In-Kind Incentives
Non-financial benefits or advantages provided by public bodies to industry buyers for the uptake and use of low carbon materials.
In-Kind Incentives
Incentives are rewarded in return for meeting an emissions threshold (e.g. an end product standard). They aim to improve the business case for using low and near-zero carbon materials and fuels without the use of public funds.
Examples of in-kind incentives that could be applied include:expediting permit approval processes/being granted additional areas in return for reducing whole life carbon in construction projects; or giving users of low emission shipping fuels priority access to ports. Many of these are likely to fall within the remits of sub-national authorities (e.g. municipal governments or port authorities).
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 this lever can apply to, and its potential impact on a business case. Depending on local or national context this may be more or less impactful in different sectors. In-kind incentives could be relevant across a range of sectors, but will likely play a supplementary role along with other demand stimulation policies discussed in this document.
Key Attributes: In-Kind Incentives
Carbon leakage risk
Incentive programmes are typically voluntary, so those who do not wish to meet the criteria of procuring/ using lower carbon materials or fuels are not impacted financially. Therefore, carbon leakage risks are low.
Technology agnostic
Depending on the sector these measures are applied to, they could either be applied to end products (e.g. based on whole life carbon for construction projects), or higher up value chains.
Ability to ramp up over time
The eligibility criteria can be tightened over time to further incentivise emission reductions. The criteria can also be expanded across various categories of materials used. Over time, as the use of green materials becomes more widespread, there would be less need to incentivise it.
Burden of cost
Governments will need to allocate resources to process and disburse in-kind incentives (e.g. instance setting up a new department to oversee the programme). Additionally, they will need to fund the incentives or forego extra revenue that could have been earned from them.
Long-term stability
Non-financial programmes could be put in place over the long term, but would likely need to be adjusted over time, particularly as the supply of low or near-zero carbon commodities scales up, and more demand-side players become eligible.
Complexity
Sufficient government capabilities, expertise, and resources are needed to manage product standards, to ensure the right materials are used and applications are evaluated thoroughly.
Deep Dives & Case Studies
Decarbonisation levers incentivised by policy
(see lever details in Annex 1)
1: Steel & Aluminium - Efficiency of use: optimising the use of material and reducing waste
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
- Type of incentive: incentives would be provided in return for meeting a certain environmental standard or performance in their construction practices, such as the use of lower carbon construction materials for new buildings. There are various in-kind incentive options available, and selecting the right ones will depend on the key pain points or bottlenecks faced by project developers and building owners to increase the attractiveness of the programme. Some examples include: expedited permit approvals; permission to add additional floors or floor area ratios beyond standard zoning limits; technical assistance; and marketing support highlighting green building efforts.
- Achieving scale: many of the processes through which in-kind incentives could be provided are administered through sub-national authorities (e.g. municipal governments) and therefore co-operation between multiple authorities may be needed for in-kind incentives to have a significant impact on an industrial scale.
- Scope and eligibility: policymakers should determine the types of building this applies to (e.g. new builds versus retrofits, residential, commercial, and their various sub-categories) and the eligibility criteria (e.g. carbon limits for specific materials).
- Market readiness: lower carbon materials may cost more than conventional products and may be less readily available.Hence, the eligibility criteria must be realistic and achievable.
- Administrative resourcing: manpower resources and capabilities are needed to: oversee the standards and verification of projects; the implementation of the incentives; and reporting and monitoring of the effectiveness of the programme.
Source: GRESB
Case study: Seattle Priority Green Expedited Programme
Examples of key enabling initiatives/ detailed studies
