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Inclusion of Consumption in Emissions Trading

Abgeschlossenes Projekt




Karsten Neuhoff


1. Januar 2015 - 30. Juni 2016


Climate Strategies


While the UNFCCC Lima outcome and the UNSG’s Climate Summit, among other developments, reconfirmed that pricing carbon remains a key emissions reduction tool, the focus of international negotiations has shifted from global carbon pricing mechanisms towards support for countries in their implementation of national transformation strategies, often including forms of pricing. But if countries retain flexibility in their policy mix, national carbon prices might continue to differ over longer time horizons and countries are likely to continue to implement free allowance allocation in emission trading schemes as a mechanism for leakage protection – which inevitably blunts the intended carbon price signal.


Against this background we would like to explore:

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

This would build on the experience of both Korea and some Chinese pilot schemes that use a similar mechanism to re-instate a carbon price signal for electricity consumption that is muted due to electricity regulation. In these schemes, large electricity consumers have to surrender allowances proportional to electricity consumption and a benchmark rate of carbon intensity of power.

DIW Team

Original reports

Inclusion of Consumption of Carbon Intensive Material in Emissions Trading (PDF, 0.77 MB) 
Climate Strategies Report, May 2016

Ergänzung des Emissionshandels: Anreize für einen klimafreundlicheren Verbrauch emissionsintensiver Grundstoffe (PDF, 191.79 KB)
DIW Wochenbericht 27/2016

Updated policy briefs

Climate Contribution and its role in European industrial decarbonization (2020), WISE Europe

Green Deal for Industry: A Clear Policy Framework Is More Important Than Funding, DIW Weekly Report 10 / 2021

Green Deal für die Industrie: Wichtiger als Förderung sind klare Rahmenbedingungen, DIW Wochenbericht 10 / 2021, S. 153-162

Technical analysis

Pricing Carbon Consumption: A Review of an Emerging Trend (PDF, 430.64 KB)
DIW Discussion Papers 1620/2016

Policy Summary (PDF, 0.56 MB) 
Inclusion of Consumption of Carbon Intensive Material in Emissions Trading 
Climate Strategies Policy Summary, May 2016

Inclusion of Consumption into Emissions Trading Systems: Legal Design and Practical Administration
DIW Discussion Papers 1579/2016

Quantifying Impact of Inclusion of Consumption Based Charge for Carbon Intensive Materials on Products  (PDF, 2 MB)
DIW Discussion Papers 1570/2016

Refined version: Carbon Pricing of Basic Materials: Incentives and Risks for the Value Chain and Consumers (2021) DIW Discussionpaper 1935 / 2021

Inclusion of Consumption into the EU ETS: The Legal Basis under European Union Law
RECIEL Journal Vol. 24 (3), 2015

Follow up analysis: Border Carbon Adjustments and Alternative Measures for the EU ETS: An Evaluation (2020), DIW Discussion Paper 1855

Preceeding sector level analysis

Steel Report: Carbon Control Post 2020 in Energy Intensive Industries (2014), Climate Strategies Report

The Cement Report: Carbon Control and Competitiveness Post 2020 (2014), Climate Strategies Report

The pulp and paper overview paper -Sector analysis for the Climate Strategies Project on Inclusion of Consumption in Carbon Pricing (2016)

The pulp and paper overview paper

This project is led jointly by Climate Strategies and DIW Berlin and delivered by a multidisciplinary, international team of researchers from a number of institutions, representing various fields (EU law and institutions, climate policy and economics, energy market and infrastructure policy and economics).

Advisory Group

Maurits Henkemans – Chair
Chang Hoon Lee, Korean Environment Institute
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

Researchers contributing to papers of the Inclusion of Consumption projects

William Acworth, DIW Berlin, Germany
Andrzej Ancygier, Hertie School of Governance, Germany
John Barrett, University of Leeds, UK
Carolyn Fischer, Resources for the Future
Manuel Haußner, University of Erlangen, Nürnberg
Roland Ismer, University of Erlangen, Nürnberg
Hanna-Liisa Kangas, Finnish Environment Institute
Yong-Gun Kim, Korea Environment Institute
Clayton Munnings, Resources for the Future
Anne Owen, University of Leeds, UK
Stefan Pauliuk, Freiburg University, Germany
Jean-Pierre Ponssard, CNRS, France
Philippe Quirion, CIRED, France
Susanna Roth, Swedish Environmental Research Institute (IVL)
Nagore Sabio, UCL Energy Institute, UK
Oliver Sartor, Institute für Sustainable Development and International Relations (IDDRI)
Misato Sato, London School of Economics, UK
Anne Schopp, DIW Berlin, Germany
Thomas Sterner, University of Gothenburg, Sweden
Richard Wood, Norwegian University of Science and Technology (NTNU)
Zhang Xiliang, Tsinghua University, China
Lars Zetterberg, Swedish Environmental Research Institute (IVL)

Over the course of the first year of the project, several workshops were held side-to-side to steering committee meetings. The following provides a list of the meetings, including links to agendas and presenations, starting with the most recent event.

Launch of IoC Report in the European Parliament Agenda (PDF, 409.29 KB)
Report (PDF, 0.77 MB)
Implementation details matter: Roundtable Discussion on Inclusion of Consumption  Agenda (PDF, 177.51 KB)


Innovation in the Materials Sector Agenda (PDF, 187.66 KB)
Seoul, Korea
Experience with Emission Benchmarks - Options for International Coordination

Agenda (PDF, 182.88 KB)

Lim, D-W. Experience with Emission Benchmarks. ETS ALLOCATION in KOREA (PDF, 0.52 MB)

Matthes, F. EU and Germany's experience with ETS benchmarking (PDF, 335.12 KB)

Matthes, F. The importance of carbon intensive sectors and their specific mitigation options (PDF, 258.17 KB)

Morgenstern, R. U.S. Experience with ETS Benchmarking: The case of California (A.B. 32) (PDF, 0.83 MB)

Neelis, M. Benchmarking in the EU ETS (PDF, 0.88 MB)

Neuhoff, K. Experience with Emission Benchmarks. Options for International Coordination (PDF, 259.39 KB)

Neuhoff, K. Leakage Protection options (PDF, 369.13 KB)

Qing, T. Beijing Pilot ETS: Allowance Allocations, Benchmarks & Incorporation of Consumption (PDF, 0.73 MB)

Ritchie, A.Benchmark development: UK and EU experience (PDF, 1.17 MB)

Beijing, China
Inclusion of Consumption for Carbon Pricing
Neuhoff, K. Inclusion of Consumption - Beijing Project Workshop (PDF, 1.5 MB)


Inclusion of Consumption for Carbon Pricing - Relevance and feasibility for the pulp and paper sector

Agenda (PDF, 354.53 KB)

Acworth, W. Inclusion of Consumption in Emissions Trading – an International Comparison (PDF, 0.69 MB)

Ismer, R. Including Consumption – Administrative Aspects (PDF, 353.78 KB)

Inclusion of Consumption in Emissions Trading - Kick-off Workshop

Agenda (PDF, 141.19 KB)

Neuhoff, K. Inclusion of Consumption in ET (PDF, 0.63 MB)