Wealth inequality and carbon inequality

Abstract

Recent analyses have highlighted the fact that the richest people contribute disproportionately to the increase in CO2 emissions, and thus to global warming. So far, the literature has mainly provided descriptive analyses linking wealth inequality to carbon inequality, raising concerns about the identification of the relationship between the two variables. Against this background, this paper advances the issue by examining the effect of wealth accumulation on carbon emissions, thus providing robust econometric validity. Based on a large sample of 200 countries from 1990–2020, our regression estimates support the hypothesis that wealth concentration significantly increases carbon inequality and accounts for nearly 20% of the CO2 emissions of the richest people. Our findings also highlight some heterogeneity, confirming the prominent role of industrialized and newly emerging countries such as China and India in global carbon emissions. Finally, transmission channel analysis suggests that the effect of wealth inequality on inequality in CO2 emissions is channeled through deterioration in institutional quality, captured by the level of democracy and environmental legislation introduction, and the marginal propensity to emit, captured by global emissions per capita.