The impact of wealth inequality on carbon emissions and climate policy

Reducing inequality and carbon emissions represent interrelated global challenges. Whereas research has paid considerable attention to income inequality in relation to emissions and climate mitigation, the role of wealth inequality has hardly been studied. Here we review the literature on the relationship between wealth inequality and carbon emissions and suggest issues that merit further examination. We synthesize studies from distinct disciplines to identify four plausible transmission mechanisms underlying the observed relationship: excessively luxury consumption of the rich; increased power of elites; positional consumption causing increased status anxiety and emulative consumption in the wider population; and investment in high-carbon activities. We revisit arguments in favour and against these hypotheses. Next, we evaluate policies to reduce the effects of wealth inequality on emissions. Though there has been a recent push for a global minimum wealth tax through the G20, we show that the main role of such tax would not be direct emissions reduction but redistribution and raising revenues for low carbon investments. We recommend that policies targeting the effects of the concentration of power and directly regulating excessively luxurious consumption are more effective ways to reduce emissions associated with wealth inequality.