To ban or not to ban carbon‐intensive materials: A legal and administrative assessment of product carbon requirements

Abstract

By setting near‐zero‐emission requirements for the production of certain products to be sold on the European single market (product carbon requirements, PCRs), the European Union could accelerate the phase‐out of carbon‐intensive production processes. The announcement of such requirements would send a signal to producers, financing institutions and other relevant stakeholders, thus incentivizing them to prepare for the shift to a carbon‐neutral society. This article analyses several European environmental standards and technical regulations to offer insights into the political, legal and technical background for the adoption of PCRs. It shows that PCRs would constitute a new development in technical regulations. Given the relevance of World Trade Organization law for the adoption of standards and technical regulations on products, the article analyses in further detail the compatibility of PCRs under WTO law, and argues that PCRs can be designed in line with the provisions of the General Agreement on Tariffs and Trade and the Agreement on Technical Barriers to Trade.

Carbon contracts-for-difference: How to de-risk innovative investments for a low-carbon industry?

“…Third, green public procurement can help in creating lead markets ( Chiappinelli and Seres, 2021 ) and ensuring collaboration on innovation material use and production along value chains ( Chiappinelli et al., 2021 ), but should be structured so as to ensure material-efficient design, manufacturing and construction of buildings, infrastructure and products rather than only a substitution of carbon intensive with clean produced materials funded through CCfDs. Finally, instruments to encourage a shift to climate neutral production, such as product labeling schemes to engage final consumers, financial reporting requirements to engage the finance sector, and expectations that once sufficient scale of climate neutral production is available, product carbon product requirements requiring climate neutral production processes for the sale materials in a territory will create strong long-term planning incentives to prepare for a full transition ( Gerres et al., 2021 ; Neuhoff et al., 2019 ).…”

“…In the past, significant levels of public and private R&D funding have taken place in the energy-intensive industries and led to a series of pilot projects (for example in Europe in the steel sector funded by the Horizon 2020 program, as well as the NER 300 fund ( Kushnir et al., 2020 )), bringing technologies (close) to large-scale maturity. In the long-run, sufficient carbon pricing (including carbon leakage protection) promises to provide a framework to ensure private investments in clean processes ( Bataille et al., 2018 ), potentially complemented or substituted by phasing-out policies at later stages of the diffusion process, such as product carbon requirements ( Gerres et al., 2021 ). However, currently private investments in these technologies face the challenges of (i) first-of-kind costs (ii) higher operation and investment costs than conventional carbon-intensive processes and (iii) insufficient and uncertain carbon prices, which partly stem from political uncertainty, and which, owing to incomplete risk markets ( Greenwald and Stiglitz, 1986 ), can usually not be hedged over sufficient time horizons ( Newbery et al., 2019 ).…”

Carbon Leakage, Consumption, and Trade

“…Product standards on intermediate or final goods can focus on a variety of objectives including the carbon efficiency of materials, the life cycle emissions of final products, and the recyclability of products. First, standards on the embodied emissions in basic materials can take the shape of minimum performance standards for materials sourced from production processes, excluding those exceeding a certain carbon intensity threshold (118). Such standards could help accelerate the phasing out of the most inefficient, polluting plants such as, for example, inefficient wet kilns for cement clinker production.…”