Climate and inequality: How a rising tide can sink the smallest boats

By Max Rashbrooke

Max Rashbrooke is a senior associate at the Institute for Governance and Policy Studies, Victoria University of Wellington-Te Herenga Waka.

ANALYSIS: The classic defence of economic inequality has always been that a rising tide lifts all boats: as long as the economy is growing, everyone will benefit, and it doesn’t matter that some benefit more than others.

Contemplating the threat of climate change, some commentators are now reversing this metaphor. As the world warms and storms become more frequent, smaller boats may be overwhelmed while larger ones emerge unscathed. A rising tide may, metaphorically, sink some boats.

Climate change is, after many decades of delay, being taken seriously by policy-makers. However, some academics believe the connections with economic disparities have not been sufficiently explored in New Zealand. “I can’t think of much in that respect at all,” says David Hall, an Auckland University of Technology climate change researcher – the possible exception being Auckland’s regional fuel tax debates, which emphasised the tax’s impact on the poorest.

Internationally, researchers point to World Bank data showing that the wealthiest countries – including the United States, Canada, Japan and much of western Europe – account for just 12% of the current global population but 50% of all greenhouse gas emissions since 1850. Last year, the New York Times quoted Sonam Wangdi, chair of the 47-strong Least Developed Countries bloc, as saying: “We have contributed the least to this problem, yet we suffer disproportionately.”

This year’s World Inequality Report shows that, on a per-person basis, the poorest people in rich countries are already at or near 2030 targets for cutting emissions. The same is not true of richer people. (File photo)

Taking the global population as a whole, the top 10% of individual emitters, whichever country they live in, contribute nearly half of all carbon dioxide emissions. This data is derived by taking information on households’ consumption and attributing emissions to them based on the items they purchase. And as shown in this year’s World Inequality Report, compiled by a French-led team of economists, some social groups are already doing their bit for the climate – but others are making it worse.

The report argues that the per-person emissions of poorer people in rich countries have actually decreased in recent decades. If the world’s 2030 targets for cutting emissions are calculated on a per-person basis, effectively allocating each individual a carbon budget, the poorest half of the population in rich countries is already at or near those 2030 climate targets.

But, as the report notes, “This is not the case for the top half of the population [in rich countries].” Indeed, emissions for that group “have increased substantially” in recent decades.

Oxfam data compiled for the Financial Times showing the differences in emissions between the richest and poorest residents of G20 countries.

These inequalities can be seen in Oxfam data that examine the disparity between emissions for the rich and poor in wealthier countries. Most notably, the richest Americans’ emissions are many times those of their poorer counterparts.

Emerging evidence suggests that similar patterns exist in New Zealand. According to the World Inequality Database, the average New Zealander’s annual carbon dioxide emissions are roughly 15 tonnes. For someone in the richest 10%, that figure is roughly 45 tonnes – three times higher. This fits with previous research showing that higher-income households tend to have larger homes, use more energy, catch more international flights, eat more meat and drive more.

Keeping up with the Joneses

It is not just that the wealthy emit more carbon, however: economic disparities themselves can contribute to climate change. A growing body of research indicates that the more unequal a country’s distribution of income or wealth, the greater its overall emissions.

One explanation for this phenomenon was advanced back in 2010 in the book The Spirit Level, by British scientists Richard Wilkinson and Kate Pickett, who argued that “a great deal of what drives consumption is status competition”. In order to maintain their social position and “keep up with the Joneses”, people spent more on material goods, inducing greater emissions.

The graph shows how many tonnes of carbon are generated each year by the consumption of someone in the richest 10% (red line) and the average person (blue line). The measure used is tonnes (t) of carbon dioxide equivalent (CO2e) per capita (/cap).

That competition, in turn, became more important the larger the economic disparities between households. “As inequality increases status competition,” Wilkinson and Pickett wrote, “we have to struggle harder to keep up … inequality ratchets up the competitive pressure to consume.”

This argument has been corroborated by more recent research. Earlier this year, Chinese scholars found that greater wealth inequality leads to greater per-person carbon emissions. In more unequal societies, they argued, “The middle and lower classes are inspired to copy the consumption patterns of the rich, who tend to overconsume and prefer carbon-intensive products, such as central air conditioning.”

Inequality may worsen emissions in other ways. Some researchers argue that a more unequal society will have larger numbers of people living in poverty, who may feel isolated from mainstream society and oppose environmental policies that they see as either an irrelevance to their lives, an indulgence for wealthier voters, or simply an unfair imposition. These arguments are relevant to New Zealand, which had the developed world’s largest increase in income inequality between 1985 and 2005. The wealthiest 1% hold one-quarter of all assets, while the poorest half have just 2%.

Conference participants walk past the Mona Blue Pacific Pavilion at the COP27 climate conference in Sharm El Sheikh, Egypt. Poorer countries, such as those in the Pacific, will be most affected by rising sea levels.

Not only are the causes of global warming unequally distributed, the impacts will also be disproportionately felt by disadvantaged households. Globally, it is widely acknowledged – by a diverse cast of figures that includes Leonardo DiCaprio, the Pope and the World Bank – that the poorest will be most affected by rising sea levels, increased natural disasters and failing crops. As one international NGO, Global Citizen, reports, “Climate change is going to amplify the already existing divide between those who have resources and those who do not.”

In New Zealand, recent research shows that one child in 10 is both living in poverty and likely to be hard hit by an increase in natural disasters.

Save the Children’s Jacqui Southey says the many Kiwi families already unable to afford essentials “will struggle most in the face of extreme climate events” and will need extra support – such as emergency funds, shelter and food – when major climate events occur. Inequality and climate change are, on this reading, in a negative feedback loop: inequality raises emissions; higher emissions then lead to greater inequality.

Impact on Māori

Responding to these concerns, the New Zealand Government has endorsed the idea of a ”just transition”, in which the shift to a low-carbon economy protects the fortunes of low-income individuals, who may be more likely to work in carbon-intensive “sunset” industries. However, some academics fear the tools currently mooted to mitigate global warming are not in line with such ambitions.

Writing earlier this year, AUT’s Hall and Massey University’s Robert McLachlan warned that simply imposing a price on carbon through the Emissions Trading Scheme (ETS) – akin to a flat-rate tax for every tonne of carbon emitted – would disproportionately affect poorer households.

“Emissions-intensive goods constitute a higher proportion of household spending for low-income households,” they wrote in the journal Policy Quarterly. “With fewer resources, lower income households will have lower ability to change behaviour or invest to reduce their exposure to emissions prices.”

Max Rashbrooke: ‘’Inland Revenue estimates New Zealand still loses at least $1.1b each year in evasion.’’

Hall and McLachlan also noted that Māori “are disproportionally exposed to this regressive impact”. Along similar lines, a 2021 ETS consultation document suggested that putting the price of carbon up to $100 “would increase the weekly spend of low-income households by 1.3% while raising the weekly spend of the highest income households by just 0.5%”.

A price on emissions, Hall adds, is also unlikely to change the high-polluting lifestyles of wealthier New Zealanders. The costs they would pay through the ETS “would be marginal for wealthier people – I don’t think they will take any notice”.

That’s not to say that the rich are all bad news when it comes to the climate. “Wealthier people, by making consumption decisions around purchasing electric vehicles and making their own homes energy self-sufficient, will be contributing to the economies of scale for some of those new technologies,” Hall says.

Wealthy early adopters, in other words, drive prices down for everyone else. They may also help build support for collective infrastructure like EV charging points. “They can use their wealth for the collective good,” Hall says.

The rich are not all bad news for the climate, writes Rashbrooke. Wealthier people buying electric vehicles or making their homes energy self-sufficient, help to drive down prices for everyone. (File photo)

Revenue from the ETS could also be distributed to lower-income households, in what is sometimes called a “climate dividend”. Some commentators, meanwhile, are arguing for measures to reduce economic inequalities directly – and, in the process, generate revenue for pro-environmental policies like free public transport.

Jo Spratt, Oxfam Aotearoa’s communications director, views this as a potential win-win. For instance, a windfall tax, levied on supermarkets and other companies enjoying “excess” profits, could be used to support lower-income households and implement climate-friendly policies.

“Tax is one of the most powerful tools we have to fight inequality,” Spratt said in a statement earlier this month. “Excess profits and windfall tax revenues can help tackle the biggest challenges of our times, like the explosion in inequality and the climate crisis.”

Hall, meanwhile, believes that as the impacts of climate change become ever starker, wealthier New Zealanders may be asked to shoulder a greater share of the response. Taxes on luxury items and emissions from long-haul flights – currently given a free pass by the ETS – may well be put on the table. “I just think that’s quite likely,” he says.

This article was published with the support of Boomers for Real Climate Measures, a charity that pays for research into climate change solutions. The charity took no part in writing or editing the article.