Would income redistribution result in higher aggregate...
Transcript of Would income redistribution result in higher aggregate...
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Would income redistribution result in higheraggregate emissions?
(”Income Inequality and Carbon Consumption:Evidence from Environmental Engel Curves”)
Lutz Sager([email protected])
PhD Student in Environmental EconomicsGrantham Research Institute — Department of Geography & Environment
London School of Economics and Political Science
27 April 2017
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
1 Motivation and Previous literature
2 Data and Methodology
3 ResultsIncome, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
4 Discussion
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Motivation: Greenhouse gas emissions and climate change
Source: IPCC, 2014 (AR5)
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Motivation: Greenhouse gas emissions and climate change
Global annual GHG emissions49Gt CO2e in 2010 (7t pp)
Limiting global warming to 2oC(relative to 1861-1880)..
..requires about 40-70 per centreduction in GHG emissions by2050.
about 2-3t per person
Source: IPCC, 2014 (AR5)
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Motivation: Income inequality on the rise
Source: Atkinson et al., JEL 2011
Rising incomeinequality since1980s(Atkinson et al.,2011)
Rising wealthinequality since1980s (Saez &Zucman, 2016)
Global convergenceof living standards(Lakner & Milanovic,2016)
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Motivation: Distribution matters
Distribution matters:
Welfare & distributional justice (Rawls, 1971; Cowell, 2011)
Social norms and cohesion (Wilkinson & Pickett, 2010)
Economic development (Alesina & Perotti, 1996)
Consumer behaviour (Stiglitz, 2008; Frank et al., 2014)
...
The environment (?)
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Motivation: Distribution and the environment
The environment as a source of inequalities:
Climate change and food security in LDC’s(Rosenweig & Parry, Nature 1994)
Exposure and vulnerability to air pollution(Currie & Neidell, QJE 2005)
...
Inequalities as a source of environmental degradation
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Motivation: The ”equity-pollution” dilemma
Existing literature: Income and carbon
Income is predictor for CO2 (e.g. Chancel & Piketty, 2015)
BUT Income elasticity < 1 (e.g. Chakravarty et al., 2009)
Necessities are carbon-intensive (Pearce, 1991)
Regulation / taxation can be regressive (Gough, 2013)
The ”equity-pollution” dilemma:
Given the higher pollution intensity of consumption per unit ofexpenditure by poorer households, progressive redistribution mayresult in higher aggregate pollution from consumption.
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Motivation: Research question(s)
Principal research question:
Will progressive income redistribution increase GHG emissionsembedded in household consumption? If yes, by how much?
Subsidiary research questions:
1 How does consumption-based carbon vary with income?
Budget constraint?Other correlated factors?
2 How has consumption-based carbon evolved over time?
Contribution of technology?Income growth? Distribution?
3 Inequality of consumption-based carbon?
Contribution of income, education, location, etc.?
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Previous literature: Inequality & carbon
Theory: How inequality may affect environmental outcomes
Political Economy (Boyce, 1994)
Consumer choice (Scruggs, 1998; Heerink et al., 2001)
Evidence: Association between inequality and emissions
Baek & Gweisah (2013): positive association(time-series, US, 1967-2008)
Heerink et al. (2001): negative association(panel, 180 countries, 1961-2001)
Others; BUT problems of identification for causal inference
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Previous literature: Inequality & carbon
Contribution of this draft:
Estimate household carbon in United States (1996-2009)
First to quantify the ”equity-pollution” dilemma
Decompose evolution of household carbon (1996 vs. 2009)
Decompose household carbon inequality (2009)
Using concept of Environmental Engel curves (EEC)introduced by Levinson & O’Brien (NBER, 2015)
Assess link between carbon intensity and ’visibility’ of goods
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Methodology: (Environmental) Engel curves
EEC for air pollution (Levinson & O’Brien, NBER 2015)Household-level Kuznets curve (Kahn, 1998)Allows for a number of analytical exercisesKey assumption: (Conditional) homogeneity of preferences
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Methodology: From consumption to emissions
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Consumer expenditure (CEX) - Data
Data source: U.S. Consumer Expenditure Survey (quarterly)(Bureau of Labor Statistics)
Population: U.S. Consumer Units (CU / Households)
Information: - Monthly expenditures (860 UCC) [MTBI]- CU Income & characteristics [FMLI]- Much more (potential use?)
Sample: 51,642 CU (1996 - 2009, yearly)[full information providers]
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Emission factors (WIOD) - Data
Data source: World Input-Output Database
Population: 35 Industry sectors (US, 1996-2009) List
Information: - Input-output tables [IO]- CO2 emissions per sector [Env. Acc.]
Output: Emission intensity (kg CO2 per USD)
Methodology: Leontief(1970)
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Emission factors (Direct)
Yearly avg. prices [U.S. EIA]:
1 Gasoline (retail)
2 Heating oil (residential)
3 Gas (residential)
4 Electricity (residential)
Air travel [U.S. BTS]:Avg. fuel use
Avg. pass. miles x Avg. pass. milesAvg. air fare
Emission factors [U.S. EPA]:
1 Gasoline
2 Heating oil/Diesel
3 Propane gas
4 Kerosene-type jet-fuel
Electricity [U.S. EPA eGRID]:Total CO2 emissions (kg)
Total energy output (kWh)
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Final sample
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Limitations
Limitations:
1 Product segments / quality
2 Trade (in progress)
3 Only CO2, not CH4/N2O (agriculture, waste disposal..)
4 CEX Survey: Sampling (tails), reporting bias, etc.
5 Sample: Full-information reporters only
6 Matching: 641 UCC codes to 34 WIOD sectors
7 Coverage: Deductions (e.g. medicine), debt / mortgage, etc.
8 Regional heterogeneity (electricity grid, rural/urban, etc.)
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Non-parametric Engel curves
1 EECs areincreasing
2 EECs areconcave
3 EECs shift downover time
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Non-parametric Engel curves
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Technology, savings, composition
Detail
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Parametric Engel curves
Further analyses require additional assumptions:
1 Inclusion of control variables
2 Specific functional form for EEC
3 Assume (conditional) homogeneity of preferences
Empirical specification:
yit = β1tmit + β2tm2it + x′itδt + εit (1)
Household carbon (yit); After tax income (mit); Controls (x′it)
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Parametric Engel curves
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Parametric Engel curves
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Household carbon - Decomposition over time
Oaxaca-Blinder decomposition:
Increase of 10.9t inhousehold carbon between1996 (22.8t) and 2009(33.7t) [2009 technology]
Income (after tax)explains 3.4t (30 percent)
Expenditure explains 6.0t(55 per cent)
Other variables explain little
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Households carbon inequality
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Household carbon inequality - Decomposition
Factor decomposition:
Income explains30-41 per cent ofvariation in CO2
Family sizeexplains 11-13 percent
Other variablesexplain little
Large unexplainedvariation
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Quantifying the ”equity-pollution” dilemma
Findings so far:
1 Environmental Engel curves
are upward-slopingare concaveshift down with time
2 Income appears to be main driver of household CO2
Across time (alongside technology)Within time
3 Other household characteristics explain little
4 Large unexplained variation remains
So, by how much would income redistribution increase CO2?
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Quantifying the ”equity-pollution” dilemma
Example (2009): β2 = −0.27, Ψ = 57.1 (k USD) Math
Marginal redistribution :
The expected effect of a marginal redistribution of 1000 USD froma higher income to a lower income household is an increase of30.8kg in household CO2. That constitutes about 6 per cent ofaverage CO2 per 1000 USD expenditure (514kg).
Full redistribution:
Average household carbon in 2009 is predicted to increase by 0.9tfrom 33.7t to about 34.6t under full income equality, a rise ofabout 2.7 per cent.
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Income, consumption, technologyHousehold carbon inequalityQuantifying the ”equity-pollution” dilemmaPositional consumption (?)
Results: Positional consumption (?)
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Discussion
Next steps:
1 Expand from 1996-2009 to 1996-2014 (WIOD)2 Improve measurement:
TradeCO2eRegional prices / emission-factors...
Future research:1 Motivations for consumption of specific goods
Status / positional consumptionEnvironmental awareness in consumption...
2 Wealth inequality and access to assets
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Appendix: WIOD sectors
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Appendix: WIOD sectors
Back to WIOD
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Appendix: Direct emission factors
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Appendix: Consumption categories
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Appendix: Consumption categories
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Appendix: Emission factors (WIOD) - Methodology
Methodology as proposed by Leontief (1970)Output of n sectors (x); intermediate (Cx) and consumed (y).
x = Cx + y (2)
Direct Requirement matrix (C) to Total Requirement matrix (T).
x = [I− C]−1y = Ty (3)
Total emission-intensities (z) to total emission-intensities (z).
z = z′T (4)
Back to WIOD
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Appendix: Technology, savings, composition
Back
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Results: Quantifying the ”equity-pollution” dilemmaEstimated EEC: yit = β1tmit + β2tm
2it + x′itδt
Marginal change in consumption from income:∂yi∂mi
= β1 + 2β2mi
Marginal transfer from j to i :∂yi∂mi−
∂yj∂mj
= −2β2(mj − mi )
Expected effect of marginal transfer between two random households:
Eij(∂yi∂mi− ∂yj∂mj|mj > mi ) = −2β2Eij (mj −mi |mj > mi ) = −2β2Ψ(F (m))
Gini’s Mean Difference: Ψ(F (m)) =∫ ∫|y − z|dF (y)dF (z) or 1
N(N−1)
∑Ni=1
∑Nj=1 |mi − mj |, i 6= j
Difference in emissions when moving to ”full equality”:
β2
[m2 − 1
N
N∑i=1
m2i
]Back to Results
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
OutlineMotivation and Previous literature
Data and MethodologyResults
Discussion
Appendix: Positional consumption (?)
Lutz Sager ([email protected]) Would income redistribution result in higher aggregate emissions?
LSE Seminar series on Climate Change, Inequality and Social Policy27 April 2017
Would income redistribution result in higher aggregate emissions?Lutz Sager (Grantham Research Institute, LSE)
Discussants:
Ian GoughVisiting Professor CASE and Grantham Research Institute, LSE
Professor Angela DruckmanCentre for the Understanding of Sustainable Prosperity, University of Surrey
Ian Gough:Heat, Greed and Human Need:
Climate change, capitalism and sustainable wellbeing
Edward Elgar, Forthcoming autumn 2017
Selected slides
Categories of personal consumption by necessity and emission content, UK 2009
Source: Chitnis et al (2014): Tables 5, A.5
Summary of eco‐social policies in Chapter 7
Raworth, K. (2012) 'A safe and just space for humanity: can we live within the doughnut', Oxfam Policy and Practice: Climate Change and Resilience, 8(1), 1-26.
A Safe and Just Space for Humanity