Per capita income, consumption patterns, and carbon dioxide emissions

a column by Justin Caron and Thibault Fally for VOX: CEPR’s Policy Portal

With global emissions of CO₂ still growing, understanding the determinants behind energy use and emissions is as relevant as ever.

This column looks at the role of per capita income and consumption choices. It finds that the share of expenditures spent on energy and energy-intensive goods tends to decrease with income across a large set of countries. Simulations indicate that income growth shifts consumption patterns in a way which generally reduces emissions.

However, increasing emissions in low- and middle-income countries as well as a shift from direct to indirect consumption of energy mean that the effect on total world emissions is modest.

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