Iceland's Consumption and Decarbonisation

Sammanfattning: As an effort in combating climate change, the Icelandic government has set the ambitious goal of a carbon-neutral economy before the year 2040. Meanwhile, projections show continuing growth in private household consumption. The aim of this thesis is to examine these goals of carbon-neutrality using an alternative way of accounting for carbon emissions, a consumption-based approach in contrast to production-based, keeping in mind the expected increase in consumption. The aim is twofold. Firstly, the relationship between consumption and emissions is examined. Granger causality was seen running from consumption to production-based emissions, while the opposite was the case for consumption-based emissions, which were shown to lead consumption. This suggests that lowering consumption-based emissions is impossible without lowering household consumption, while decoupling production-based emissions from consumption is shown to be possible. Secondly, these results are used to present rough scenarios showing different paths of consumption-based emissions depending on household consumption behaviour. If the goal is to decrease global emissions, not simply emissions within the borders of Iceland, it is unlikely that complete carbon-neutrality (i.e. consumption-based) is reached without changes in consumption.