The carbon footprint of European households and income distribution

This paper calculates the CO2e (CO2 equivalents) footprint of private consumption in the EU27 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 EU27. Due to macroeconomic feedback mechanisms, this methodology not only takes into account intermediate demand induced by the demand of a household group, but also: (i) private consumption induced in the other household groups, (ii) impacts on other endogenous final demand components, and (iii) negative feedback effects due to output price effects of household demand. Direct household emissions from household energy consumption are taken into account in a non-linear specification. Emissions embodied in imports are calculated using the results of a static MRIO (Multi-Regional Input-Output) model. The footprint is calculated separately for the consumption vector of each of the five income groups. The simulation results yield an income elasticity of direct and indirect emissions at each income level that takes all macroeconomic feedbacks of consumption into account and differs from the ceteris paribus emission elasticity in the literature. The results further reveal that a small structural "Kuznet effect" exists.