Impact of household expenditures on CO2 emissions in China: Income-determined or lifestyle-driven?

The aim of this paper is to analyze the relationship between household expenditure and CO2 emissions among different income groups of urban and rural households in China. Having employed the 2007 Social Accounting Matrix of China, this study examines the direct and indirect CO2 emissions caused by household demand. The results show that within both urban and rural households, the higher the income level is, the higher the per capita emissions are; the CO2 emissions per unit expenditure due to savings and taxes are generally much larger than those from consumption of goods and services; and these emissions per unit consumption expenditures mainly come from indirect emissions. To deeply explore the relationships between consumption patterns and CO2 emissions, two scenarios are established to eliminate the differences in income level and consumption propensity among different groups step by step. Main results indicate that (1) the income gap is the primary cause of the significant differences in emission levels among each group; (2) the difference in consumption propensity is also a notable reason; and (3) the rural higher income groups spend a larger share of their income on those carbon-intensive goods (e.g., electricity, transportation, energy products), thus making their consumption patterns more carbon-intensive, while for the urban, the consumption patterns of lower income groups are more carbon-intensive. Finally, policy recommendations on the reduction of household emissions are also made.