The top 10% of the wealthiest Americans churn out 40% of the nation’s climate- warming emissions, says a new study, and yet most current climate-change policy wants to unduly punish poorer residents.
That study, published this week and led by researchers at the University of Massachusetts Amherst, looked harder at investment-generated wealth and its link to carbon-intensive industries, so, for instance, investment in fossil fuels like oil CL00, +0.42% and natural gas NG00, -1.83%, other heavy industries with a sizable carbon footprint and financial sources for these industries. The results are the basis for the researchers’ suggestion that more effective climate policy would target such investments and not punish point-of-purchase consumption of goods such as food, gasoline RB00, -0.13% and technology, which tend to hurt lower-income groups more than their higher-earning counterparts.
The authors suggest that policymakers adopt taxes focused on shareholders and the carbon intensity of investment incomes in order to equitably meet the goal of keeping the global temperature to 1.5 Celsius of warming. And because the bulk of income among the wealthiest comes from their investments, researchers say the data suggests governments should shift away from “regressive” taxes on the carbon-intensity of what people buy and and tax climate-polluting investments instead.
These regressive taxes “disproportionately punish the poor while having little impact on the extremely wealthy, who tend to save and invest a large share of their income,” said Jared Starr, a sustainability scientist at UMass Amherst and the lead author of the study. “Consumption-based approaches miss something important: carbon pollution generates income, but when that income is reinvested into stocks SPX, rather than spent on necessities, it isn’t subject to a consumption-based carbon tax. What happens when we focus on how emissions create income, rather than how they enable consumption?”
Even when allowing for a considerable range of investment strategies, passive income accruing to this wealthier group is a major factor shaping the U.S. emissions distribution, the report said. Results suggest an alternative income or shareholder-based carbon tax, focused on investments, may have equity advantages over traditional consumer-facing cap-and-trade or carbon-tax options and be a useful policy tool to encourage decarbonization, while raising revenue for climate-conscious finance.
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An alternative income or shareholder-facing carbon tax puts pressure on executives and large shareholders (i.e. those with the most economic and corporate power) to act in their own self-interest and decarbonize their supply chain and operations in order to reduce taxes on their compensation and investments, the report said. Recent work has calculated that a climate-inspired wealth tax could be an effective tool to raise revenue for adaptation and mitigation efforts, especially as wealthier nations as a whole are increasingly on the hook for helping developing nations who provide natural resources and yet, feel the larger wrath of warming oceans, extreme weather and more.
Global warming is a natural phenomenon, and some of this summer’s warming was boosted by El Niño, the recurring weather pattern whose latest effects, scientists say, are only beginning. Still, it’s the speed of warming in the last several decades, boosted by man-made burning of fossil fuels like coal, oil and natural gas that alarms scientists and policy makers.
Globally, July was the hottest month on average in any given year, but even regular hot spots like Phoenix, Ariz., and parts of Texas suffered under unrelenting strings of days when the mercury was been well above 100 degrees Fahrenheit. In July, more than 100 million Americans were routinely under extreme heat warnings.
Challenged to expand the study beyond incomes to include investing stats, Starr and his colleagues looked at 30 years’ worth of data, drawing first on a database containing over 2.8 billion inter-sectoral financial transfers and following the flow of carbon and income through these transactions. This allowed them to calculate two different values: supplier-based and producer-based greenhouse gas emissions of income.
“While consumer-facing carbon taxes have struggled to move from proposal to law in the U.S., an investment-based carbon tax may be more equitable, politically palatable and equally justifiable,” the researchers summed up. “Of course, any such proposals would likely face significant pushback from the economically advantaged households who dominate policymaking.”