This case study on green hydropower, conducted by Ecologic Institute, illustrates a novel application of economic policy instruments in European water management. Hydropower in Switzerland accounts for about 59 % of the electricity supply. While hydropower is already considered a green energy, the sector's "green" potential has increased with the introduction of a new label certification scheme.

Since 2000 customers in Switzerland are given the possibility to influence green energy production and thus promote fair competition in the electricity market by being offered the possibility to buy electricity produced sustainably under the label "Naturemade". From an ecological perspective, the introduction of this label developed by a non-profit organisation was to improve local river conditions by setting an incentive to develop sustainable hydropower. This instrument represents a combination of voluntary standards and payments for ecosystem services.

The main lesson learned from the introduction of this voluntary instrument is the fact that economic interests and ecological concerns can be combined in one voluntary instrument based on economic and regulatory instruments. Other positive outcomes include the guarantee of quality, the improvement of the environment on a local and regional scale, and the development of a competitive advantage for "greener" electricity from renewable energy sources compared to electricity from other renewable (e.g. non-certified hydropower) and non-renewable energy sources. The case study [pdf, 560 KB, English] is available for download.