Inclusion of Consumption in Emissions Trading

The Inclusion of Consumption (IoC) project was jointly led by Climate Strategies and DIW Berlin during 2015-2016.

The debate on the future of the European Union’s Emissions Trading will determine whether EU ETS can support innovation and investment opportunities in production and use of materials. Discussions to date are however largely focused on how to structure free allowance allocation to avoid the risk of carbon leakage.

The Paris Agreement on climate change, agreed in December 2015, means countries need to prepare a low-carbon transition for their economies. This requires stronger action than is currently planned, but also creates new policy opportunities.

Against this background, the Inclusion of Consumption project has explored:

Whether inclusion of domestic sales of selected energy intensive commodities (e.g. steel) in domestic emission trading schemes is an effective and feasible approach towards restoring the carbon price signal in these sectors, without damaging competitiveness.

The research network Climate Strategies has convened 17 international research partners led by DIW Berlin to analyse whether and how this can be implemented in practice. Legal and administrative assessments show that inclusion of consumption of carbon intensive materials can be aligned with existing procedures of public and private actors. The consumption-based approach also avoids WTO and political challenges with trade-related measures.

Advisory Group
Maurits Henkemans – Chair
Chang Hoon Lee, KEI
Carl de Mare / Karl Buttiens, Arcelor Mittal
Rob van der Meer, Heidelberg Cement
Sam Van Den Plas, WWF
Wang Yi, Institute of Policy and Management, Chinese Academy of Science

Reports and Events

We have organised a number of stakeholder consultations and workshops. All publications for this project are available on this page.

Media coverage for this project included an op-ed by Karsten Neuhoff on Energy Post and coverage on Carbon Pulse.

The project was finalised with an event in the European Parliament, Brussels, on Tuesday May 24, 2016 hosted by Jens Geier MEP (S&D).

As a follow up, Climate Strategies and DIW Berlin are working on a new project investigating options to reduce emissions from the basic materials sector.

Reports for download:

  1. Inclusion of Consumption of Carbon Intensive Material in Emissions Trading, Report (2016)
  2. Inclusion of Consumption of Carbon Intensive Material in Emissions Trading, Policy Summary (2016)
  3. Inclusion of Consumption into Emissions Trading Systems: Legal Design and Practical Administration
  4. Sector Analysis: Pulp and Paper
  5. Quantifying Impacts of Consumption Based Charge for Carbon Intensive Materials on Products
  6. Pricing Carbon Consumption: A Review of an Emerging Trend
  7. Inclusion of Consumption into the EU ETS: The Legal Basis under European Union Law

All reports are also available to download on the DIW website.