Embodied Carbon Limits For Basic Materials
Restrictions set on the carbon intensity associated with the use of input materials (e.g. steel or concrete) or chemicals, calculated in terms of the carbon emissions per unit of output.
Embodied Carbon Limits For Basic Materials
These policies could either:
- Set a limit on the carbon intensity that applies to all basicmaterials sold, thereby indirectly influencing demand to shift towards lower-carbon materials. Such a policy could beused to gradually limit market access for the most pollutingproducts, rather than directly creating an early market for deep decarbonisation technologies.
- Or set a limit to reduce emissions intensity at a sectorallevel, which would allow a range of incremental and deepdecarbonisation options to come into play.
In either case, due to the limited availability of low or near-zerosolutions, it is likely such limits would need to be set close tocurrent emissions levels, and gradually reduced.
Demand creation potential rating by sector
We have developed an indicative rating of the green demand creation potential of each policy by sector, based on the share of demand it can apply to, and its potential impact on a business case. Depending on local/national context this may be more or less impactful in different sectors. This policy could be applied in the chemicals, aluminium, and cement and steel sectors.
Source: Agora Industry (2024): creating markets for climate-friendly basic materials. Potentials and policy options.
Key Attributes: Embodied Carbon Limits For Basic Materials
Carbon leakage risk
This could be high if limits are applied at the point of production, as buyers may decide to source cheaper basic materials from jurisdictions with less stringent environmental regulations. However, if applied at the point of sale, the limits could be applied to both domestic and imported goods, thereby lowering the risks of carbon leakage.
Technology agnostic
Embodied carbon limits would apply to specific categories of intermediary products, but would not specify the technology or production pathway through which this is achieved - so can provide some flexibility. In practice, if very low limits are set, it will likely limit options.
Ability to ramp up over time
Limits could be gradually tightened over time, progressively ensuring deeper decarbonisation of basic materials.
Burden of cost
Buyers bear the burden of incurring additional costs that come with procuring lower carbon products. This could disproportionately impact smaller/intermediary businesses and lower margin industries with lower ability to absorb the cost, hold inventory, or secure guaranteed offtake.
Long-term stability
Embodied carbon limits for basic materials can be put in place with a long-term horizon, creating a stable trajectory to increasingly support industrial decarbonisation.
Complexity
To ensure the success of these policies, governments need robust systems in place to facilitate emissions reporting; measurement; monitoring; and enforcement. Additionally, they would need to evaluate the impact on industrial competitiveness and on downstream sectors, and potentially implement supporting measures to complement the limits.
Deep Dives & Case Studies
Decarbonisation levers incentivised by policy
(see lever details in Annex 1)
1: Steel & Cement - Efficiency of use: refers to the optimal use of the material to reduce the overall embodied emissions of a building/product
2: Aluminium - Low/near-zero carbon primary production: adopting production technologies with a lower carbon footprint (e.g. using clean power for aluminium smelting, inert anodes and/or mechanical vapor recompression (MVR))
Key considerations
- Material substitution: unless complemented by other policies, or measures across multiple sectors, setting embodied carbon limits on basic materials that increase overall costs may pose the risk of material substitution.This could result in emission reductions or increases over the life cycles of downstream products (e.g. they may be less recyclable/durable and result in higher whole life emissions for end products). For instance, switching to timber-based materials could lead to increased emissions associated with land use change. Therefore, it is important that such policies are complemented by measures to ensure the overall life cycle carbon emissions of downstream products is also reduced.
- Enforcement: a regulatory body is needed to oversee the standards and compliance of carbon limits for material manufacturers and/or project developers.
- Implementation over time: carbon limits can take a few years to become fully effective, as both public and private stakeholders involved will need to mainstream and implement reporting practices and ensure data on products is readily available. Policymakers can first focus on mandatory disclosure of product data, before enforcing limits, and then progressively tightening the limits over time, and increasing the scope (e.g. scope of materials).
- Impact on competitiveness: unless the limits are applied to imported products, domestically produced products, and materials in products down the value chain, the competitiveness of domestic industries could be impacted.Furthermore, the impact may be different across the supply chain. Such limits could adversely impact intermediary businesses in the supply chain that may not have guaranteed offtake or have a lower ability to hold inventory.
Examples of key enabling initiatives/ detailed studies
