A blueprint for the Inclusion of Consumption in the EU ETS: Administrative implementation of a consumption based charge

The “Inclusion of Consumption in EU ETS” is currently gaining traction as a new approach to address carbon leakage and improve the effectiveness of the EU ETS, within legal and political constraints.

In order to ensure the recovery of carbon costs from consumers, we propose the introduction of a complementing second pillar. This would be facilitated by adding a consumption‐based charge to the EU ETS directive (the charge).

This report provides a blue print for the administration and control of the “Inclusion of Consumption”. The proposed approach builds from the administration of other consumption based levies including excise and Value Added Tax (VAT). The research has been informed via a literature review, case studies with businesses that produce excisable goods as well as interviews with public authorities, academics and excise administration experts.

The intent of the research is not to design an all‐ encompassing administrative framework, but rather to demonstrate how such a system may function.