Consumption

Context

Global systems of production and consumption generate a complex mixture of environmental, social and economic costs and benefits — supporting livelihoods across the value chain, but also accounting for much of humanity's burden on the environment. Managing the diverse impacts is a central challenge in the transition to a green economy.

Efforts to monitor and manage society's pressures on the environment have tended to focus on production.

Yet there are good reasons for considering consumption — in both analysis and policy — to be of equal importance.

• First, improving the resource efficiency of production may not, by itself, cause absolute reductions in resource use or impacts. This is because efficiency improvements tend to lead to lower production costs and prices, incentivising increased production and consumption (a process sometimes referred to as the 'rebound effect'). 
• Second, market prices often provide little indication to consumers and regulators about the environmental and social impacts that occur across complex globalised supply chains. Additional measures are therefore needed to guide consumers towards more sustainable choices.
• Third, while governments have limited ability to influence production processes in other countries, efforts directed at consumption can influence impacts across the entire life-cycle of products and services. Measures targeting consumption therefore have the potential to extend the reach of government policy, influencing resource use and production phase impacts across the world.
   

Consumption is today recognised as a core concern in long-term environmental and development strategies.

Globally, governments at the Rio+20 Conference in 2012 adopted the '10-Year Framework of Programmes on Sustainable Consumption and Production'. The programmes set objectives and define activities and indicators, addressing issues such as sustainable lifestyles, education, tourism and buildings.^[1]

In the EU, the Roadmap to a Resource Efficient Europe^[2] provides a framework for policies addressing production and consumption, and defines milestones to be met by 2020, for example phasing out environmentally harmful subsidies by 2020.

More recently, the 7th Environment Action Programme (7th EAP) is the first EU policy to include goals on reducing environmental pressures caused by European consumption, including impacts outside EU borders.^[3]

Trends

Consumption expenditure trends

Consumption consists of household final consumption expenditure (i.e. all purchases by resident households to meet their everyday needs) and government final consumption expenditure (i.e. goods and services provided to citizens and financed by tax revenues). This assessment focuses on household consumption, which accounts for approximately 60% of EU-28 gross domestic product (GDP), compared to about 20% for government consumption.

Household consumption expenditure in the EU-28, Iceland and Norway grew roughly in line with economic output in the period 1996–2012, increasing by 23% in real terms despite a slight fall following the economic crisis. EU-28 per capita household consumption expenditure was EUR 14 500 in 2012.^[4]

Three broad consumption categories — housing and utilities, mobility, and food — account for approximately half of European household expenditure (Figure 1) and more than two-thirds of the direct and indirect environmental pressures caused by household consumption.^[5][6][7] The EU prioritised these categories for action in the Roadmap to a Resource Efficient Europe and the 7th EAP in view of their comparatively large life-cycle impacts.

Figure 1: Share of expenditure on household consumption categories

Europe's global footprint

The resources and emissions caused during the production of products and services can be estimated using 'environmentally extended input-output analysis'. According to this method, most of the global environmental pressures associated with EU-27 household consumption declined or grew less rapidly than household expenditure between 1996 and 2009. Only water use increased more than expenditure in this period (Figure 2).

The dominant cause of this decoupling of pressures from expenditure was improved eco-efficiency in the production of goods and services, rather than changing consumption patterns.^[5]

Figure 2: Environmental footprint of household purchases of goods and services

The growth in greenhouse gas (GHG) emissions illustrated in Figure 2 contrasts with the decreasing trends for EU emissions calculated using production-based methods.^[8] However, some uncertainties still remain with calculating the environmental pressures from consumption, and further development of tools and methodologies is needed.

While acknowledging these limitations, the data do indicate that an increasing proportion of the environmental pressures linked to European demand occurs in other parts of the world. In 1995, 13% of GHG emissions caused by EU domestic final demand (i.e. total consumption and investment expenditures) were released outside the EU during the production of goods exported to the EU. By 2008, this had risen to 24% (Figure 3). The figures are higher for other pressures.^[9]

Figure 3: Percentage of the EU footprint exerted outside EU borders

For some categories of goods and services a substantial proportion of final consumption is supplied directly by imported goods. Imports accounted for 87% of EU clothing expenditure in 2012, rising from 65% in 2005. Imports of electrical and electronic products accounted for 74% of EU consumption in 2012, up from 50% in 2007. Net imports of these products are somewhat lower but they are also increasing.^[9]

Measures that alter European consumption can influence related environmental pressures globally. However, such gains may be offset by increased pressures elsewhere if consumption-oriented approaches are not complemented by broader efforts to reorganise production-consumption systems. For example, reducing food waste can reduce demand for agricultural resources, alleviating associated environmental impacts. But it may also leave a consumer with extra resources to spend on other consumption categories, resulting in a form of rebound effect.^[10]

Prospects

Global economic output is projected to triple in the period 2010–2050,^[11] implying greatly increased competition for resources. In this context, Europe will need to find ways to adapt its consumption patterns as part of broader efforts to alleviate environmental pressures. A variety of approaches exist to make consumption patterns more sustainable. Some are already firmly established in EU policy, such as the Ecodesign Directive, the Energy Labelling Directive,^[12] the Ecolabel Regulation,^[13] and the Green Public Procurement Communication.^[14] The European Commission has also adopted a harmonised method to calculate the environmental performance of products and organisations.^[15] This method will help deliver more credible information to all stakeholders, including consumers.

While these approaches are important, substantially reducing the European environmental footprint will require deeper changes in lifestyles, including in the size and location of dwellings, commuting patterns and diets. Government measures are only part of the solution in effecting such transitions. Consumption patterns are shaped by multiple drivers, including income levels, prices and social norms. Producers play a crucial role in determining these factors, for example via innovation and advertising. Reshaping consumption therefore involves a complex interaction between governments, businesses and consumers.

Consumers can have a significant influence over production-phase impacts via their purchasing decisions, thereby incentivising corporate social responsibility and sustainable supply-chain management. Businesses can work towards transparent, sustainable supply chains and apply ecodesign and dematerialisation strategies in product design. They can also shape consumer choices via marketing and use of certification.^[16]

Government policy at all levels can help incentivise social and technical innovation through the introduction of regulations and market-based incentives. For example, within the waste policy framework, bottom-up initiatives have emerged to enable waste prevention, repair and reuse. This has occurred via increased donation, sale and purchase of second-hand goods.

Collaborative consumption initiatives are likewise proliferating in many European countries. Such approaches could reduce the resource-intensity of consumption by meeting consumer needs through leasing, product-service systems and sharing arrangements, rather than purchases. Shifting away from a logic of maximising product sales towards one of service provision can fundamentally alter the incentives driving product development, encouraging a greater focus on durability and reparability.^[17][18]

There are many business opportunities within such new approaches, as well as opportunities to build social capital at the community level.^[19] Policies should enable and encourage initiatives with the highest potential to reduce overall environmental impacts from European consumption, and support up-scaling by developing favourable framework conditions. Structured monitoring of these innovations and their environmental effects, including possible rebound effects, will be crucial.