Luxury Carbon Tax: A Just Solution for Climate Change?

New research explores energy inequality within European countries

by Nouman Rasool
Luxury Carbon Tax: A Just Solution for Climate Change?

Recent research indicates that curbing energy consumption by the top 20% of energy users in Europe could decrease household greenhouse gas emissions by nearly 10%. This study is among recent efforts aiming to identify fair and equitable solutions to reduce energy consumption and carbon emissions both within and across countries.

"Addressing 'luxury energy use' and broader energy inequality are crucial components of combating climate change," states Milena Büchs, a sustainability researcher at the University of Leeds in the UK and member of the study team.

The research team analyzed spending data from 275,614 households across 27 European nations. They organized energy use into percentiles and created models to simulate the impact if energy consumption was capped at the 80th percentile, or 170.2 gigajoules per person annually.

The results, published in Nature Energy, show that limiting energy use among the top 20% of users could decrease emissions by 9.7%. This is noteworthy as past studies emphasize that merely decarbonizing the energy system will not suffice to mitigate climate change.

Individuals, particularly those in high-income nations with high energy consumption, must also reduce their energy use to meet global climate objectives.

Addressing Energy Inequality

However, even within affluent countries, some individuals lack sufficient energy for basic needs.

Thus, the researchers also studied the effects of elevating the bottom 20% of energy users to the 20th percentile. They found that while this would slightly reduce the emission savings from the 80th percentile cap, it only accounted for a 1.4 percentage point decrease.

Effectively, establishing both a "floor" and a "ceiling" for energy use in Europe could reduce emissions by 8.3% overall. "Tackling energy poverty can sometimes be seen as problematic from a climate change perspective," Büchs observes, so the marginal impact of increasing energy consumption among the lowest users was somewhat unexpected.

"This is good news. It suggests we can strive to meet everyone's needs while staying within planetary boundaries, provided we address high energy use," she adds. A separate study examined the effect of a 'luxury carbon' tax in 88 countries worldwide.

Current carbon taxes charge a uniform rate per ton of CO2 emitted, which can disproportionately burden the poor in high-income countries and have a relatively modest effect on overall emissions. The researchers modeled a tax that charges more for carbon from luxury activities (like vacation flights) than basic necessities (like home heating), assessing its impact on household carbon footprints.

Published in the journal One Earth, their findings suggest that a luxury carbon tax is fairer, leading to larger emission reductions and financial burdens for high-income households. Furthermore, it is more effective at immediate emission cuts as it targets luxuries that people can sacrifice with minimal disruption to daily life.

The luxury carbon tax is especially effective at improving fairness in high-income countries. In low-income countries, where even basic necessities are not widely consumed, even a standard carbon tax disproportionately targets the wealthy.

If implemented across the 88 countries, the luxury carbon tax could save around 100 gigatonnes of carbon emissions by 2050 – three-quarters of the reductions households must achieve to limit global warming to 2 °C and a third of the cuts needed for a 1.5 °C limit.

Neither the luxury carbon tax nor the 80th percentile energy cap alone would suffice to meet climate targets. However, these fair climate policies could potentially boost public support for further necessary changes. Policies like the 80th percentile energy cap "help to reduce emissions and create a fairer distribution of energy use, which could be key in increasing public acceptance for urgent and drastic climate action," concludes Büchs.