The Carbon Footprint of European Households and Income Distribution

This paper calculates the carbon footprint of private consumption in the EU 27 by five groups of household income, using a fully fledged macroeconomic input-output model covering 59 industries and five groups of household income for the EU 27. Due to macroeconomic feedback mechanisms, this methodology – besides induced intermediate demand – also quantifies: 1. private consumption induced in the other household groups, 2. impacts on other endogenous final demand components, and 3. negative feedback effects due to output price effects of household demand. The carbon footprint is calculated separately for the consumption vector of each of the five income groups. The simulation results yield a non-linear income elasticity of direct and indirect emissions at each income level: the value of the direct footprint income elasticity decreases from 1.32 (first quintile) to 0.69 (fourth quintile). The value of the indirect footprint income elasticity is always below unity and decreases from 0.89 to 0.62. The results in general reveal a relative decoupling effect: the share of the top income group in income (45 percent) is much larger than its share in the carbon footprint (37 percent) and vice versa for the bottom income group (6 percent in income and 8 percent in footprint).