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Expenditure-elasticity and income-elasticity of GHG emissions: a survey of literature on household carbon footprint

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  • Antonin Pottier

    (CIRED/CMB/EHESS)

Abstract

The relationship between income, living standards and carbon emissions has been the subject of extensive research. It can be summed up by a number, the elasticity of the carbon footprint with respect to income. This is an output of bottom-up studies that compute carbon footprints from household budget surveys, while top- down studies use it as an input to estimate the distribution of the carbon footprint from the distribution of income. I survey here these cross-sectional studies of household carbon footprints and their estimation of elasticities with respect to income and with respect to expenditures. The distinction between elasticity of carbon footprint with respect to expenditures and elasticity with respect to income comes from the fact that the saving rate rises with income. I compile published estimates of elasticities of carbon footprint or energy requirements with respect to expenditures or income, and I compute new estimates. This totals around eighty estimates (a third of which are newly computed) for over twenty countries. This extensive coverage of the literature shows that, generally, the carbon footprint grows less rapidly than expenditures, and confirms that the income- elasticity is lower than expenditure-elasticity. Unambiguously, the assumption of an income-elasticity equal to 1, used by some top-down studies, is not supported by the published literature. I discuss the difference between carbon inequality and carbon concentration, the ambiguity in the literature between income-elasticity and expenditures-elasticity. I present the limitations of our knowledge on the income-carbon footprint relationship, from contestable assumption in the methodology as well as measurement errors in household budget surveys. I conclude with several recommendations for implementing the top-down method to assess the carbon footprint distribution.

Suggested Citation

  • Antonin Pottier, 2021. "Expenditure-elasticity and income-elasticity of GHG emissions: a survey of literature on household carbon footprint," Working Papers 2021.01, FAERE - French Association of Environmental and Resource Economists.
  • Handle: RePEc:fae:wpaper:2021.01
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    Keywords

    carbon footprint; inequality; household consumption; income and expenditure surveys; elasticity;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D30 - Microeconomics - - Distribution - - - General
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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