America’s wealthiest 10 percent linked to 40 percent of emissions

A new study led by the University of Massachusetts at Amherst has found that the wealthiest Americans – individuals whose incomes place them in the top ten percent of earners – are responsible for 40 percent of the country’s total greenhouse gas emissions. 

This study is the first to connect income – particularly that derived from financial investment – to the emissions used in generating that income. These findings suggest that policymakers should adopt taxes focused on shareholders and the emission intensity of investment income to equitably meet the goal of mitigating climate change. 

Consumption-based approaches

Scientists and environmentalists have long been aware that consumption – the amount and types of foods we eat, the things we buy, or the cars we drive – is closely associated to greenhouse emissions. Thus, traditional environmental policy has focused on either limiting consumption or guide it into more environmentally friendly alternatives, such as replacing red meat with plant-based diets or switching to electrical vehicles. 

“But consumption-based approaches to limiting greenhouse gas emissions are regressive. They disproportionately punish the poor while having little impact on the extremely wealthy, who tend to save and invest a large share of their income,” explained study lead author Jared Starr, a sustainability scientist at UMass Amherst. 

“Consumption-based approaches miss something important: carbon pollution generates income, but when that income is reinvested into stocks, 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?”

How do emissions create income?

Answering this apparently simple question is quite challenging, since although it is relatively easy to understand the distribution of wages and salaries for about 90 percent of Americans, it is much more difficult to get a sense of the investment income which makes up a large source of the wealth of the richest Americans. 

To address this, the experts examined three decades’ worth of data, by first using a database containing over 2.8 billion inter-sectoral financial transfers and then following the movements of carbon and income through these transactions. These methods allowed them to calculate two different values – supplier-based and producer-based greenhouse emissions of income.

Focus of the study

Supplier-based emissions are those generated by industries supplying fossil fuels to the economy. For example, although the operational emissions released by fossil fuel companies are in fact quite low, such companies make huge profits by selling oil to other who will burn it and thus contribute to pollution. On the other hand, producer-based emissions are those directly released by the operations of specific businesses, such as coal-fired power plants.

By taking into account these two values, the researchers linked emission data with another database containing comprehensive demographic and income data for over five million Americans. This data differentiated active income (salaries and wages earned through employment) from the passively generated investment income. 

What the researchers learned 

The analysis revealed that over 40 percent of U.S. emissions were attributable to the income flows of the top ten percent wealthiest citizens, with the top one percent of earners generating between 15 to 17 percent of the country’s emissions. While white, non-Hispanic households had the highest emission-connected income, Black households had the lowest. 

Moreover, emissions tended to increase with age, peaking with the 45-54 age group, before starting to decline. Finally, the scientists also identified so-called “super-emitters” with extremely high emissions intensity, consisting of the top 0.1 percent of households, most of them active in fields such as finance, real estate, insurance, manufacturing, and mining and quarrying. 

Study implications 

“This research gives us insight into the way that income and investments obscure emissions responsibility,” Starr said. “For example, 15 days of income for a top 0.1 percent household generates as much carbon pollution as a lifetime of income for a household in the bottom 10 percent. An income-based lens helps us focus in on exactly who is profiting the most from climate-changing carbon pollution, and design policies to shift their behavior.”

According to the experts, to solve this problem, officials should focus on income and shareholder-based taxation rather than taxing consumables. 

“In this way, we could really incentivize the Americans who are driving and profiting the most from climate change to decarbonize their industries and investments. It’s divestment through self-interest, rather than altruism. Imagine how quickly corporate executives, board members, and large shareholders would decarbonize their industries if we made it in their financial interest to do so. The tax revenue gained could help the nation invest substantially in decarbonization efforts,” Starr concluded.

The study is published in the journal PLOS Climate.

—

By Andrei Ionescu, Earth.com Staff Writer

Check us out on EarthSnap, a free app brought to you by Eric Ralls and Earth.com.