The economic case for a consumption charge on carbon-intensive materials

Chapter 1 discusses the three mitigation channels for deep decarbonization of the materials industry: A credible and robust carbon price to trigger investment in low carbon technology and fuel shifting (production channel); a reflection of carbon costs in the consumption price to support materials efficiency (consumption channel); public funding of breakthrough technologies like CCS to commercialize such technologies (investment channel). It shows that an ETS would deliver full incentives in a perfect world. Under the current EU ETS design, the emission reductions channels are, however, only activated to a limited extent. Utilizing an EU ETS-integrated and carbon-related consumption charge on carbon-intensive materials consumed within the EU can deploy the full emission reduction potential.