Heating System Choice Among Swiss Households: Determinants and Effects of Policy Counterfactuals

Burning fossil fuels for space heating causes environmentally damaging emissions. In this paper, we estimate the determinants of households' heating system choice using information on around 75 000 buildings in the Swiss Canton of Bern. Our results show that households mainly respond to the up-front prices of heating systems and to a lesser extent to future heating resource costs. Buildings in a municipality where a gas distribution network is present are 13 percentage points more likely to heat with gas. We simulate the effects of two policy counterfactuals. An increase in subsidies for heating systems based on renewable energy leads to a strong reduction in the probability to acquire oil-based heating systems and thus to a decrease in annual CO2 emissions of 8 percent. A change in the variable heating costs due to an increase in the CO2 levy on fossil heating fuels also results in lower emissions by 4 percent per year. While the subsidy triggers a larger emission reduction, it is also accompanied by higher government outlays. This highlights the importance to also evaluate the benefits of emission reductions against the costs of achieving them.