Inequality, (re)distribution and luxury-taxation of international household energy and carbon footprints

Climate change is caused predominantly by high-income countries, and by upper economic classes
within countries, through high energy demand. After decades of political and economic failure to end
fossil fuel dependence and reduce emissions through innovation on the supply-side and in energy
efficiency, attention is now shifting towards the reorganization of energy demand. Here we contribute
to this paradigm shift by identifying levers to reduce energy inequality, recompose energy demand
and ultimately mitigate emissions and the climate crisis. Going beyond established measures of energy
inequality, we analyse international household final energy footprints according to consumption
purposes and classify consumption in terms of energy intensity and income elasticity of demand. We
find that transport-related goods and services are very energy intensive, while also being luxury goods,
disproving the long-standing assumption that household consumption automatically becomes
greener and less resource-intensive with increasing income. Moreover, we introduce novel scenarios
of global income redistribution and its impact on household final energy footprints. We find that the
energy costs of greater equity are small. An equal income distribution also recomposes energy
demand towards subsistence for a majority, contrasting with an unequal income distribution, which
results in luxury energy demand for a wealthy minority. Finally, we integrate information on the
distribution and purpose of consumption into an innovative carbon tax design targeting household
consumption by differentiated tax rates — setting higher tax rates for luxuries and lower rates for
necessities. We find that this differentiated design improves the progressivity of carbon taxes, even
before revenue redistribution, and with no detriment to effectiveness when compared to traditional
uniform carbon taxation.