Granular EU: Regional assessment of spending power and carbon footprints

“United in diversity” (Official motto of the European Union)

Tomorrow, the 26th of May, is the fourth and final day of elections for the European Parliament (it started on Thursday in the Netherlands and the UK) and we from World Data Lab present you with the fourth article in our EU special.

Climate change – the hot topic of the election campaigns

In the run up to the elections, questions on climate change mitigation turned out to be one of the main topics. Some queries (e.g. here) and the Friday’s for Future movement suggest that, especially among the younger generations, the emphasis was (and still is) on fulfilling the 1.5% target as put forward by the IPCC.

Based on an EU-wide project funded by the European Commission in 2017 (GLAMURS – Green Lifestyles, Alternative Models and Upscaling Regional Sustainability), which found that the levels of spending power and the levels of CO2 emissions are highly correlated, we from World Data Lab used our spending power forecasting tool MarketPro to analyze the status quo and future whereabouts of this correlation. The link between spending/consumption power and CO2 emissions is given due to embedded emissions which occur in production processes—the more one consumes (goods and services) the higher her or his carbon footprint will be.

The most interesting finding of the GLAMURS project was that this correlation between spending power and carbon footprint levels off with the amount of spending power capability. According to the model, a rise of $1,281 in individual spending power [1] would result in a roughly 450 kg CO2 emissions increase per capita between the 25th ($10,379 in 2011 PPP) and 50th ($18,067) annual spending power percentiles, an increase by the same amount within the 50th and 75th ($26,652) percentile would cause a slightly lower increase of 300 kg CO2 emissions per person, and an increase between the 75th percentile and the peak at $34,341 results in an increase of 150 kg of CO2. Just after this peak in spending power is reached, a further increase by the above mentioned $1,281 does not affect the carbon footprint—consumption becomes CO2-neutral, so to say. Spending power percentiles are based on the EU-wide average spending capability per person per year.

These findings are especially important for the UN SDG 12—Sustainable Consumption, as analyses of the correlation between spending power and embedded carbon footprints might be insightful for the development of effective, resource saving circular economies, and consumption-based climate mitigation strategies. [2] Consumption of clothing, mobility and manufactured products are very income-elastic, according to the study, with the effect of increased spending power explaining 45%, 35% and 30% of the regional emission variances, respectively.

Potential consumption-based carbon footprints of EU countries and regions

Comparing the spending power levels of our sample of European countries and capital regions so far with the thresholds mentioned above, the prospect of sustainable—in the meaning of carbon neutral—consumption does not look bright for the EU within the medium term. On a country level, Germany will pass the 75th spending power percentile only by 2025 and will still be almost $3,600 short of reaching the carbon neutral spending power peak by 2035. Until this peak is reached, a further increase in spending power will, based on the model, translate into an additional 428 kg CO2 emissions per capita. For other countries that follow behind (Ireland, the Netherlands and the UK are the closest), the leeway for per capita CO2 emissions based on consumption will be even higher. Countries from Eastern Europe lag considerably behind.

Urbanization is an ongoing trend and studies and forecasts suggest that cities are more prepared for CO2 mitigation strategies and policies. Based on our forecasts, we tend to agree: Most capital regions, as mainly urbanized entities, have a higher spending power level than their respective national average and are thus closer to reach the CO2-neutral consumption and spending power peak. But even the top spender within our sample cities, London, will surpass this threshold only by the end of 2034, and Madrid will be the only other city to come close. Other cities will struggle for a long time yet to come.

However, we have to stress that all of our analysis is based on unchanged environment, meaning that potential improvements in terms of carbon intensity in production processes and consumption are not taken into account. We do hope though, that our findings can contribute to academic debate and policy making.

[1] originally €1,000, converted in 2011 USD PPP according to OECD

[2] e.g. Duarte et al., 2012; Hertwich and Peters, 2008; Jackson and Papathanasopoulou, 2008; Lenzen et al., 2006; Marcotullio et al., 2014; Reinders et al.,2003; Tukker et al., 2010; Wier et al., 2001; Wilson et al., 2013

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