Towards Sustainable Consumption in the Nordic Region
The purpose of the assignment is to analyse the environmental and social effects that private consumption leads to.
Environmental “spillover effects” are defined in this report as the emissions caused by consumption in a country that are not visible in their emissions reporting. These effects occur because all Nordic countries measure their CO2-e emissions considering production of emissions, as opposed to consumption. The spillover effect is the emissions that are caused abroad, due to these domestic consumption habits and in the case of the Nordics, this is a substantial effect. At present, only Sweden in the Nordic region includes consumption emissions in their reporting, but even here it might be considered an afterthought, with nearly all emphasis on production. Other countries in the region have been looking to include consumption statistics in some way or another, but there has been very little urgency here.
This is very important as the Nordic region has some of the highest per-capita household energy consumption in the whole of the EU.
Figure 1. Per capita final energy consumption in Nordic households in MWh. (Eurostat, 2021)
Potential to decrease emissions
Therefore, this report focuses on the potential to decrease emissions through changes to consumer behaviour. Special attention is paid to consumption elasticity, the amount by which demand for a given product falls following a set increase in price. Staple goods, such as milk, eggs, and bread, were found to be very inelastic, where a change in price has little effect on demand; whilst the opposite was found to be true for things considered luxury, such as short-haul and domestic flights. Also explored is the cross-price elasticity of demand, which shows the change in demand for a product, given a change in the price of a different product. Both of these can clearly, be very useful tools in policymaking, as they show the likely consumer responses to taxes on environmentally harmful goods.
With this in mind, a number of suggestions are made, with the view to exploit areas of consumption where there is the potential for a large impact on consumer behaviour.
1. Shift from beef to other meat
2. Shift from meat to vegetables
3. Reduce food waste
4. Reduce air travel
5. Shift from private cars to public transportation and soft mobility
6. Prolong life of goods
7. Respect human rights
8. Reduce overall private consumption
These shifts in behaviour can be categorised into three types of shifts: decreased consumption; redistributed consumption; and more efficient use of goods and materials.
Suggestions under reduced consumption, such as reducing air travel and overall private consumption, draw upon the prior demand elasticity research, which found short-haul air travel and luxury consumption as demand elastic. Therefore, policy options such as increased VAT on goods and services, and aviation taxes are discussed.
With regards to redistributed consumption, where the use of cross-price elasticity is also relevant, it is noted that shifts in food consumption are price inelastic, with people often unwilling to change their habits. Therefore, ideas such as eco-labelling and public procurement changes are considered as well as taxation. It is noted that even though food consumption is inelastic, due to the large imbalance in emissions from different food groups, even a small change in demand could have a large impact on emissions.
Increasing efficiency in goods and material usage is suggested through reducing food waste, which is described as an apparent “no-brainer”, creating benefits for all with no real downsides. Prolonging the life of consumer goods is another efficiency gain that could be made, although it is stressed that rebound effects should be considered here as individuals may spend the savings they make on other forms of consumption.
This report sheds light on the importance of consumption-based emissions and highlights that there is no harmonized methodology for the reporting of these in the Nordic countries. This draws attention to the large spillover emissions that occur in other countries in order to sate Nordic consumption. It also suggests a number of high impact shifts in consumption that can exploit consumer behaviours to reduce emissions of CO2-e.