Inequality Repercussions of Financing Negative Emissions
A peer-reviewed paper by colleagues at the RFF-CMCC European Institute on Economics and the Environment weighs in on how carbon dioxide removal technologies may exacerbate economic inequality.
Abstract
Negative emissions technologies are attracting the interest of investors in the race to make them effective and profitable. When deployed at scale, they will be financed through public funds, reducing the fiscal space for a socially inclusive climate transition. Moreover, if the private sector owns negative emissions technologies, potentially large profits would disproportionally benefit investors and equity holders. Here we quantify the inequality repercussions of direct air capture of CO₂ in a 1.5°C scenario, using a regional integrated assessment model that features within-country income heterogeneity. We find that, under a single carbon market, financing negative emissions technologies could double the increase in income inequality of climate policy. The effects are highest around the time of net zero and in scenarios with carbon budget overshoot. We identify the drivers of the inequality increase and discuss policy provisions to mitigate the equity concerns of CO₂ removal strategies.
Authors
Pietro Andreoni
RFF-CMCC European Institute on Economics and the Environment
Johannes Emmerling
RFF-CMCC European Institute on Economics and the Environment
Massimo Tavoni
RFF-CMCC European Institute on Economics and the Environment
