1

Households, Consumption, and Energy Use:

The Role of Demographic Change in Future

U.S. Greenhouse Gas Emissions

U.S. Environmental Protection Agency, Socioeconomic Causes and Consequences of Future Environmental Changes Workshop,

San Francisco, November 16, 2005

Brian O’Neill, Brown University & IIASAMike Dalton, California State University

Monterey BayLeiwen Jiang, Brown University

Alexia Prskawetz (VID) and John Pitkin (Cambridge)

2

Presentation Outline

1. Key drivers of greenhouse gas emissions and current treatment of population in energy-economic growth models

2. U.S. household projections from ProFamy model

3. Economic data for households from U.S. Consumer Expenditure Survey

4. Demographic structure of Population-Environment-Technology (PET) Model

5. U.S. CO2 emissions projections with and without demographic effects

3

Drivers of Greenhouse Gas Emissions

Demography

Economic Growth

Technology

Policy

Lifestyles

Energy use

Land Use

Emissions

• Demographic change is one among many drivers• Economic growth models have focused on

population size and technology as key drivers• What about other demographic factors?

4

Demography and Emissions

• Energy-economic growth models (used for

emissions projections) typically consider only

changes in population size

• What are the implications of other demographic

trends for future emissions?

Population Growth/Decline

Aging

Urbanization

Household Size

Energy use

Land Use

Emissions

5

Overview of U.S. Emissions Scenarios

• Case study of demographic trends in the U.S. that uses long-term (50-100 year) scenarios

• New household projections to quantify effects of future demographic change

• Combine household projections with benchmark income and consumption data

• Incorporate household projections and benchmark data into an energy-economic growth model

• Run numerical simulations with the model to compare CO2 emissions in scenarios that account for demographic change to those that do not

6

U.S. Household Projections with ProFamy Model

• ProFamy model (Zeng et al., 1997)– Uses demographic events as input– Produces consistent population and household

outcomes– Produces wide range of household types as output

• Inputs to projections of future living arrangements: – fertility, mortality, migration– marriage, divorce, cohabitation, age at leaving home,

propensity of elderly to live with adult children, etc.

What are plausible bounds for thecomposition of the U.S. population byhousehold size and age?

7

Total Fertility Rates in Low Scenario

Assumptions on the Changes of TFR in the US

1.2

1.6

2.0

2.4

2.8

2000

2020

2040

2060

2080

2100

Low projection

UN Long Term Projection

US SSA 2003US Census Bureau 1999Our Low AssumptionUN Population Prospects 2004

IIASA 2001

Low Scenarios for Total Fertility Rate(TFR), 2000-2100Assumptions on the Changes of TFR in the US

1.2

1.6

2.0

2.4

2.8

2000

2020

2040

2060

2080

2100

Low projection

UN Long Term Projection

US SSA 2003US Census Bureau 1999Our Low AssumptionUN Population Prospects 2004

IIASA 2001

Low Scenarios for Total Fertility Rate(TFR), 2000-2100

8

U.S. Household Projections

• Define one medium scenario and two bounding scenarios:

– Large/young scenario: high fertility, low life expectancy, high migration, and stable unions (marriage, cohabitation)

– Small/old scenario: low fertility, high life expectancy, low migration, and unstable unions

9

Total Fertility Rates, All Scenarios

Assumptions on the Changes of TFR in the US

1.2

1.6

2.0

2.4

2.8

2000

2020

2040

2060

2080

2100

High Projection

Medium Projection

Low Projection

All Scenarios for Total Fertility Rate(TFR), 2000-2100

10

Summary of Assumptions, 2100

11

Summary of Assumptions, 2050

• Medium scenario assumes all rates constant at 2000 level

• Small/old scenario: unstable unions, cohabitation is a substitute for marriage

• Large/young scenario: stable unions,cohabitation is a precursor to marriage

12

U.S. Population in Large/Young and Small/Old Scenarios

0

200

400

600

800

1000

2000 2020 2040 2060 2080 2100

Millions o

f P

eople Large

>65Small>65Large45-65Small45-65

Large<45Small<45

0

200

400

600

800

1000

2000 2020 2040 2060 2080 2100

Millions o

f P

eople

Large>65Small>65Large45-65Small45-65Large<45Small<45

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ProFamy population distribution over households, by age of head

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

large/young <45

small/old 65+

small/old <45

large/young 65+

Household head <45

Household head 65+

Pro

po

rtio

n o

f P

op

ula

tio

n

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

large/young <45

small/old 65+

small/old <45

large/young 65+

Household head <45

Household head 65+

Pro

po

rtio

n o

f P

op

ula

tio

n

14

ProFamy population distribution over households, by size

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

1 2 3 4 5 6 7+

2100 large-young

2000

2100 small-old

Pro

po

rtio

n o

f P

op

ula

tio

n

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

1 2 3 4 5 6 7+

2100 large-young

2000

2100 small-old

Pro

po

rtio

n o

f P

op

ula

tio

n

15

U.S. Consumer Expenditure Survey

• We use household level economic data from the

U.S. Consumer Expenditure Survey (CEX) to

estimate benchmark per capita values for labor

and capital, and expenditures on 17 different

types of consumer goods

How do demographic changes projected by the ProFamy model translate into economic patterns of income and consumption?

16

Per Capita Household Income• U.S. Consumer Expenditure Survey indicates level and

composition of per capita income varies by age and size of the household head

• Per capita labor greatest in smaller, younger households

05,000

10,00015,00020,00025,00030,00035,000

<45 45-65 65+ <45 45-65 65+

Small Households Large Households

Per

cap

ita 1

998

dolla

rs Capital

Labor

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CO2 Intensive Household Expenditures

• The PET model has 17 consumer goods: Utilities and Fuels have the greatest CO2 intensities

• Expenditure levels vary by household age and size, affecting direct and indirect energy use

0

500

1,000

1,500

2,000

<45 45-65 65+ <45 45-65 65+

Small Households Large Households

Per

cap

ita e

xpen

ditu

res

Fuels

Utilities

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Non-CO2 Intensive Household Expenditures• Education and Health have the lowest CO2

intensities of consumer goods in the PET model• Expenditure levels for these goods differ

substantially across age groups

0500

1,000

1,5002,0002,500

<45 45-65 >65 <45 45-65 >65

Small Households Large Households

Per

cap

ita e

xpen

ditu

res Health

Education

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Population-Environment-Technology Model

• We developed a dynamic general equilibrium modeling framework (with optimizing, forward-looking behavior) that can be calibrated to baselines with and without demographic change in labor supply, demand for consumer goods, etc.

How do emissions under baseline patterns of labor supply and household demand implied by the ProFamy projections and CEX data compare to baseline scenarios without changes in age structure or household size?

20

Introducing Demography into the PET Model

• Replaced standard “representative household” assumption by disaggregated household types

• Population composition of each household type driven by exogenous household projections

• Households are stratified into successive “cohorts”, and two size categories

• Within each size category, cohorts are linked together separated by a generation length (30 yrs), to form three co-existing infinitely-lived dynasties

21

PET Model Dynastic Structure• Lexis diagram

shows age structure of three co-existing dynasties

• Dynasty 1 consists of cohorts 1a-f Dynasty 2 consists of cohorts 2a-f Dynasty 3, consists of cohorts 3a-e

• For example: one dynasty includes today’s 20 year-old, 50 year-old, and 80 year-old households

0

10

20

30

40

50

60

70

80

90

2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100

Year

Age

1a 1b 1c 1d

1e

1f

2a 2b 2c 2d

2e

2f

3a 3b 3c

3d

3e

cohort:

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PET Model Overview

HouseholdsConsumption & Savings

Capital & Labor

Final Goods ProducersConsumptionInvestment

GovernmentExports & Imports

Intermediate goods producersOil&Gas

CoalElectricity

Refined PetroleumMaterials

K & LC & I

E & M

CO2 Emissions

22

23

Per Capita Labor Income for 3 Dynasties (Old/Small Scenario, effects of age only)

 

10

12

14

16

18

20

22

24

2000 2020 2040 2060 2080 2100

Per c

apita

labo

r inc

ome

(thou

sand

s)

Dynasty 1Dynasty 3

Dynasty 2

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Per Capita Asset Accumulation for 3 Dynasties (Old/Small Scenario, effects of age only)

 

30

40

50

60

70

80

2000 2020 2040 2060 2080 2100

Cap

ital

per

pers

on

(th

ou

san

ds o

f 2000 d

oll

ars

)

Dynasty 1Dynasty 3

Dynasty 2

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US CO2 Emissions and Population Aging (solid = representative; dashed = w/age effects)

 

0

1

2

3

4

5

6

2000 2020 2040 2060 2080 2100

Gig

ato

ns

of

Ca

rbo

n

Lo-Rep Lo-Het

Med-Rep Med-Het

Hi-Rep Hi-Het

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Effects of Aging and Changes in Household Size on Emissions in 2100

All changes relative to emissions in representative household case.No technological progress in this scenario.

-29

-23

-16-18

-10

-17

-35

-30

-25

-20

-15

-10

-5

0

Age Age +Size

Age Age +Size

Age Age +Size

%-C

han

ge f

rom

Rep

Small/Old Medium Large/Young

-29

-23

-16-18

-10

-17

-35

-30

-25

-20

-15

-10

-5

0

Age Age +Size

Age Age +Size

Age Age +Size

%-C

han

ge f

rom

Rep

Small/Old Medium Large/Young

27

SRES A1 Changes in GDP and CO2-Intensity

 

0

0.005

0.01

0.015

0.02

0.025

0.03

2000 2020 2040 2060 2080 2100

AIM

ASF

IMAGE

MESSAGE

MINICAM

MARIA

PET

-0.05

-0.04

-0.03

-0.02

-0.01

0

2000 2020 2040 2060 2080 2100

AIM

ASF

IMAGE

MESSAGE

MINICAM

MARIA

PETCh

ange

in C

O2-

Inte

nsi

tyC

han

ge in

per

cap

ita

GD

P

28

US CO2 Emissions in SRES A1 • Comparison of emissions with and without

technical change: population effects are larger than technology effects until almost 2090!

0

0.5

1

1.5

2

2.5

3

3.5

4

2000 2020 2040 2060 2080 2100

Gig

ato

ns

of

Ca

rbo

n No Tec Rep No Tec HetTec Rep Tec Het

Pop Effect with No Tec

Decline in C-Intensity overtakes effects of population heterogeneity

Pop Effect with Tec

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Results Summary

• Population heterogeneity in the PET model reduces CO2 emissions in all scenarios, up to 30% by 2100 in the Old/Small scenario

– Age-effects reduce emissions in all scenarios

– Size-effects increase emissions in the Old/Small scenario, and decrease emissions in the Young/Large scenario

• Effects of population heterogeneity on CO2 emissions as large, or larger, than technology in some cases

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Current and Future Work

• Immigration scenarios for the U.S.

• Household projections and household level

economic data for China, India (work in progress

at Brown, IIASA)

• Land use component for the PET model and link

to Integrated Science Assessment Model (ISAM)

31

Acknowledgements

• Financial support from the U.S. Environmental

Protection Agency, and U.S. Department of

Energy

• Warren Sanderson and other participants at the

Symposium on Population Ageing and Economic

Productivity, Vienna Institute for Demography

• Computational support from California State

University Monterey Bay and International

Institute for Applied Systems Analysis (IIASA)