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Inclusion of Consumption into Emissions Trading Systems: Legal Design and Practical Administration

Discussion Papers 1579, 23 S.

Roland Ismer, Manuel Haussner, Karsten Neuhoff, William Acworth


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A world of unequal carbon prices requires measures aimed at preventing carbon leakage. Climate policy imperatives demand that such measures must be compatible with the goal of sending a carbon price signal down the value chain. For carbon intensive materials, the combination of dynamic free allocation combined with Inclusion of Consumption (IoC) into emissions trading systems such as the European Union Emissions Trading Scheme (EU ETS) arguably fulfils both the aims of preventing carbon leakage and of sending the price signal. The paper presents concrete proposals regarding the legal design and practical administration of this mechanism. It argues that the IoC is, provided appropriate choices are made, ripe for implementation.

Karsten Neuhoff

Head of Department in the Climate Policy Department

JEL-Classification: H23;K23;L61
Keywords: Carbon pricing, value chain, consumption charge
Frei zugängliche Version: (econstor)