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

Federica Cappelli, University of Ferrara

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 spectre 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 highlights how different income classes 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 negative at lower income levels and becomes positive as their income rises. The contribution of the middle class is negative at all income levels, while the CO2 contribution of the poorest segments is negligible.

Distributional impacts of climate change: global and country-specific patterns

Elisa Palagi, Scuola Superiore Sant’Anna

Climate anomalies, such as floods and droughts, as well as gradual temperature changes have been shown to adversely affect economies and societies. While studies find that climate change might increase global inequality by widening disparities across countries, its effects on within-country income distribution is still an expanding area of research, as is the role of rainfall anomalies. This lesson shows that extreme levels of precipitation exacerbate within-country income inequality. The strength and direction of the effect depends on the agricultural intensity of an economy. In high-agricultural-intensity countries, climate anomalies that negatively impact the agricultural sector lower incomes at the bottom end of the distribution and generate greater income inequality. Projections with modeled future precipitation and temperature reveal highly heterogeneous patterns on a global scale, with income inequality worsening in high-agricultural-intensity economies, particularly in Africa. Finally, the lesson presents some insights on the relation among climate change, extreme events and income inequality from country-level analyses.

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