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Executive Summary


Some abbreviations are used in this chapter. You can find explanations of all abbreviations in the glossary.

Vision

Industry and the service sector are taking their responsibilities in tackling the climate crisis. We can finally consume the products and services we need for a good quality of life, without worrying that our consumption is fueling the climate crisis. Innovation of sustainable technologies and materials and their implementation is being promoted. We have a functioning emissions trading system with a very limited number of certificates and a reduction path with a net 0 target for 2030. Synthetic substances harmful to the climate will be banned or replaced. A market such as Amazon is considered obsolete and will be replaced by a platform where only zero-emission products are traded. Ambitious action plans will be drawn up by all producing-entities as early as 2021. Many of the measures will already be implemented in the coming years. It is thus becoming increasingly clear that change is possible and what our world will look like after 2030.

Current Situation

Emissions

Overall, the service and industry sectors are currently responsible for just under 24% of Switzerland's greenhouse gas emissions (FOEN 2020b).
The service sector contributes mainly through heating emissions, which can be estimated at approximately 4 million t CO2eq (FOEN 2020d).

The industry sector causes emissions firstly due to the consumption of fossil fuels and secondly to industrial processes that emit CO2 and other greenhouse gases (B. Meier et al. 2018):

  • The consumption of fossil fuels caused an average of about 5.0 million t CO2 in the years 2014-2016. The most energy-intensive sectors are cement production, chemistry and food processing, which together account for over 90% of these emissions.
  • In the same time span, industrial processes generated an average of 4.1 million t CO2eq. Around 85% of these greenhouse gas emissions come from cement production (50%) and the consumption of hydrofluorocarbons for cooling and air conditioning units (35%).

The thermal processes of the Swiss industry and service sector can be divided into 3 temperature levels: Space heating (up to approx. 70 degrees flow temperature), low temperature process heat (up to approximately 120 degrees) and high temperature process heat (up to over 1’400 degrees). According to the study "Renewable energies in industry" by the Swiss Federal Office of Energy, there are technical solutions for substitution for both space heating and low-temperature process heat. Only in the case of high-temperature process heat is it currently not possible to replace all processes with renewable heating systems, as CO2 is sometimes indispensable for the process.

Figure 4-1: Development of emissions in the main Swiss industrial sectors since 1990 (data from BAFU (2020d))

Existing policies

The most important existing climate policy instruments for the industrial sector:

CO2 Levy

Since 2008, a CO2 steering levy has been imposed on fossil fuels such as heating oil or natural gas. The CO2 law already stipulates that the levy rate is to increase at certain intervals if reduction targets are not met. At present, the levy is CHF 96 per ton of CO2eq. This corresponds to approximately 25 centimes per liter of heating oil. According to the Federal Council, the maximum levy rate should be able to rise to a maximum of CHF 210 by 2030. Two thirds of the revenue from the levy will be redistributed to the population and the economy. The remainder will go to the buildings program and promote the renovation of buildings, and CHF 25 million of the revenue will be made available annually to the Technology Fund. Through this fund, the federal government guarantees loans to companies that develop and market innovative products and processes that reduce greenhouse gas emissions or promote renewable energies (The Federal Council 2017).

Only about 50% of the emissions of the industry and services sector are subject to the CO2 levy, because companies can have the tax refunded, either by participating in the emissions trading system or by target agreements.

Emissions trading system

Currently, the largest emitters of greenhouse gases in industry, such as producers of cement, iron & steel, chemicals, pulp & paper and refineries are covered by the Swiss Emission Trading System (CH-ETS). Today, these are 54 installations that emit around 5.5 million tons of CO2eq annually. The Swiss ETS has been linked to the European ETS (EU ETS) since January 2020, which means that Swiss companies can buy European emission allowances and have them credited to their account, and European ETS companies can buy Swiss emission allowances. Industrial companies currently benefit from a free allocation of emission allowances and companies participating in the ETS are exempted from the CO2 tax on fuels. Due to the free allocation, the closure of TAMOIL and the use of emission reduction certificates of the Kyoto Protocol, too many emission rights are in circulation. Because the market price for CO2 emission rights was therefore low, the Swiss ETS has so far created hardly any incentives for emission reductions (Eidgenössische Finanzkontrolle 2019).

Target agreements with CO2 levy exemption

Companies can be exempted from the CO2 levy if, in return, they commit themselves to reducing their own greenhouse gas emissions. A study suggests that, for the most part, target agreements do not lead to more emission reductions, but rather subsidize business-as-usual (André Müller and Steinmann 2016).
Approximately 14% of the CO2 emissions of the industry and service sector are covered by such target agreements. It is expected that as the CO2 levy rate increases, more companies will enter into a target agreement.

Figure 4-2: Visualization of the different policy instruments and the emissions they cover

Policy Measures

GHG reduction in the industry and service sector relies heavily on certain policy measures covered in other chapters of the CAP, namely the following:

Moratorium on new infrastructure (Cross-Sectoral Policies, Policy 1.1)
To achieve full decarbonization of the industry sector without at the same time increasing emissions elsewhere through imports, demand for emissions-intensive products and services needs to be significantly lowered. We therefore propose a moratorium on new construction, including buildings, streets and other infrastructure that use GHG-intensive materials (e.g., cement, steel).

Prohibition and replacement obligation on fossil & electric heating systems (Buildings, Policy 3.1)
Thermal processes as well as space heating in the industry and service sector must be decarbonized rapidly and with no exception. No new fossil fueled heating systems will be installed, and existing ones have to be replaced by renewable energies. This of course also includes the burning of coal.

It is true that coal has played practically no role in Switzerland for decades and is stagnating at 0.5% of Switzerland's gross energy consumption (SES 2020). Nevertheless, 156,000 tons of coal are still burned in Switzerland every year (BFE 2020), more than four-fifths of it by the cement industry (BFE 2015), which corresponds to annual CO2 emissions of at least 468,000 tons CO2eq.

Greenhouse Gas Pricing (Cross-Sectoral Policies, Policy 1.2)
While the remaining production shall be transformed to become net-zero-compatible by 2030 we want the market to also adjust the demand for products by internalizing external costs. Both, domestic emissions and emissions embodied in imported goods shall carry these external costs.

Border carbon adjustment (Cross-Sectoral Policies, Policy 1.3)
To prevent leakage and the export of emissions and to protect Swiss industries, a border tax should be implemented to create a level playing field.

Additionally, we propose the following 7 policy measures specifically for the industry and service sectors:

Policy 4.1: Ban on Technical Gases with High Radiative Forcing

A substantial amount of emissions in CO2-equivalents in the industry sector are caused by emissions of “F-gases” (more than 10%). Therefore, this policy is a ban on new products and equipment using synthetic substances with a Global Warming Potential (GWP) > 50 (100 year time horizon) for all applications. The production, import and use is banned immediately.

Most of these gases are substitutes of CFCs (Chlorofluorocarbons) that have been banned in the follow-up to the Montreal-protocol that lists them as ozone-depleting substances referring to the ozone layer in the stratosphere. Therefore, the protocol has been amended by the Kigali agreement that aims to reduce the manufacture and use of Hydrofluorocarbons (HFCs) by roughly 80-85% from their respective baselines, till 2045. Developed countries are supposed to reduce their usage to 15% by 2036 (baseline 2019). This phase down is expected to arrest the global average temperature rise up to 0.5 C by 2100.

These “F-gases” are mostly used in small amounts but have a high global warming potential per kg (several 100 to several 1000 times more effective per kg than CO2) with a long lifetime. These substances are used because they have a high stability and favorable properties in terms of toxicity and flammability. This makes them convenient candidates for cooling aggregates (both in cars and professional cooling and air conditioning), heat pumps, cleaning in the high-tech industry (electronics etc.) but also for sprays in the pharmaceutical industry. Alternatives such as NH3, CO2 and a variety of short-lived hydrocarbons are available and cheap. Therefore, there has been no interest from the chemical industry to push them. Users of these alternatives are confronted with higher safety standards for both workers and customers that opens questions of liability and additional investments for housing some of the installations (e.g. ammonia-based coolers).

In Switzerland these substances have been regulated - if at all - in the Chemical Risk Reduction Ordinance (ChemRRV) which has failed to curb the usage of these substances. The regulation today allows for too many exceptions, especially for smaller cooling units.

Usually, bans need exceptions for applications that are not able to get clearance for new substances on a short term, such as medical applications. For such applications a levy of 500 CHF/t CO2eq is charged. This is higher than the usual levy on other greenhouse gases to take into account the long lifetime of the substances involved and the lack of technologies for negative emissions for F-gases. Consequently, there should also be an incentive scheme to avoid the emission of F-gases that are already installed. This could be a financial incentive that old F-gases are bought by a designated entity at a price of, e.g., 200 CHF/t CO2eq and that the gases would be burned for free.

Many cars on the street still use R134a as a cooling agent for their air conditioners. This substance is officially phased out in new cars since 2011 already but is still used to refill systems that leak. The GWP of R134a is 1430 and a typical car may use 700g per fillage which equals 1t CO2eq. Therefore, a new refill would cost 500 CHF in tax if the exception would accept refills of old systems. Therefore, this would be a good incentive to either not refill the air conditioner and stop using it, to properly repair the unit to avoid any further leakage or to replace it with a system using no F-gases anymore.

Financing

The ban itself is a low cost measure. However, implementation and control requires much more emphasis and staff than what the BAFU and cantons invest today. Also, to deal with exceptions in a strict way needs more experts. The levy for remaining usage may initially pay for the reward scheme for collected and destroyed substances. However, as new sales for exceptions shall vanish the remaining costs will be paid from the levy on GHG and the border carbon adjustment (see chapter Cross Sectoral Policies).

Impact

Figure 4‑3 from the National Inventory Report of the Swiss Submission to the UNFCCC shows how dominant refrigerants became and that the replacement of refrigerants in leaking existing cooling devices is the main source. Therefore, the impact of the proposed policy will depend largely on the effect on replacing existing aggregates. Eventually, if applied in a strict way from 2021 through 2030 the remaining emissions should decline from 1.5 Mio.t CO2eq in 2017 to <0.3 Mio.tCO2eq in 2030. Remaining emissions would include leakage from still existing aggregates filled with HFC, few exceptions where no substitutes exist and the emissions from old PUR foams that have been produced with CFCs or HFCs.

Figure 4-3: Development of emissions under source category 2F Product uses as substitutes for ozone depleting substances. HFC and small amounts of PFC are used as substitutes for ozone depleting substances. Most relevant today are emissions from the built up refrigerant stock in refrigeration and air conditioning equipment. (FOEN 2020d)Social compatibility

Drugs for special illnesses may be affected by this ban and should be evaluated carefully.
Further, the application of more toxic and more inflammable substances may cause safety concerns if not addressed properly. Therefore, new safety rules should apply in a manner to avoid dangerous workspace situations.

Questions and Uncertainties

A ban always needs control, including at the border to prevent black imports. This requires skilled personnel to be trained in a short time.

Policy 4.2: From Emission Trading Scheme to CCS Financing Instrument

Description

As described in the section on existing policies above, today's Swiss Emission Trading Scheme is weak and not ready for net zero. In practice, there are certain factors that render today’s CH-ETS a rather weak instrument:

  1. Cap-setting: In order to drive emissions reduction, the total cap needs to be set below business-as-usual (BAU) emissions. Given that the Swiss ETS also covers shrinking sectors such as refineries and cement, such structural changes need to ideally be taken into account in the cap-setting process. Adopting the EU cap-setting process, which covers a different set of sectors, did not ensure that allocation in Switzerland was below BAU. In consequence more Swiss emissions allowances were allocated then emissions occurred, which lead to over-allocation and to low prices that provide little to no incentives to invest in emission reduction measures (Eidgenössische Finanzkontrolle 2019). Over-allocation is a global phenomenon that plagued all ETS in particular in their earlier phase, be it in Switzerland, the EU, California, Canada, New Zealand, South Korea, China, etc. Since the surplus of allowances can be banked in most schemes into future years, prices do not go down to zero, but reducing over-allocation takes time.
  2. Political uncertainty: Investment in greenhouse gas mitigation will be only undertaken if companies are sure that the benefits will be higher than the costs. Long-term political commitment and long-term price signals as well as liquidity are therefore crucial for a functional market. In the past the scheme did suffer from low liquidity, a missing long-term price signal which was due to the uncertainty of the linking as well as the political debate in Switzerland on the future of the CH ETS.

In order for the ETS to play a role in decarbonization by 2030 the following amendments need to be made:

  1. Cap-setting: The cap over the years will need to follow the path which is needed for a rapid decarbonization taking the banked allowances into account and leading to net zero emissions from the ETS in 2030.
  2. Accompanying measures: High greenhouse gas mitigation costs may lead to a reduced competitiveness of some industry sectors and bring the risk of moving plants abroad (“carbon leakage”). Therefore, instruments such as border tax adjustments (see Policy 1.3) need to be put in place.
  3. Restricted linking: Depending on the developments with regards to reduction of the emission cap of the EU-ETS, the Swiss ETS may need to be fully de-linked or a restricted linking with the EU-ETS needs to be introduced, which allows for Switzerland to restrict the inflow of lower-priced allowances from the EU-ETS if prices fall below a certain threshold.

Residual Demand for Materials like Steel and Concrete

The first measure is to reduce demand for goods that lead to high CO2 emissions in their production. For many materials, there are substitutes e.g. using wood instead of concrete for most buildings, etc. (see chapter Buildings and Spatial Development).

However, we assume that even with the highest possible level of avoidance, recycling and substitution, also in a decarbonized world there remains a certain demand for goods and materials with inherently high carbon emissions, e.g. for cement and steel to build wind power plants, crystalline silicon for photovoltaic panels, copper to transmit power etc.

New technologies are currently being developed to allow for net zero production of these materials, such as the use of hydrogen or synfuels from renewable power for steel production, or carbon capture e.g. for the geogenic emissions from cement plants. In carbon capture, carbon flue gas streams with high concentrations of CO2 are captured technically at the plant, transported and pressed into underground geological formations, such as saline aquifers.

These emerging technologies pose significant challenges:

  1. These technologies are still under development and not yet mature for large scale deployment.
  2. These technologies are currently not available at larger scale and are rather expensive (starting at hundred to several hundred CHF per ton mitigated or sequestrated).
  3. Some of these technologies bring additional risks, such as the risk of resurfacing of sequestered CO2 from geological formations and related suffocation.

The large-scale research, development and deployment of these technologies requires considerable financial resources. The existing ETS may be a starting point to allow for these technologies to be financed (see also chapter Negative Emissions Policy 7.1).

Transforming the Emission Trading Scheme into an Instrument to Finance CCS

If the overall cap of the ETS reaches net zero emissions in 2030, the Swiss ETS would not be obsolete, but would evolve into a framework that creates a market for negative emissions. Minimum thresholds of emissions would be removed as a criterion for installations to participate in the ETS. In 2030, the ETS allows companies with residual emission that they cannot further reduce to purchase allowances from companies that have the capacity to implement negative emissions technologies. The costs of these negative emissions may be assumed to be very high, and the ETS provides a regulated market environment that fosters large scale investments in novel negative emissions technologies. In this way, the combination of BECCS technologies, border tax adjustments and an ETS could transform into an efficient market-based instrument to finance expensive technologies to neutralize the “unavoidable” residual emissions left for certain key materials and goods.

Financing

The consumers of industrial products would pay higher cost for decarbonization for specific emissions intensive goods. Beyond that, the measure will generate substantial revenue to finance other climate mitigation measures.

Impact

Decarbonization of high emitting Industries by 2030. Impact is expanded internationally through the formation of clubs of countries that commit to steep decarbonization pathways and form common BTA areas.

Social Compatibility

Higher costs of goods for consumers may be expected. This may require compensation for low income households (e.g. from carbon levy revenues). Further, there is the need for measures to support just transition, e.g. for workers in industries with high emissions (see Policy 12.1).

Questions and Uncertainties

CCS, BECCS and CDR in general will need a significant push to be deployed on a large scale for commercial applications. Not clear if costs can be significantly reduced in the next decades. Transport and storage of CO2 poses significant risks for the local population.

Policy 4.3: Regulations for the Swiss Commodity Trade

From 2025 onwards, companies based in Switzerland will be prohibited from extracting fossil fuels (namely oil, natural gas and coal), promoting them or providing financial, administrative or technical support for their production.
The Swiss commodity marketplace will have to withdraw completely from climate-damaging raw materials. Individual Swiss companies are heavily involved in the mining of coal, but if Switzerland wants to set an example in climate policy, such activities must no longer be approved.

There is, of course, the danger that raw materials companies will relocate their headquarters to a country without the appropriate regulations. However, this should not be an excuse to tolerate their harmful practices in our own country. Beyond that, the aim should be to soon have similar regulations in place in all parts of the world.

Impact

The companies concerned will have to limit their activities to carbon neutral raw materials. Switzerland is making it clear to the international community that fossil fuels are no longer socially acceptable and must stay in the ground.

Financing

Due to the possible emigration of affected companies abroad, tax losses can be expected. These losses can be compensated by a slight adjustment of the cantonal taxes, as these companies are typically located in cantons with low tax rates anyway.
The additional administrative costs for the introduction and periodic review of compliance with the regulation should be included in the budget of the relevant federal offices and tax audit offices. Revenue from penalties for non-compliance will be used to finance other climate protection measures.

Social Compatibility

Apart from the tax losses discussed above, no negative social consequences are to be expected.

Policy 4.4: Net-Zero Action Plans for all Producing Entities

Description

It is assumed that the sector policies for the building sector will decarbonize heating in industry and services already. Electricity consumption, district heating and use of transportation (people and goods) are already covered by other sector policies. All companies that produce additional direct emissions that are not already covered by the other sector policies have to develop net-zero action plans to fully decarbonize by 2030 in line with the reduction path to stay within the carbon budget (see introduction - GHG Budget). These remaining producing facilities – probably several thousand only – must submit in 2021 a net-zero emissions plan. The plans will then be third party verified.

The plans must list all measures necessary to transform the company no later than by 2030 into a net-zero-emission company. The needed transformation measures are listed in three categories:

a) measures that are economically viable with an 8 year pay back assuming that no remaining depreciation costs of existing equipment occur and that external GHG costs are fully internalized following measures 2&3. (net-zero ready and viable)
b) measures that are technically feasible but uneconomic under the conditions mentioned in a), e.g., producing biogas from manure to fuel high-temperature processes. (net-zero ready but uneconomic)
c) measures that lack proven technical feasibility at the scale needed, e.g., synthetic kerosene produced from sun converters (unproven technology)

Concerning type (a) measures, even if new net-zero compatible production facilities would pay for themselves a company could argue that the existing facility is not yet paid off in the books. However, this is part of the investment risks associated by making business. The science is established since 1990 and the global climate policy established in 2015 with the Paris agreement.

Net-zero company plans need to be updated every three years (2024, 2027) and need third party verification. Companies without such plans lose their license to operate.

Financing

Already now the agencies EnAW and ACT are supported by the government to help companies to draw emission reduction plans. This mandate would be adapted, and the support increased to cover all companies that have to provide a plan.

Impact

Although the plan itself may already have some impact it is the combined impact with measure 5-7 of this chapter that is relevant. To have such a plan is not only vital for business and investment planning but also mentally. Dividing the decarbonization task in groups of measures and knowing that financial or/and technical support will come may make the challenge more acceptable.

Social Compatibility

No concerns so far

Questions and Uncertainties

It is not clear whether enough decarbonization experts and tools are available by 2021. It may be necessary to limit the first period from 2021-2023 to companies with emissions above 100t CO2eq per year or that are already members of EnAW or ACT.
The split of measure into the categories a) to c) is at this time not known, but first guesses are included.

Policy 4.5: Implementation of all Net-Zero Ready and Viable Measures Incentivized with Early Adopter Bonus

Description

Companies are encouraged to implement all net-zero ready and viable measures (category a) measures as soon as possible. By 2030 all net-zero ready and viable measures from the 2027 plan need to be implemented. Otherwise their operation license is revoked.

To speed up the implementation companies get an early mover bonus. The difference between the 10-fold emissions of 2020 and the effective emissions from 2021 through 2030 get rewarded by a bonus of CHF 50 per ton of CO2eq. The earlier a company implements all measures the more bonus it gets.

This bonus should also pay for investments that have not yet been depreciated. The money could come from the GHG levy or the BTA net income. Implementation starts 2021 at the pace chosen by the company.

Financing

The investments would be made by the companies and refinanced by the financial industry, as it is the usual process today. Since the investments pay for themselves, the risks for the financial industry are in principle low. However, companies that struggle for other reasons and will not survive for another 8 years in the view of the financial industry will have troubles to get any new money.

Assuming that half of the decarbonization measures fall under this policy and that they are performed thanks to the early mover incentive already by 2025 then a total of 30 Mt CO2eq at 50 CHF/t need to be rewarded equaling 1.5 billion CHF. This amount can be taken from the CO2-levy or BTA revenue.

Impact

About 10 million tons of CO2eq per year concern production related emissions. If half of the decarbonization measures concern net-zero ready and viable measures, this means reductions of 5 million tons per year by 2030.

Social Compatibility

Some companies may not be able to lend the needed investment means because their business model is considered too weak for a safe investment. In some regions (structurally poor, alpine etc.) a closure of such companies would have effects on employment. Most cantons have their own regional banks and can make sure that no companies go out of business that could survive without this policy measure. However, in order to get new companies starting their business the cantonal economic and location promotion institutions should focus on net-zero suppliers. Furthermore. the educational system needs to be adjusted on all levels to provide enough trained employees and experts.

Questions and Uncertainties

It is not clear whether there are enough trained planners, engineers and installers. Also, the producers of certain equipment may have problems to scale up their production, especially if the demand increases globally.

Policy 4.6: Support to Implement Net-Zero Ready but Uneconomic Measures

Description

A specialized unit/agency/foundation investigates all net-zero plans that lists net-zero ready but uneconomic measures (category b). These plans are grouped according to sectors and type of measures and the following groupings are made:

I. Measures that concern sectors/products of very limited future roles. (e.g., upgrade for an oil refinery if oil demand in Switzerland would be close to zero in 2030)
II. Measures that would become affordable if the learning curve continues or minimal critical demand is created.
III. Measures that are likely to stay expensive

The regulation would make sure that companies with (I)-measures have to implement them anyway or close operations of the respective production line by 2030.

For (II) measures the unit/agency/foundation would provide both financial support and relevant purchasing vehicles in order to bring down the cost. “Contracts for difference” that have been used when power from renewables were uneconomic could also be used to accelerate industrial learning curves and ensure fair risk- and cost-sharing between producers and a supporting agency.

For (III) measures the unit/agency/foundation would engage with the concerned companies to analyze the long-term prospects of their products/services and likely global market scenarios including both technological alternatives and product alternatives. Financial and technical support for both process and product innovation and interim support for installing uneconomic net-zero compatible technology would be part of the support package.

Financing

The money could come from the GHG levy or the BTA net income. This support program is supposed to have a sunset clause, e.g., 2035. It is assumed that the needed support will be reduced thanks to spill-overs from other fast decarbonizing economies.

Impact

Probably 40% of the decarbonization measure could fall under this goal. This means that around 4 million tons CO2 would be reduced by 2030. The support for type (II) and (III) measures would create positive spill-over on a global level.

Social Compatibility

See social compatibility of Policy 4.5.

Questions and Uncertainties

It remains unclear what the split would be in reality and how support in (II) and (III) measures would bring down the costs.
The abortion of type (I) measures may lead to some temporary increase of imports.

Policy 4.7: Net-Zero Technology Program

Description

In order to achieve net-zero plans, the creation of new technologies is required such as new energy storage technologies, more efficient technologies for generating energy from renewable sources, a more efficient creation of lab-grown meat for human consumption, the development of more energy-efficient machines or materials which, when applied, lead to a reduction in the consumption of resources and energy.
Companies that depend on the development of type (c) measures to transform to net-zero will be screened for their long-term prospects and then supported to become early implementers of these new technologies.
In order to achieve a quick diffusion, technologies that have been financed with state funds should be shared proactively and their patent protection should be limited.

Of course, it will not be possible for Switzerland to develop the necessary technologies on its own. Other regions, especially the EU, work both on framework conditions (strengthened climate laws to achieve stricter targets by 2030) and allocating relevant resources to the transition (Green Deal Fund). Therefore, cooperation makes sense and may open up large markets. Switzerland is predestined to play a leading role in the development of such technologies given its good education system and existing innovation experience.
A specialized unit/agency/foundation investigates all net-zero plans that list unproven technologies (category (c) measures from policy 4). This should involve existing bodies such as innosuisse, core, and further experts from private industry and universities. These plans are grouped according to the technological barriers that need to be overcome. Based on already running technology initiatives in Switzerland and especially abroad (net-zero steel, CCS, batteries, etc.) the relevance for the Swiss industrial sector and the competence already in place, the technological challenges are selected to become national priority programs or programs to be pushed bilaterally.

These programs would make sure that optimal conditions are provided through all stages including the stages of industrialization. Existing large scale research programs of the format Horizon 2020 are likely to be both too slow and too little oriented towards implementation. Funds from the technology pillar in the EU-ETS revenue scheme may be more appropriate.

Due to the short time until 2030 on the one hand and the often slow and unpredictable avenue of innovation this goal is very pressing, and a large failure rate should be accepted to get enough programs that run in parallel and deliver eventually.

Examples

Cement production is a very relevant source of emissions in Switzerland. Demand will be significantly reduced by 2030 due to a moratorium on new infrastructure (see chapter Cross Sectoral Policies). For renovation however, there is a short term need to equip at least one cement plant with a CCS or/and CCU unit. If feasibility is demonstrated at industrial scale further cement plants could be made climate proof. At the same time, however, demand should be reduced since cement will become much more expensive and will be replaced by other materials or used more efficiently, as has already been demonstrated in pilot projects (NEST at EMPA).

The chemical industry is a very relevant user of fossil fuels for its products. Finding substitutes for all purposes or synthesizing them from H2 and CO2 will be a challenge within this short time. To support this change, the chemical industry will also receive specific support from this technology program through (global) competitions using the mission challenge approach or other means to find solutions on a large scale.

Financing

In Switzerland, CHF 665.5 million was spent on promoting innovation in the environmental sector in 2015. However, around 80% of this amount was spent on basic or applied research. Less than CHF 60 million was spent on industrial piloting and market implementation (FOEN 2020a). Hence, the government’s expenditures to date - especially for the market implementation of green technologies - has been very modest. By contrast, the federal agriculture budget for 2017 was around CHF 3.7 billion (Wehrli and Can 2019). Given the current ecological challenges, it should thus be possible to substantially increase the financial resources for the generation of green technologies in the future.

The money will come from existing funds for R&D, lighthouse projects and export support agencies. In Switzerland the limitation will be the existing scientists and engineers that can work on such innovations. This will keep additional costs below 1 billion per year.

Impact

The effect of the development of such technologies will not be limited to Swiss companies and households, because the technologies will also be used abroad. The ecological (and probably also economic) effect of the development of such technologies is accordingly large.

If negative emissions and aviation are not considered we estimate that 10% of the needed reductions will belong to this category, which means 1 million t by 2030. However, the potential spill-over globally could be huge and open interesting prospects for the Swiss industry.

As mentioned above, other and larger economies will enter this race as well. So spill-over effects into Switzerland may be significant as well and needed to drive down the cost of new technologies. To be able to benefit from these spillovers, however, it is important for Switzerland to build up a certain amount of knowledge. Only in this way will it be possible to benefit from existing knowledge abroad. A purely free-riding strategy will hardly work in this area, as new technologies in the green sector generally require very specific knowledge that can hardly be transferred from traditional technologies (Stucki and Woerter 2017).

Social Compatibility

No expected negative effects.

Questions and Uncertainties

A popular saying argues that innovations are oversold on a short term and underestimated on a long term. Therefore, it remains unclear how fast unproven technology today can be a solution in 2030. The moratorium for new infrastructure may reduce the hazard but post 2030 solutions are badly needed.

Riferimenti