The Widening Wealth Inequality as a Contributor to Increasing Household Carbon Emissions

ABSTRACT

The Sustainable Development Goals call for taking urgent action to combat climate change and reduce inequalities. However, the related actions have not been effective. Global CO2 emissions in 2021 are projected to rebound to approaching the 2018–2019 peak, and wealth inequality has been increasing at the very top of the distribution resulting from the COVID-19 pandemic. To test whether a trade-off exists between social and environmental benefits, this study calculates county-level wealth inequality with the Gini coefficient and consumption-based household carbon emissions with the emissions coefficient method and input–output modeling. Data are collected from the China Family Panel Studies, the Visible Infrared Imaging Radiometer Suite, the Chinese National Bureau of Statistics and Carbon Emission Account and Datasets in 2014, 2016 and 2018. In addition, a high-dimensional fixed-effects model, an instrumental variable model and causal mediation analysis are adopted to empirically test how wealth inequality influences household carbon emissions and explore the underlying mechanisms. The results show that county-level wealth inequality has a positive impact on household carbon emissions per capita. This means that policies designed to narrow the wealth gap can help reduce carbon emissions, making progress toward multiple SDGs. Moreover, the study reveals that the social norms of the Veblen effect and short-termism play an important role in mediating the relationship between wealth inequality and consumption-based household carbon emissions. This finding provides a new perspective to understand the mechanism behind wealth inequality and household carbon emissions related to climate change. Copyright © 2022 Qin, Wu, Zhang and Wang.