Decarbonizing the Industrial Sector: The Potential for Ambitious EU Member States to Use Flexible Performance Standards to Strengthen Carbon Price Signals

In this policy brief, we offer an introduction to the family of policy instruments known as “flexible performance standards.” We describe and examine the attributes of performance standards that elevate them to be chosen in many jurisdictions, often as a precursor to carbon pricing, and we explain why flexibility improves their cost effectiveness and the potential they may have as complementary policies to strengthen carbon pricing to drive innovation, with a specific focus on the industrial sector. The brief ends with a discussion of the potential to apply flexible performance standards to
the Swedish industrial sector to achieve emissions reductions in line with the national climate target.