Mixes of policy instruments towards climate neutrality in a computable general equilibrium framework

Despite being advanced as the most efficient climate policy tool, carbon pricing has not been implemented to the degree required to reach climate neutrality by mid-century. Drawing from the literature on mixes of instruments, the current study simulates deep decarbonisation scenarios which incorporate a plurality of measures thanks to a large-scale recursive-dynamic international computable general equilibrium model. In addition to carbon pricing, the considered policy measures consist of purchase subsidies, purchase taxes, as well as purchase bans on new equipment. To increase realism, vintages of energy-specific capital of fossil and non-fossil varieties are represented in key sectors. The trade-offs in terms of economic effects, non-abated emissions, and necessary instrument stringencies are discussed in the context of Switzerland's net-zero target based on four stylised mixes of instruments.