Economy-wide implications of sustainable consumption and production in a sufficiency approach

Two sides of unsustainable consumption and production problem, i.e. overconsumption of the affluent and underconsumption of the poor, are in essence consolidated into one unsolved problem, that is, a lack of a truly... [ view full abstract ]

Two sides of unsustainable consumption and production problem, i.e. overconsumption of the affluent and underconsumption of the poor, are in essence consolidated into one unsolved problem, that is, a lack of a truly sustainable consumption and production (SCP) model in terms of assuring decent quality of life of all members of the society within the carrying capacity of the Earth. Both the planetary boundary and ecological footprint indicate that the current consumption patterns as a whole already overshoot the carrying capacity of the Earth, and addressing under-consumption of the poor segment of the world without having true SCP model will aggravate this over-consumption. While SCP discussion has mainly focused on resource efficiency improvement, empirical evidence suggests that improvements in resource efficiency in OECD countries have not led to a reduction in resource consumption. This may be an inevitable consequence of the GDP growth–dependent design of the current socio-economic system that requires not mere positive growth but “robust enough” growth of GDP. Consequently, benefits of efficiency improvement are input to accelerate GDP growth further rather than to save resources. 

Against this background we claim that adjusting global level of consumption consistent with the carrying capacity of the Earth require sufficiency approach in which the objective is to satisfy fundamental needs of people given ecological and environmental limits. This paper illustrates economy-wide implications of SCP policies in this approach based on modelling analysis. We assume that an affluent segment of the world sets predetermined environmental limits in terms of ecological footprint and implements SCP policies in terms of taxes on resource use including energy use in order to adjust consumption level consistent with those limits. Impacts of SCP policies on economic activities are simulated by a global recursive dynamic computable general equilibrium (CGE) model and associated ecological footprints are estimated based on simulated natural resource use by economic sectors and the global footprint data of the Global Footprint Network (GFN) corresponding to the GTAP database. This methodology aims to capture economy-wide economic and environmental impacts of SCP policies taking into account interactions among sectors and actors such as households under resource cap represented as upper limits of ecological footprint. Our analysis highlights several important implications. Firstly, it shows difficulty to adjust level of consumption and its associated production only through taxes. More drastic changes in consumption patterns of households including shifting to sharing economy may be necessary to realize sustainable consumption and production more smoothly. Secondly, there may be significant repercussion effects of SCP policies implemented in affluent countries to other countries. These implications may suggest the strong necessity to introduce wider range of SCP policy packages than resource taxes as well as to carefully design them so as not to have negative spillover effects for other countries, particularly in developing countries.