The Carbon Footprint of Capital: Evidence from France, Germany and the US based on Distributional Environmental Accounts

What is the carbon footprint of capital and how are emissions associated with asset ownership distributed across the population? We address this question by developing a novel framework to systematically measure individual carbon footprints, taking into account both consumption and ownership-related emissions to varying degrees. Our framework is both comprehensive and exclusive, encompassing all emissions associated with economic activity, while ensuring no double-counting, thereby enhancing comparability between different countries and wealth groups. We apply the framework by constructing distributional environmental accounts for France, Germany and the US, yielding the following results. First, taking into account emissions from capital ownership increases the carbon footprint of the wealthiest 10% of the population by 2-2.8x as compared to consumption-only estimates, depending on the country. Second, for this group, 75-80% of emissions stem from asset ownership, not from direct energy consumption. Financial assets such as equity are found to emit, on average, 75-150 tonnes of carbon dioxide equivalent per million dollars or euros. Third, emissions from capital ownership appear to be more concentrated than capital itself, with the top 10% of the population emitting 70-85% of all emissions linked to capital ownership. These findings suggest that policies targeting the carbon content of individuals' assets and investments, rather than focusing only on individual consumption decisions, can be critical to reduce emissions and particularly so at the top of the distribution. We explore policy options consistent with this perspective.