Income inequality and carbon consumption: evidence from environmental Engel curves
Produced as part of the Understanding green growth and climate-compatible development CCCEP research programme theme
This analysis by researcher Lutz Sager puts a ‘carbon dioxide cost’ on household consumption by adding up the emissions that can be attributed to the goods, services and energy that households in the United States buy in a year, comparing households with different incomes.
Sager combines data from 1996 to 2009 on household yearly expenditure on different products and services with estimates of how much CO2 is emitted per dollar of each product. The results reveal that the 10 per cent of households in the US with the highest incomes had an average annual carbon footprint of 59.4 metric tons of CO2 in 2009. The 10 per cent of households with the lowest incomes had carbon footprints of 18.1 metric tons. The research also shows that poorer households spend a larger proportion of their income than better-off households on carbon-intensive products and services, such as fossil-fuel-based energy.
The analysis concludes that progressive income redistribution in the US could result in an increase in household CO2 emissions of up to 2.3 per cent – the ‘equity-pollution dilemma’. However, it points out that development of clean technologies has a significant impact on household CO2 emissions and could mean that households can become richer while also reducing their carbon footprints.
Key points for decision-makers
- This research puts a ‘CO2 cost’ on household consumption in the US by adding up the emissions that can be attributed to the goods, services and energy that households buy in a year.
- The research uses data on household consumption from 1996–2009 from the Bureau of Labor Statistics’ US Consumer Expenditure Survey. It uses estimates of how much CO2 is emitted per dollar of a product based on data from World Input-Output tables.
- The analysis finds that the 10% of households with the highest incomes had an average carbon footprint of 59.4 metric tons of CO2 per household in 2009. The 10% of households with the lowest incomes had a carbon footprint of 18.1 metric tons.
- The research points out a dilemma for policymakers that income equality could increase CO2 This has been called the ‘equity-pollution dilemma’. It predicts that if the US had the same household income distribution as Sweden, CO2 emissions from private households would be 1.5% higher, and would increase by 2.3% – or an extra 0.8 metric tons per household per year under total income equality.
- Despite having a smaller carbon footprint, the consumption of households on lower incomes is more carbon-intensive per dollar because they spend a greater proportion of their income on fossil-fuel-based utilities, for example energy. The 10% of households with the lowest income spend 7% of their income on utilities – 42% of their carbon footprint. The richest 10% spend 4% of income on utilities – 29% of their carbon footprint.
- Sager calculates that transferring US$1,000 from a richer household to a poorer household could increase the emissions created by that sum by 5%, or 28.5kg of CO2
- The research highlights that the development of clean technologies such as cleaner electricity generation and more fuel-efficient cars has had a significant impact on average household CO2 emissions and could mean households can become richer while also reducing their carbon footprint.
- Between 1996 and 2009, average household CO2 emissions in the US across all incomes fell from 37.8 to 33.9 metric tons. If technology had not improved, by 2009 a household with an average income would have had a carbon footprint of 57.9 metric tons.
ISSN 2515-5717 (Online) – Grantham Research Institute Working Paper series
ISSN 2515-5709 (Online) – CCCEP Working Paper series