Can we improve well-being while reducing carbon emissions? Household-level evidence from China

Abstract

Understanding the link between well-being and carbon emissions is crucial, as demand-side emission reduction efforts should not compromise living standards. While a nonlinear, threshold-based relationship between well-being and carbon emissions has been identified at the national level, empirical evidence at the household or individual level remains limited. Using data from the China Family Panel Studies, this study develops a multidimensional indicator framework to measure household well-being and empirically assesses its relationship with per capita carbon emissions. The results indicate an inverted U-shaped relationship, where carbon emissions are initially associated with improvements in well-being. However, beyond a certain threshold, further increases in carbon emissions are no longer linked to significant gains in well-being. Specifically, the decoupling threshold is estimated at 15.4 tons of CO₂ annually per capita in the absence of technological progress, and is reduced to 9.7 tons when technological improvements are taken into account. However, the available carbon budget is insufficient for all individuals to reach these decoupling points, and sample households could only reduce emissions by 1.4% without sacrificing overall well-being. Moreover, prioritizing limited carbon allowances for low-income groups may maximize societal well-being, since their carbon intensity of human well-being is comparatively lower. These findings underscore the importance of technological progress and population heterogeneity in designing fair and effective policies that balance well-being with emission reductions.