Do sufficiency consumption changes drive emissions down? A production network approach

Energy efficiency and decarbonized energy sources are essential yet insufficient for meeting ambitious climate change mitigation goals. Sufficiency strategies, which involve reducing consumption and shifting to less environmentally impactful lifestyles, are increasingly recognized as crucial for decarbonization. However, their wider economic implications remain underexplored. This paper develops a static macroeconomic model with a detailed microeconomic production framework to analyze these implications. We derive comparative statics to unravel three primary propagation channels for consumption changes: direct demand effects, price effects, and substitution effects, based on the production network structure and elasticities of substitution. Using multi-regional input-output data, we assess the impacts of two sufficiency-driven consumption changes: adopting a vegetarian diet and reducing energy use. Our findings reveal significant rebound effects, up to 38% for domestic emissions and 60% for global emissions (accounting for carbon leakage), compared to estimates excluding behavioral aspects. Rebound effects from sufficiency strategies are smaller than those from energy efficiency improvements. Alternatively, conceptualizing sufficiency as increased leisure time preference results in reduced rebound effects and negative carbon leakage.