Net-Zero Emissions Come at High Cost to Income Equality, Study Finds

Photo by Iain Kennedy

New research published in the journal Nature Climate Change warns that efforts to remove carbon dioxide from the atmosphere could increase economic inequality if current climate policy designs are used.

In the paper “Inequality repercussions of financing negative emissions”, published on Nature Climate Change by researchers at the Politecnico di Milano and the Euro-Mediterranean Center on Climate Change found that public incentives to finance so-called “negative emission technologies” could disproportionately benefit wealthy owners of removal companies, while costs would be borne by the wider public.

“In this work, we provide a conceptual channel and quantify how financing negative emissions can cause detrimental distributional consequences in the long run, generating a tension between cost efficiency and equity in the climate transition,” said Pietro Andreoni, a PhD student at Politecnico di Milano and the study’s lead author.

Most scenarios consistent with the Paris Agreement’s goal of limiting warming to 1.5 degrees Celsius depend heavily on removing carbon from the air. The industry could be worth $1 trillion annually by midcentury if removal reaches over a billion tons of carbon dioxide per year, the study notes.

Public support would likely be needed to scale up the nascent carbon removal industry. But the researchers found that channeling such support through existing emissions trading systems could allow private companies to reap sizable profits while costs are socialized.

In an illustrative scenario, this effect could double the increase in income inequality caused by climate policy, concentrated around the time global emissions reach net zero. Small economies with high removal potential appear especially exposed.

The results suggest alternative policies should be explored to limit inequality impacts, the authors argue. Options could include regulating removal company profits or transferring resources to lower-income regions.

“The study highlights the importance of adequate policy design to finance large-scale CO2 removal,” said Massimo Tavoni, a professor of climate economics at Politecnico di Milano and director of the Euro-Mediterranean Center.

The findings underscore the need to weigh effects on fairness alongside cost-efficiency when designing climate transition policies, the researchers say.

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