Sustainable Consumption: Economic Modelling

The economic analysis of sustainable consumption structures concentrates on the extent to which it is possible and recommendable to foster substitution of flows by stocks (improving the thermal quality of buildings, more energy-efficient transport systems). Also of relevance is the role that technological progress plays in such restructuring processes (improving the existing stock of buildings and vehicles, and incentives for entirely new technologies in these fields). Two central components will thus decide on the sustainability of consumption structures: changes in demand for desired consumer services and the composition of stocks and flows required to render such services. The model analysis of sustainable consumption starts out by changing the focus of economic welfare measurement. The primary attention is on the generation of consumer services (housing, mobility, information) and thus on welfare as a combination of stocks (e.g., stock of buildings with improved thermal quality) and flows (mainly energy), since it may be misleading to concentrate solely on flow measurements, especially when it comes to consumption. Accordingly, the following changes were made compared to the conventional economic models: • focussing on consumer services obtained by the the combination of flows and stocks rather than on an economic analysis of consumption flows, • explicitly modelling the dynamics of this relationship of stocks and flows, • including technological progress in this interaction between stock and flow variables to produce consumption services that are relevant for welfare, • accounting for "demand shifts" as a result of changes in consumption styles.