4. EU Perspective on Consumption-Based Policies

The main focus in this report is on national policy options for addressing consumption-based emissions. However, since consumption-based emissions often involve multiple countries, coordinated approaches can be especially effective. Recognizing this, the EU has a significant opportunity to adopt EU-wide regulatory measures. In terms of scope, pace, level of ambition and coordination across sectors, the European Green Deal, is the world's most ambitious attempt at reaching net-zero emissions by 2050. Launched in December 2019, the European Green Deal has generated a range of new laws, action plans and standards, including the climate package 'Fit for 55'. Out of the long and ambitious list of green EU policies, Axelsson et al. (2024) lists 10 EU consumption-oriented policy measures, see Table 2. below.

Table 2. Identified consumption-oriented EU policy measures

Source: Table produced by Axelsson et al. (2024).

In relation to the consumption categories specifically highlighted in this report – food, household furnishings, textiles, and electronics – it is important to mention the Ecodesign Directive, which was first adopted in 2009. This directive has been regularly updated and expanded with new regulations. The EcoDesign for Sustainable Products Regulation is another significant policy measure expected to be adopted later this year.

Another relevant measure for the focus areas of food and furniture is the Deforestation Regulation. This requires importers of cattle, cocoa, coffee, oil palm, rubber, soy, and wood to ensure that their supply chains do not include embodied emissions associated with deforestation or forest degradation.

However, more general policy measures also lead to improvements across various specific consumption categories. The Emissions Trading System (ETS) for industries continues to prove effective in consistently reducing consumption-based carbon emissions as well.

Another policy development is the EU's Carbon Border Adjustment Mechanism (CBAM), which is currently being implemented and could be extended in the future to include more product groups and a wider range of indirect emissions (European Commission, 2024). The aim of the EU's CBAM is to prevent carbon leakage by imposing a price on the carbon emissions associated with imported goods, aiming to make both domestic and foreign producers subject to the same carbon costs. Another benefit of CBAM is that it incentivizes exporting countries to implement carbon taxes or emissions trading schemes. Norway, which is a member of the European Economic Area and cooperates closely with the EU to reach the climate targets, has not yet decided whether to join CBAM (Farstad et al., 2024).

Initially, CBAM covers basic materials such as cement, aluminium, fertilizers, iron and steel, as well as energy in the form of electricity and hydrogen. A few downstream products, such as screws and bolts, are also included. The EU CBAM is implemented in stages starting from 2023 and will fully apply from January 1, 2026. The EU will, before January 2026, conduct a comprehensive review and present a report to the Parliament and the Council, examining whether and how to expand CBAM. In particular, the Commission will assess whether to extend CBAM to other goods at risk of carbon leakage, including organic chemicals, plastics, and other downstream goods. More basic materials and downstream products could be included in the future to cover more of the consumption-based emissions.

Analysing how important hot-spots for consumption-based emissions, such as meat and intercontinental air travel, could be addressed through EU-wide policies is an important area of policy work for the upcoming years.