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

25 Pages Posted: 25 May 2016

See all articles by Roland Ismer

Roland Ismer

German Institute for Economic Research (DIW Berlin)

Manuel Haussner

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg, Law School, Students

Karsten Neuhoff

German Institute for Economic Research (DIW Berlin)

William W. Acworth

Independent; ICAP

Date Written: May 1, 2016

Abstract

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.

Keywords: Carbon pricing, value chain, consumption charge

JEL Classification: H23, K23, L61

Suggested Citation

Ismer, Roland and Haussner, Manuel and Neuhoff, Karsten and Acworth, William W., Inclusion of Consumption into Emissions Trading Systems: Legal Design and Practical Administration (May 1, 2016). DIW Berlin Discussion Paper No. 1579, Available at SSRN: https://ssrn.com/abstract=2784169 or http://dx.doi.org/10.2139/ssrn.2784169

Roland Ismer

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

Mohrenstraße 58
Berlin, 10117
Germany

Manuel Haussner

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg, Law School, Students ( email )

Germany

Karsten Neuhoff (Contact Author)

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

Mohrenstraße 58
Berlin, 10117
Germany

William W. Acworth

Independent ( email )

ICAP ( email )

2 Broadgate
London, EC2M 7UR
United Kingdom

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