The carbon cost of rising incomes: Evidence from a middle-income country

As developing countries reduce poverty and expand their middle classes, household consumption tends to shift toward more carbon-intensive patterns. This paper examines the carbon footprint of household consumption in Colombia, one of the world's most unequal middle-income countries, using microdata from the national household budget survey and an environmentally extended input-output framework. Results reveal a stark concentration of emissions: the top 1% of households account for nearly a quarter of total emissions, while the bottom 10% are responsible for just 0.1%. Carbon emissions are more unequally distributed than household expenditure, underscoring the environmental implications of income inequality. We also estimate the income elasticity of emissions, finding that a 1% increase in income leads to a 0.6–0.85% increase in emissions. These findings highlight the need to integrate distributional concerns into climate policy. Without addressing the carbon consequences of income growth, developing countries risk locking themselves into unsustainable and inequitable development trajectories.