Quantifying Impacts of Consumption Based Charge for Carbon Intensive Materials on Products

32 Pages Posted: 15 May 2016

See all articles by Stefan Pauliuk

Stefan Pauliuk

University of Freiburg

Karsten Neuhoff

German Institute for Economic Research (DIW Berlin)

Anne Owen

University of Leeds

Richard Wood

Norwegian University of Science and Technology (NTNU)

Date Written: April 1, 2016

Abstract

After the Paris Climate Agreement, it is anticipated that carbon prices will differ across regions for some time. If countries use free allowance allocation as carbon leakage protection, only a fraction of carbon prices are passed through to consumers particularly by carbon intensive materials producers. Adding a consumption charge based on benchmarks applied to the material content can reinstate the carbon price signal. The paper investigates the implications of such a consumption charge for industry and consumers based on material flow analysis and material flow cost accounting. The material‐related carbon liabilities for production, import, export, and consumption are estimated for 4000 commodity groups that contain one or more of the five bulk materials steel, aluminium, plastics, paper, and cement. Assuming an underlying carbon price of 30 Euros per ton of CO2, the total charge to European final consumers is estimated to be about 17 billion EUR. The total charges levied on imports and those waived for exports are each of similar size and roughly amount to half of the total charge to European final consumers. To reduce administrative efforts, the charge is not levied on imported products for which the value of the consumption charge compared to product price falls below a threshold. Thus administrative efforts for 77 to 83% of imports could be avoided while still 85% to 90% of import‐related carbon liabilities are included.

Keywords: Material flow analysis, material flow cost accounting, carbon pricing, inclusion of consumption

JEL Classification: F18, H23, Q56

Suggested Citation

Pauliuk, Stefan and Neuhoff, Karsten and Owen, Anne and Wood, Richard, Quantifying Impacts of Consumption Based Charge for Carbon Intensive Materials on Products (April 1, 2016). DIW Berlin Discussion Paper No. 1570. Available at SSRN: https://ssrn.com/abstract=2779451 or http://dx.doi.org/10.2139/ssrn.2779451

Stefan Pauliuk

University of Freiburg ( email )

Fahnenbergplatz
Freiburg, D-79085
Germany

Karsten Neuhoff (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Anne Owen

University of Leeds ( email )

Leeds, LS2 9JT
United Kingdom

Richard Wood

Norwegian University of Science and Technology (NTNU) ( email )

Trondheim NO-7491
Norway

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