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Inequality repercussions of financing negative emissions

Nature Climate Change volume 14, pages 48–54 (2024)Cite this article

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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.

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Fig. 1: Characterization of aggregate and distributional effects of financial flows.
Fig. 2: Emissions and carbon prices under a 1.5 °C scenario with and without overshoot.
Fig. 3: Within-country inequality variation due to climate policy in a 1.5 °C scenario with overshoot.
Fig. 4: Inequality difference (variation in the Gini index) in the scenario without budget overshoot relative to a scenario with budget overshoot.
Fig. 5: Global inequality variation due to NET deployment (excluding emission reduction effects on inequality) as the difference in the mean log deviation index relative to the baseline, in selected years and scenarios.

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Data availability

All scenario runs and code used to produce the figures and data analysis are available in open source at https://doi.org/10.5281/zenodo.8397488.

Code availability

The model used to produce the scenarios is available in open source at https://github.com/witch-team/RICE50xmodel. To run the model, an active GAMS licence with CONOPT3 is required.

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Acknowledgements

The authors have received no external funding for this work.

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Authors and Affiliations

  1. RFF-CMCC European Institute on Economics and the Environment, Fondazione Centro Euromediterraneo sui Cambiamenti Climatici, Milan, Italy

    Pietro Andreoni, Johannes Emmerling & Massimo Tavoni

  2. Politecnico di Milano, Milan, Italy

    Pietro Andreoni & Massimo Tavoni

Authors
  1. Pietro Andreoni
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  2. Johannes Emmerling
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  3. Massimo Tavoni
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Contributions

All the authors designed and conceptualized the research questions and scenarios. P.A. and J.E. performed the model advancements. P.A. ran the scenarios, analysed the data and produced the figures. P.A. and M.T. wrote the first draft. All the authors extensively contributed to the final version of the paper.

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Correspondence to Pietro Andreoni.

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The authors declare no competing interests.

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Nature Climate Change thanks Carl-Friedrich Schleussner and the other, anonymous, reviewer(s) for their contribution to the peer review of this work.

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Extended data

Extended Data Fig. 1 Calibration of income taxes and wealth elasticities.

Income taxes elasticities (red) and wealth-to-income elasticity (blue) for each year between 2000 and 2020. Boxplots highlight median, 25th and 75th percentiles, points represent outliers. The number of observations and the median of the values is highlighted in text for each year.

Supplementary information

Supplementary Information

Supplementary Annexes A–L.

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Andreoni, P., Emmerling, J. & Tavoni, M. Inequality repercussions of financing negative emissions. Nat. Clim. Chang. 14, 48–54 (2024). https://doi.org/10.1038/s41558-023-01870-7

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