The Income Elasticity of Households' Green House Gas Emissions: The Case of Grocery Consumption

Abstract

Income is considered a key driver of sustainable consumption. While descriptive studies suggest strong links between income and sustainability, its causal effect on the environmental impact of food consumption remains unclear. This study estimates the income elasticity of the environmental impact of household grocery purchases, the primary source of household food choices. Using panel data that includes (1) household-level scanner data on grocery purchases in two European countries and the United States, (2) product category-level environmental impact estimates, we report that a 1% increase in income leads to only a 0.02%, 0.04%, and 0.01% rise in food-related greenhouse gas (GHG) emissions in Germany, the Netherlands, and the United States, respectively. We test whether this small effect masks opposing impacts on quantity versus composition of shopping baskets, but find minor effects in both dimensions. Robustness checks show our findings hold across sub-samples and time horizons, including persistence and magnitude of income changes. Administrative income data for the same households and periods in the Nether lands demonstrate our findings are not driven by imprecise measurement of income. Overall, income variation has limited influence on shifts toward lower-carbon-footprint grocery consumption, which has implications for policies to reduce environmental externalities in food consumption, and for income-based targeting strategies in the retail sector.

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