Climate Change and Inequality: How to Solve These Problems Jointly?

Abstract

In recent decades, economic growth in developing economies and the growth of the middle class lead to a surge in energy consumption and greenhouse gas emissions. Within the framework of the United Nations (UN) sustainable development goals established in 2015, the solution to poverty and inequality thus comes into conflict with climate change mitigation. The existing international system of climate regulation does not address this contradiction. Today, global climate governance relies on estimates of aggregate emissions by countries without considering their level of development and the distribution of emissions among income groups within each country. Emissions from production are being monitored, while consumption-related emissions, albeit known to experts, rarely underlie decision-making. Meanwhile, income distribution has a higher impact on consumption-based emissions in comparison to production-based ones. Decisions on emissions regulation are made at the national level by countries with different development agendas in which climate change mitigation often gets less priority in comparison to other socio-economic objectives. This paper proposes a set of principles and specific mechanisms that can link climate change and inequality within a single policy framework. First, we highlight the need to modify the global emission monitoring system for the sake of accounting for emissions from consumption (rather than production) by income groups. Second, we suggest the introduction of a new redistribution system to address climate change which would include the imposition of a “fine” on households with the highest levels of emissions. Such a system follows the principles of progressive taxation but supports climate mitigation objectives and should be understood not as taxation of high incomes but rather as payment for a negative externality. Third, we outline the need to adjust climate finance criteria; priority should be given to projects designed to reduce carbon-intensive consumption by social groups entering the middle class, or to help the poorest population groups adapt to climate change. A special role in the implementation of these principles may belong to BRICS (Brazil, Russia, India, China and South Africa), which may view this as an opportunity for a proactive transition to inclusive, low-carbon development.