Definitions

To measure consumption-based emissions, researchers have developed consumption-based emission accounting systems. These allocate emissions to consumers in each country, usually based on final consumption but also as trade-adjusted emissions. Conceptually, consumption-based inventories are built with the formula: consumption- equals production-based emissions minus emissions from the production of exports plus emissions from the production of imports (Consumption = Production – Exports + Imports).

Policy instrument

Policies usually state broad aims (e.g. carbon reduction in the transport sector), while instruments are the means to implement policies. Carbon-CAP examined specifically policy instruments.

List of 33 consumption-related policy instruments that can deliver lower carbon lifestyles and business activities:

Policy instrument Definition
Product labels Requirement of embodied and/or usage carbon information on labels
Approved technology lists List of e.g. “efficient technologies” approved by a public authority for sale or procurement
Graduated tax on advertising Tax on advertising that increases with carbon content of a product or service
Information campaign Information provision to potential consumers regarding carbon implications of consumption patterns
Product location at sale Low carbon products are given preferential placement at retail stores, internet sites, etc.
Rankings and Award campaigns Product manufacturers and/or sellers are given publically celebrated awards for low carbon performance
Regulatory standards direct regulation of performance of products available at point of sale
Licenses License is required either to sell (or purchase) high carbon products
Government procurement Government gives preferential procurement to low carbon options
Recycling requirements Retailer and/or consumer have responsibility for recycling product, with ban on landfilling
Product ban Products are banned based on a criterion of embodied and/or usage carbon
Waste targets, requirements and/or prices Product recycling is motivated through waste policies
Deposits / refunds on purchased goods Deposits are initiated to enhance recycling of goods to reduce raw materials requirements
Limits on percentage ownership or use Restrictions on the number of a given product (such as cars) that can be purchased and/or owned
Sector trade body standards voluntary product performance standards set by trade organisations
Business emission agreements / allowances Businesses (e.g. Retail) required to acquire allowances for Scope 1&2 (at least) emissions, generally with trading
Supply chain procurement requirements Retailers establish embodied carbon requirements on intermediate producers
Voluntary agreements by trade organisations Trade organizations adopt voluntary commitments to reducing embodied and/or usage carbon of products
Extension of product lifetime Restrictions on the practice of planned obsolescence, or requirements of product lifespan
Retailers product choice Point of sale operators voluntarily restricts products to lower embodied and/or usage products
C-intensive materials charge Consumers are provided an annual carbon budget and cannot exceed this, most proposals allow for trading
Carbon embodied charge Explicit price attached to product related to embodied and/or usage carbon
Product user fees A fee is attached at point of sale based on carbon associated with subsequent use
Minimum price limits Very low prices are banned to remove from markets products that have less incorporation of externalities
Subsidy Government or trade subsidy of low carbon products
Product tax incentives Eg. Enhanced tax depreciation based on product performance / embodied carbon
Trade Env Goods and Services agreements - e.g. tariffs Proposal for tariff reductions on Env Goods and Services products
Preferential finance terms Lower interest rates for low carbon investments (e.g. energy efficiency improvements in buildings)
Mandatory metering Requirements of materials for power and gas use in buildings to signal energy consumption
Infrastructure improvements Improvements to infrastructure that enable low carbon options (e.g. public transport)
Enabling recycling Creation of the infrastructure for re-cycling of goods between consumers
Enabling product sharing Creating infrastructure for shared ownership and/or use of products (e.g. Zipcar)
Refund mechanism Part of the price of purchase is refunded based on lower than average embodied and/or usage carbon

 

Classification matrix

Class 'Mandatory'  'Voluntary' 
Informational
  • Product labels
  • Approved technology lists
  • Graduated tax on advert
  • Information campaign
  • Product location at sale
  • Ranking and awards campaigns
Regulatory / administrative
  • Regulatory standards
  • Licenses
  • Government procurement
  • Recycling requirements
  • Product ban
  • Waste targets, requirements and/or prices
  • Deposits / refunds on purchased goods
  • Limits on percentage ownership or use
  • Sector trade body standards
  • Business emission agreements / allowances
  • Supply chain procurement requirements
  • Voluntary agreements by trade organisations
  • Extension of product lifetime
  • Retailers product choice
Economic / financial ‘Externality / Cost-raising’

  • C-intensive materials charge
  • Carbon embodied charge
  • Product user fees
  • Waste targets, requirements and/or prices
  • Minimum price limits
  • Business emission agreements / allowances
‘Subsidy / cost –reducing’

  • Subsidy
  • Deposits / refunds on purchased goods
  • Product tax incentives
  • Trade Env Goods and Services agreements - e.g. tariffs
  • Preferential finance terms
Enabling infrastructure & institutional
  • Mandatory metering
  • Infrastructure Improvements
  • Enabling recycling
  • Enabling product sharing

 

Policy instrument evaluation

Each policy instrument was assessed against a sub-set of criteria. The analysis considered political, legal, social and administrative barriers to implement each policy instrument at a sufficient scale, geographically and in terms of economic sectors. In evaluating instruments, there was a distinction between ‘theoretical effectiveness’, meaning the effectiveness suggested by models (for example global macroeconomic models in the case of price mechanisms used to drive consumption changes ), and ’empirical effectiveness’, meaning the measured impact on consumer behaviour and related carbon emissions. There was a significant gap between expected and actual performance of policies; therefore, the focus was placed largely on empirical experience.

Scope

Depending on the percentage of carbon associated with a product in a particular sector, a Scope score was assigned between 1 and 3:

  • 1 if scope was 20% or less of carbon of that product in that sector
  • 2 if scope was 20-40% of carbon of that product in that sector
  • 3 if the scope was more than 40% of carbon of that product in that sector.

Effectiveness

An Effectiveness score of 1 to 3 was assigned as follows:

  • 1 if the instrument was likely to produce 10% or less conditional reduction in carbon. This assignment was given to instruments that rely primarily on consumer information to drive behavioural change.
  • 2 if the instrument was likely to produce 20-40% conditional reduction in carbon. This assignment was given to instruments that rely primarily on price signals and voluntary trade sector programes to drive behavioural change.
  • 3 if the instrument was likely to produce more than 40% conditional reduction in carbon. This assignment was given to instruments that rely primarily on regulation and infrastructure to drive behavioural change.

Potential impact

  • Low (red): the instrument was likely to yield a less than 10% reduction in carbon associated with demand for the product/service category due to its effectiveness and scope
  • Medium (yellow): between 10 and 30% reduction
  • High (green): more than 30% reduction.

An initial judgment was formed of the potential level of success of the instrument in reducing consumer demand for high carbon goods and services and the embodied carbon and usage emissions.
The judgments were categorical rather than fully quantitative.
The judgments here were therefore LOW (the instrument is likely to yield a less than 10% reduction in carbon associated with demand for the product/service category due to its effectivness and scope); MEDIUM (between 10 and 30% reduction) and HIGH (>30% reduction).

The scoring system was as follows. An instrument/sector combination was first assessed for Scope.
Depending on the percentage of the carbon associated with a product in a particular sector, a Scope score was assigned between 1 and 3:

  • A Scope score of 1 if scope was 20% or less of the carbon of that product in that sector
  • A Scope score of 2 if scope was 20-40% of the carbon of that product in that sector
  • A Scope score of 3 if the scope was >40% of the carbon of that product in that sector

The instrument/sector was then assessed as to conditional effectiveness (i.e. effectiveness at reducing carbon associated solely with that product in that sector). An Effectiveness score of 1 to 3 was again assigned:

  • An Effectiveness score of 1 if the instrument was likely to produce 10% or less conditional reduction in carbon. This assignment was given to instruments that rely primarily on consumer information to drive behavioural change
  • An Effectiveness score of 2 if the instrument was likely to produce 20-40% conditional reduction in carbon. This assignment was given to instruments that rely primarily on price signals and voluntary trade sector programes to drive behavioural change
  • An Effectiveness score of 3 if the instrument was likely to produce >40% conditional reduction in carbon. This assignment was given to instruments that rely primarily on reguation and infrastructure change to drive behavioural change.

Feasibility

The evidence base for judgments of acceptability of the instrument for its implementation was based on literature reviews, analysis of existing legal frameworks including the World Trade Organization (WTO), economic analysis of the impacts of policy instruments on different socio-economic groups, and experience within the European Union when applying similar instruments. Each of the following was scored from 1 (a significant barrier to adoption) to 3 (not a significant barrier).

  • Distributional impact & flexibility - Does the instrument place the economic burden on members of society best able to bear that burden or onto the poorest one?
  • Legal acceptability - Is the instrument likely to face legal challenges it will be unable to withstand?
  • International political acceptability - Will the instrument raise trade concerns?
  • Policy feasibility - Will the instrument encounter administrative challenges due to constraints on institutional capacity?

More than 30 consumption-related policy instruments to deliver lower carbon lifestyles and business activities were assessed. Two major questions arose in this regard. The first was about the potential to bring about changes when the instrument would be implemented. The second was about the acceptability of the instrument for its implementation. Four meanings of ‘acceptable’ and related questions were considered:

  • Economic: Does the instrument place the economic burden on members of society best able to bear that burden or onto the poorest members?
  • Legal: Is the instrument likely to face legal challenges it will be unable to withstand?
  • International/ political: Will the instrument raise trade concerns that may affect international political acceptability?
  • Institutional: Will the instrument encounter administrative challenges due to constraints on institutional capacity?

The acceptability of a policy instrument can differ significantly across sectors of goods and services. Therefore, the analysis was divided into applications in transport, food, buildings, paper and plastics, textiles and consumer goods machinery. The evidence base for judgments of acceptability was based on literature reviews, analysis of existing legal frameworks including the World Trade Organization (WTO), economic analysis of the impacts of policy instruments on different socio-economic groups and experience within the European Union when applying similar instruments. For each of the sectors and aspects of ‘acceptability’, scores were assigned between 1 (a significant barrier to adoption) and 3 (not a significant barrier).

Compound score

This is the multiplicative score that combining all criteria used in the evaluation.