline and TAX scenarios, there is an initial increase in the CO2

emissions, reaching a peak value of 10.8 Mt CO2 in 2045 for the Baseline scenario, and 7.6 Mt CO2 in 2040 for the TAX scenario. Increasing gas prices combined with the higher CO2 tax result in increasing technology penetration from solar PV, which lowers the emissions by 2050. The NoGAS scenario clearly will not have any CO2 emissions (grey CO2 emissions due to increasing electricity imports are not represented here).

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Figure 66: CO2 emissions (Electricity sector)

For the economy as a whole, we observe an even greater decrease in fuel-related CO2 emissions for both policy scenarios relative to the baseline (Figure 67a). This is the expected outcome for scenarios that include a CO2 tax. The restriction on gas power plants in the NoGAS scenario brings the total emissions down further with regard to the TAX scenario.

It is however interesting to note the presence of a substitution effect: Although the prohibition of gas-fired power plants decreases total CO2 emissions, CO2 emissions from the other sectors (excl.

electricity generation) increase relative to the TAX scenario (Figure 67b). This is mainly, because higher electricity prices in the NoGAS scenario discourage the switch from heating and transport fuels to electric systems.

(a) (b)

Figure 67: Percentage variation with regard to the baseline of CO2 emissions from fuels for - a) all sectors including electricity generation and b) all sectors excluding

electricity generation – for the TAX and NoGAS scenarios.

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Analyzing the CO2 emissions paths by fuel, we observe an interesting consequence of policies timing:

In the TAX and NoGAS scenarios, the CO2 tax on heating fuels is increased from 2020 until 2050. An electricity tax is introduced in 2020, increasing until 2050. Transport fuels, in contrast, are taxed through the CO2 scheme only from 2035 onwards. For a more detailed presentation of the policy scenario, please refer to section 1.4.1.

The different timings of the CO2 policies affect the respective fuel demands and related emissions.

CO2 emissions from light heating oil are reduced from 2025 onward, due to the CO2 tax (Figure 68).

We notice a slight increase of CO2 emissions until 2020 due to inter-temporal effects. For natural gas, the emission reduction is somewhat delayed (Figure 68). Although natural gas is a fossil fuel, its emis-sion intensity is lower than for heating oil. This implies that under a CO2 tax, there is not only substi-tution away from natural gas, but also some substisubsti-tution from oil to gas heating, especially as long as there is still a sizeable share of existing oil heaters.

Figure 68: Percentage variation with respect to the baseline of CO2 emissions from fuels (transport fuels, heating fuels and gas) for all sectors excluding electricity generation.

The CO2 emissions from transport fuels increase until 2030 compared to the baseline (Figure 68). As electricity is taxed earlier, i.e. from 2020 onward, the switch to e-mobility is somewhat discouraged, and more transport fuels are continued to be used. Once transport fuels are also taxed, this effect is reversed, and e-mobility becomes more attractive. This effect is quite strong in our model, because of the high elasticity of substitution that we had to assume between e-mobility and transport fuels (see 2.2.3.1). In reality, the effect might be smaller. However, our simulation results demonstrate at least qualitatively that the timing of policies is crucial for the market penetration of new and cleaner technologies.

CO2 tax increase

Electricity tax

CO2 tax

CO2 tax increase

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3.1.3.10 Comparing results from the coupled ELECTRA-CH framework with results