Unequal contributions to CO2 emissions along the income distribution within and between countries

Abstract

The question of whether changes in income inequality affect CO₂ emissions remains a topic of debate at both theoretical and empirical levels. The purpose of this paper is to examine the effect of changes in the full spectrum of income distribution on consumption-based CO₂ emissions per capita. To do so, we estimate a dynamic difference-GMM model and a dynamic threshold regression model allowing for endogeneity on a panel database covering 107 countries between 1990 and 2019. Our analysis shows that different income groups contribute very differently to consumption-based CO₂ emissions. In addition, by accounting for between-country inequalities in the average income of each income group, we uncover non-linearities in the impact on carbon emissions. More specifically, the impact of an increase in the income share of the top 10% on per capita consumption-based carbon emissions varies according to their average income level: it is non-statistically significant at lower income levels and turns positive as their income rises. The contribution of the middle 40% is negative at all income levels, while the CO₂ contribution of the poorest segments is negligible.