The revised approaches to income inequality impact on production-based and consumption-based carbon dioxide emissions: literature review

Abstract

In recent decades, many authors have investigated possibility of simultaneous reduction of income inequality and pollution related to climate change. However, none of the previous researches reviewed the empirical studies of relationship between inequality and CO₂ emissions. The authors of the selected papers, published from 2001 to 2019, found a diverse impact of income inequality on carbon dioxide (CO₂) emissions. It could depend on different trajectories of Kuznets curves. Furthermore, the majority of authors have provided theoretical analysis (even including human behaviour) of the influence of income inequality on CO₂ emissions, considering only territorial (or production-based) emissions. However, this paper recommends to distinguish between the production-based and consumption-based emissions and suggests the revised approaches to the impact of income inequality on CO₂ emissions with regard to the production-based and consumption-based emissions. Regarding the production-based emissions, the following approaches are proposed: (i) determination of environmental policies, which also could reveal and explain the leakage phenomenon, and the channels of EKC, i.e. (ii) scale, (iii) composition, (iv) technical and (v) globalization effects. The influence of income inequality on consumption-based emissions can be explained by applying two approaches, namely (i) inequality determined changes in working time (this approach is also related to “Veblen effect”) and (ii) individual economic behaviours of households. Therefore, the present study provides a new insight into the subject of the relationship between income inequality and pollution related to climate change.