Executive Briefing

The briefing advocates for shifting or supplementing production-based carbon pricing with consumption-based models to eliminate the need for free allowances and exemptions that mute price signals. It highlights that pricing at the point of final consumption can prevent carbon leakage in basic materials like steel and cement, incorporate emissions from imports, and provide sub-national governments with jurisdictional autonomy. The text proposes an evolutionary implementation path, starting with undifferentiated sector benchmarks and moving toward full life-cycle carbon accounting.

• Production-based carbon pricing often fails in emissions-intensive, trade-exposed industries like cement, steel, and aluminum because governments grant exemptions or free allowances to prevent carbon leakage, which mutes the price signal for both producers and consumers.
• Consumption-based carbon pricing can eliminate the risk of cross-border carbon leakage and include extra-territorial emissions by treating all producers equally regardless of their origin, avoiding the political and legal complexities associated with border carbon adjustments (BCAs).
• The document proposes an evolutionary implementation strategy for consumption pricing: starting with simplified, undifferentiated sector-specific benchmarks and progressing toward a more developed system of mandatory product labeling based on life cycle CO2 emissions and international auditing standards.
• Consumption-based pricing is particularly useful in markets with imperfect competition or government-set retail prices, such as China's electricity market, where production costs are not fully passed through to consumers.
• Sub-national entities can use consumption-based pricing to achieve jurisdictional autonomy. For example, Tokyo prices carbon consumption for electricity and fuels at the building level because its electricity is primarily sourced from outside the prefecture.
• Basic materials industries—specifically cement, iron, steel, and aluminum—are primary candidates for consumption-based pricing as they are responsible for approximately 30 percent of global CO2 emissions and face the highest operating cost increases from carbon pricing.

APA

Climate Strategies (2018). Executive Briefing. https://climatestrategies.org/wp-content/uploads/2018/05/27916-CPLC-ExecBrief-CarbonPricing-v7.pdf

Chicago

Climate Strategies. Executive Briefing. 2018. https://climatestrategies.org/wp-content/uploads/2018/05/27916-CPLC-ExecBrief-CarbonPricing-v7.pdf.

Wikipedia

{{cite report |author=Climate Strategies |title=Executive Briefing |date=April 2018 |url=https://climatestrategies.org/wp-content/uploads/2018/05/27916-CPLC-ExecBrief-CarbonPricing-v7.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatestrategies2018executive, author = {{Climate Strategies}}, title = {{Executive Briefing}}, institution = {Climate Strategies}, year = {2018}, month = apr, url = {https://climatestrategies.org/wp-content/uploads/2018/05/27916-CPLC-ExecBrief-CarbonPricing-v7.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }