Jun 24, 2023
This study calculated the carbon emissions of getting rich
Bella Isaacs-Thomas Bella Isaacs-Thomas Leave your feedback Just 15 days of income generation for the top 0.1 percent of wealthy households in the United States creates as much carbon pollution as the
Bella Isaacs-Thomas Bella Isaacs-Thomas
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Just 15 days of income generation for the top 0.1 percent of wealthy households in the United States creates as much carbon pollution as the income earned by the poorest 10 percent of the population over the course of a lifetime.
That’s one of the findings of a new study published in PLOS Climate that examined the greenhouse gas emissions associated with the money people obtain, spend and save.
READ MORE: Climate change caused by wealthy nations creates harm for poorer, study says
As income rises, so too does environmental impact, the study found. The highest-earning 10 percent of households in the United States were linked to 40 percent of total national emissions in 2019, according to their paper. The gulf is particularly vast when comparing households in the highest percentiles to the lowest.
Investments increasingly play a major role in driving up the large carbon footprint of the highest-income households, said Jared Starr, a sustainability scientist at the University of Massachusetts Amherst and lead author of the paper.
Graphic by Megan McGrew/PBS NewsHour
When we think about carbon footprints, we usually think about measuring discrete actions, like driving a new car, taking a flight or eating a meat-heavy diet. The connection between consumer choices and emissions has been a point of interest for decades, but there’s comparatively little research focused on the emissions that arise from producing income itself, Starr said.
“You can think of your [carbon] footprint in terms of what you buy and your lifestyle, but you can also think about, where’s your money? And how do you invest your money, and who holds your retirement savings, and what kind of company are you working for?” said Richard Wilk, an anthropologist and distinguished professor emeritus at Indiana University who was not involved with the research.
Even as world leaders and scientists emphasize the increasingly urgent task of decarbonizing the global economy to combat climate change, fossil fuels continue to power countless facets of our lives. That extends to the wages and investment income households may receive from industries that rely on fossil fuels to operate.
To conduct their analysis, Starr and his colleagues first calculated the carbon intensity per dollar of income produced across multiple industries. Basically, that calculation refers to the emissions that were used to create a dollar of income, he explained. They defined emissions as either producer- or supplier-based.
Starr offered the energy industry as an example: Producer-based emissions come from power plants that run on fossil fuels, whereas supplier-based emissions are calculated according to who made it possible for power plants to generate emissions, like companies that sell them the fuel they use.
A company that extracts fossil fuels like oil, natural gas or coal has a higher footprint because it’s providing that fuel into the economy, Starr explained. Although that fuel is later combusted by a different entity, these companies bear responsibility for providing it in the first place, he added.
Starr also noted that this framework reveals the responsibility of more “hidden” types of industries further up the chain, like companies that finance or insure drilling projects.
The researchers then connected that information to survey data on U.S. households, which Starr said included their primary employing industry.
“If you’re working in finance or real estate or insurance, you’re likely to be having a much higher carbon impact than if you’re working, say, in hotels or restaurants or education or in retail or wholesale trade. And that’s something we really did not know before,” Wilk said of the study. The paper examines other industries, too, and notes that “super emitting households” can belong to any sector of the economy.
The survey data also included pre- and post-income tax categories, including wages, investments and the value of employer-sponsored retirement and health care plans, Starr added.
READ MORE: Climate change is hitting close to home for nearly 2 out of 3 Americans, poll finds
Starr said they used a model portfolio reflective of the overall economy (with some algorithmic randomization) to estimate the carbon footprint of income derived from investments, which include stocks, bonds and owning shares in a company.
Income derived from investments isn’t nearly as common among those who are in lower income brackets. That’s because those groups typically earn income through wages, the vast majority of which is spent instead of saved.
“Basically, the bottom half of the U.S. population [in terms of income] spends everything that comes in, and spends it on goods and services,” Starr said. “And as you move up the income ladder, households increasingly save, or save and then reinvest money into things like the stock market.”
Graphic by Megan McGrew/PBS NewsHour
Starr and his colleagues also found that wealthy, whiter groups are increasingly generating income through the production of emissions, while Black Americans are disproportionately represented among lower-income groups.
He noted that Black communities, other communities of color and low-income communities disproportionately bear the consequences associated with climate change despite contributing to it far less compared to groups that financially benefit from industries that fuel warming.
“I think one thing we can all do is stop scapegoating the poor and the middle class who are trying their best to be responsible,” Wilk said, and instead recognize that if the top 1 percent “cut their emissions in half, it would make a huge difference in the total for the country.”
Although individual action alone won’t solve the climate crisis — the International Panel on Climate Change underscores the importance of “structural and cultural change” alongside those efforts — it’s still true that the choices people make do influence their carbon footprints. And wealth is a major determinant of just how large that footprint is.
Several countries have a consumer-facing carbon tax, which involves taxing fossil fuels at the point of production, Starr said, and that raises prices on goods down the line for consumers.
Poorer people tend to bear the brunt of that cost, because they’re the ones who spend most of their income, including on carbon-intensive goods. Given that wealthy households save a comparatively much higher portion of their income, he said, they aren’t as exposed as other households when they have to absorb a consumer-facing carbon tax.
Lower-income households also don’t necessarily have the time, specific knowledge or control over different factors that it takes to make lower-carbon choices when it comes to the products they buy, Starr added. Plus, the economy doesn’t always offer those types of items as viable options.
READ MORE: COP27 closes with deal struck for climate disaster fund, but no new emissions cuts
“In all this discourse, what is missing is people are not actually pointing the finger” at those who are responsible for many of us having fewer green choices, said Giovanni Baiocchi, an applied environmental economist at the University of Maryland.
So what policies incentivize people with the most economic power to decarbonize their investments? In Starr’s view, one option would be to tax investments based on their carbon intensity. Companies that require a lot of emissions to create value for their shareholders would face a higher tax than ones with less of a carbon footprint in this scenario, Starr said. That shift would align decarbonization with their financial interests.
Taxing investments in this way could also encourage people who manage pensions or private wealth to shift investments in order to save money for their clients, Starr added.
That tax-generated revenue could even be used to fill loss and damage funds, he suggested, which wealthy nations have promised to establish to help poorer nations that haven’t developed using fossil fuels yet bear a disproportionate burden of negative climate impacts.
“We haven’t been decarbonizing our economy rapidly enough to reach the goal that would make the planet habitable — the 1.5°C goal,” Starr said. “Our current policy solutions aren’t enough. And so I think we need to look at what else we can do.”
Left: Plenty of research has examined the relationship between a person's consumption habits and their carbon footprint. But a new study looks at the emissions associated with generating household income. Photo via Getty Images
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