The impact of the Swiss CO2 levy on residential heating emissions and energy demand

This paper assesses the impact of the Swiss CO 2 levy on residential heating energy demand and the associated CO 2 emissions. Using the synthetic control method, the results show that the levy led to an average annual reduction in CO 2 emissions of 6.5% during the post-treatment period (2008–2021), corresponding to a decrease of 0.1 metric tons of CO 2 per capita per year. Furthermore, the empirically estimated price elasticities for heating oil indicate that the short-run elasticity for the retail price is − 0.044 , while the elasticity for the CO 2 levy is − 0.997 , demonstrating that consumers respond more strongly to policy-induced price changes than to market-driven price changes. In the long run, these elasticities increase to − 0.054 (retail price) and − 1.215 (levy), highlighting that over time, households adjust their demand more significantly in response to sustained price changes. A similar pattern is observed for natural gas, with short-run elasticities of − 0.216 (retail) and − 0.547 (levy), increasing to − 0.552 and − 1.396 , respectively, in the long run. These findings are consistent with the Swiss CO 2 levy contributing to lower fossil-fuel demand and building-sector emissions, although the SCM inference does not reach conventional levels of statistical significance. The results underline the importance of policy-induced price instruments and highlight the necessity of high levy rates to ensure a measurable impact on consumption behavior.