Long-Term Elasticity of Environmental Demand: Environmental Protection Expenditures in Sweden, 1972–2020

Abstract

This study uses reconstructions of historical Environmental Protection Expenditure Accounts (EPEA) in Sweden from 1970–2020 to present a time series approach that analyses the demand for environmental services. The paper’s aim is to analyse environmental adaptation as a historical, economic and environmental process and to explore structural shifts suggestive of an overall periodisation of environmental demand. The article contributes to a deeper understanding of demand-side factors in environmental adaptation as part of contemporary economic history. The investigation also provides evidence that the income elasticity of environmental demand was slightly higher than 1.0 and largely stable over time, and even though we were able to detect trend breaks, there is insufficient evidence for major structural breaks suggesting sharp shifts in societal environmental preferences. Policies requiring sharply rising environmental expenditures should consider this level of historical stability.

Keywords

• environmental expenditure
• cepa
• crema
• income elasticity of environmental demand
• structural breaks