ProSTEP - Promotion or Steering-based Energy Policy: Assessing Distributional and Efficiency Implications

It is a central policy concept within the context of the Energy Strategy 2050 (ES2050) to facilitate a gradual transition from today’s promotion-based system (“Fördersystem”) to a steering system (“Lenkungssystem”). The future regulatory system, with an expected phase-in starting in 2020, is envisaged to be primarily based on market-based policy instruments (such as incentive taxes) whereas current policy measures rely heavily on promotion-based instruments (such as command-and-control (CAC) measures and subsidies). Establishing the necessary social and political consensus of the ES2050 will involve, among other things, estimating both the socio-economic distributional and efficiency implications of current and planned regulatory measures of energy and climate policy. The overall aim of this project (ProSTEP) is to assess and compare promotion- and steering-based regulatory instruments as envisaged in the context of the Energy Strategy 2050 in terms of their socio-economic redistributive and efficiency effects. ProSTEP will be essential (i) to resolve the fundamental question of instrument choice and design of energy and climate policy in Switzerland for the second phase of ES2050, (ii) to uncover the hidden distributional effects of promotion and command-and-control measures compared to a steering system, (iii) to handle the uncertainty about the future development (technological change, economic growth etc.) (iv) to help establish a social and political consensus for the ES2050 by providing detailed and relevant impact analysis to stakeholders (e.g., households, firms, industries) at different levels (e.g., federal, cantonal, and municipal). We propose to use quantitative and empirical economic analysis to assess the performance of promotion- and steering-based energy policy instruments. Our methodological framework combines concepts from (micro-)economic theory with applied tools from general equilibrium modelling and micro-simulation analysis of household behaviour.