Policy Options

The Carbon-CAP project looked at what options might be available to stimulate an effective climate policy mix that addresses consumption-related emissions. Carbon-CAP identified 113 improvement options. The most promising ones were then analysed and subjected to more detailed scrutiny.

Carbon-CAP developed a tool to evaluate 33 policy measures to reduce emissions at various stages of products’ life cycle and determine their effectiveness in transport, manufacturing, food, buildings, paper and plastics, and textiles.

The 33 policy measures:

# Instrument Summary definition
1 Regulatory standards Direct regulation of performance of products available at point of sale
2 Sector trade body standards Voluntary product performance standards set by trade organisations
3 Product labels Requirement of embodied and/or usage carbon information on labels
4 Carbon embodied tax Explicit price attached to product related to embodied and/or usage carbon
5 Information campaign Information provision to potential consumers regarding carbon implications of consumption patterns
6 Consumer carbon budget / personal carbon allowance Consumers are provided an annual carbon budget and cannot exceed this, most proposals allow for trading
7 Business emissions agreements / allowances, at least Scope 1+2 Businesses (e.g. retail) required to acquire allowances for Scope 1 & 2 (at least) emissions, generally with trading
8 Subsidy Government or trade subsidy of low carbon products
9 Product user fees A fee is attached at point of sale based on carbon associated with subsequent use
10 Licenses License is required either to see (or purchase) high carbon products
11 Refund mechanism Part of the price of purchase is refunded based on lower than average embodied and/or usage carbon
12 Product location at sale Low carbon products are given preferential placement at retail stores, internet sites etc.
13 Supply chain procurement requirements Retailers establish embodied carbon requirements on intermediate producers
14 Government procurement Government gives preferential procurement to low carbon options
15 Voluntary agreements by trade organisations Trade organisations adopt voluntary commitments to reducing embodied and/or usage carbon of products
16 Recycling requirements Retailer and/or consumer have responsibility for recycling product, with a ban on landfilling
17 Product ban Products are banned based on criterion of embodied and/or usage carbon
18 Shop product choice Point of sale operators voluntarily restrict products to lower embodied and/or usage products
19 Waste targets, requirements and/or prices Product recycling is motivated through waste policies
20 Rankings and award campaigns Product manufacturers and/or sellers are given publically celebrated awards for low carbon performance
21 Deposit on purchased goods Deposits are initiated to enhance recycling of goods to reduce raw materials requirements
22 Minimum price limits Very low prices are banned to remove from markets products that have less incorporation of externalities
23 Approved technology lists List of e.g. “efficient technologies” approved by a public authority for sale or procurement
24 Product tax incentives e.g. enhanced tax depreciation based on product performance / embodied carbon
25 Trade Env Goods and Services agreements – e.g. tariffs Proposal for tariff reductions on Env Goods and Services products
26 Limits on percentage ownership or use Restrictions on the number of a given product (such as cars) that can be purchased and/or owned
27 Enabling recycling Creation of the infrastructure for recycling of goods between consumers
28 Extension of product lifetime Restrictions on the practice of planned obsolescence, or requirements of product lifespan
29 Enabling product sharing Creating infrastructure for shared ownership and/or use of products (e.g. Zipcar)
30 Mandatory metering Requirement of metering for power and gas use in buildings to signal energy consumption
31 Graduated tax on advertising Tax on advertising that increases with carbon content of a product or service
32 Preferential finance terms Lower interest rates for low carbon investments (e.g. energy efficiency improvements in buildings)
33 Infrastructure improvements Improvements to infrastructure that enable low carbon options (e.g. public transport).

The assessment criteria to consider what kind of instrument may be most relevant and desirable, at each potential point of intervention and to which kinds of decision-makers were:

  • Effectiveness
  • Efficiency
  • Flexibility
  • Equity
  • Institutional coherence
  • Community acceptance
  • Sustainability

Additionally, three auxiliary criteria were included: Coordination, Consistency and Spillover effects. The instruments may be aimed at any or all of the following general categories of influence:

  • Final consumer: Government policies aimed directly at final consumer choices
  • Intermediate consumer: Government policies aimed at intermediate stages in the production chain, affecting the consuming behaviours of these organisations as these influence the carbon
  • characteristics of goods and services available to the consumer
  • Supply chain management: Policies – often by corporates or in support of corporate initiatives – that affect overall supply chain management, again influencing the consumer choices of
  • intermediate producers.

At the end of this first assessment of the policy instruments, two major questions arose. The first was about the potential to bring about changes when the instrument is implemented. The second concerned the acceptability of the instrument for its implementation. Four meanings of ‘acceptable’ 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?

To assist with choices between policy instruments, a shortlist of promising instruments were ranked in three tiers. The first tier contains instruments judged to be strong across the four criteria of acceptability. The third tier contains instruments for which there is a significant barrier to acceptance on at least one of the criteria. Instruments in the middle (second) tier have only medium acceptability on most categories.

1st rank 2nd rank 3rd rank
  • Approved technology lists
  • Supply chain procurement requirements
  • Carbon-intensive materials charge
  • Infrastructure improvements
  • Product location at sale
  • Retailer product choice
  • Regulatory standards
  • EGS trade agreement
  • Recycling requirements, waste targets & prices
  • Voluntary agreements by trade associations
  • Business emission agreements & allowances
  • Direct regulation of performance of products available at point of sale

The research concluded that to effectively reduce emissions at the global level, consumption-based climate policy instruments will have to be part of the policy mix. Introducing instruments in a portfolio has three main advantages. First, consumer-oriented policy should not have the effect of ‘individualising’ responsibility solely on end-users. It should spread responsibilities across many sectors, across consumers and across producers. Second, emissions are caused by many different decisions at many different levels from primary production to consumption to disposal. Consumer-oriented policies only act on part of these, and individual consumer-based instruments further focus the scope of application. Finally, experience has shown policies are often most effective when developed in mutually reinforcing ways since weaknesses in any one instrument can be counterbalanced by strengths of another. This often could also help in negotiations between groups implementing and affected by an instrument.

The assessments carried out by the project provided a useful first overview of promising instruments and a starting point for identifying opportunities and challenges to focus on in the future. A key lesson was that consumer choice is difficult to influence when consumers have equal access to high and low carbon goods meeting the same needs. Therefore, the rankings of effectiveness and acceptability of instruments reflected a tiered approach in which instruments that alter the range of products available, their ease of access and/or the cost (due to carbon charges) were applied first. The second and third ranks of instruments would then be considered as means to support the first rank. This was consistent with the lesson that instruments are most effective when introduced as complementary portfolios.

The improvement options in all three selected sectors (food, buildings and transport) combined showed a maximum potential to deliver household emission reductions at EU level of 47-67%, and total production-based emission reductions of 16-26% relative to the reference scenario in 2050. The impacts on production-based CO2 emissions outside the EU were small and mostly negative. However, when behavioural responses to individual policies that could realise the improvement options were considered, there was a maximum 14% reduction (7.5-14%) in total CO2 production-based emissions in the EU by 2050, relative to the reference scenario. These more modest reductions could be considered more realistic as many of the actions and policy measures considered were voluntary.

The most potential for reducing EU territorial CO2 emissions came from the transport and buildings scenarios. The food options had less potential when CO2 only were considered because of the rebound effect. All models showed a slight decrease in consumption-based EU CO2 emissions under the combined food scenario (-0.2 to -3.6%). The range of impacts on consumption-based emissions was slightly wider range than the reductions in the territorial emissions (-0.3 to -1.2%).

The economic impacts of the combined scenario on the EU’s GDP were small, ranging from about 0.78% loss to a very small positive impact (0.06%) in 2050, depending on the model. The overall impact on employment in the EU in 2050 was very small and positive. Sectoral employment impacts would vary depending on the improvement option and span from a 20% decrease in the vehicle manufacturing sector to a 61% increase in the provision of transport services.

The modelling undertaken in Carbon-CAP showed that various consumption-based policies relating to food, buildings and transport have considerable potential to reduce territorial CO2 emissions in Europe, especially with regards to household CO2 emissions. However, the reduction in consumption-based emissions was rather small and the relative gap between consumption- and production-based emissions expected to increase. More detailed modelling will be required to estimate more comprehensively the total greenhouse gas emissions reduction potential of each of the individual policy packages and their implementation over the time horizon 2020-2050.

The consumption-based emission reduction measures used in this study showed small impact on trade related emissions and therefore more attention should be paid to designing and assessing policies that address these emissions.

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