Household characteristics and decomposition of carbon footprint inequality

We investigate how the carbon footprint inequality is influenced by household characteristics. We decompose inequality into different subgroups such as location, age of household head, household size, education and income quintile. Table 3.5 presents the carbon footprint inequality decomposition by relevant household characteristics.

Results show that the carbon footprint inequality is higher in rural areas than in urban areas. While this may seem contrary to the income inequality where we observe greater income inequality in urban rather than in rural areas (Estudillo 1997), this observation is plausible. It can be explained by evaluating the most carbon intensive consumption items of households such as fuel, light and transportation. Urban households have better access to electricity than rural households. Households in the rural areas are more dispersed and isolated, hence we can expect that the share of households who have no access to electricity is higher in rural areas than in urban areas. This creates a more unequal distribution in emissions.

In terms of transportation, car and public transport are used more frequently in urban areas than in rural areas. Consequently, this creates a more unequal carbon footprint distribution in rural areas than in urban areas. Despite having on average a huge carbon footprint gap between urban and rural households, the inequality between these two groups accounts for only a little over 20%. Thus if we eliminate the disparity in household carbon footprint between rural and urban households, the inequality in the carbon footprint will only decline on aggregate by around 20%.

There is a positive relationship between age of the household head and carbon footprint inequality. Both the Gini and Theil indexes reveal that the lowest degree of carbon footprint inequality is observed among young household heads while the highest carbon footprint inequality fell among the oldest household heads.

A U-shaped behavior is observed between emission inequality and household size.

Initially with a smaller household size, emission inequality tends to be higher but then with added household members emission inequality tends to decline reaching its lowest peak, after which, emission inequality starts to rise again. This behavior captures the economies of scale or the sharing of resources among household members. With a smaller household size, each member can maximize household resources, hence emission disparity tends to be higher.

60 However, with more household members siblings will share resources, thus inequality in emissions tends to decline. But eventually more resources are needed and consumption on the aggregate will rise as household size increases, driving the inequality to increase again.

Classifying households based on the educational attainment shows an inverted U-shaped pattern with emission inequality. Emission inequality is increasing as household heads attain more education and then reaches its peak and eventually, inequality declines again as household heads were able to achieved at least a college level education. The lowest level of emission inequality is observed among households who were able to go to college or university. This implies that highly educated household heads have more homogenous emissions yet their lifestyle is carbon intensive. Take note that college headed households have the largest share of emission at around 42% as compared to the rest of the households (see Appendix Table 5). This also suggests that gaining higher education is associated with declining emission inequality.

Decomposing carbon footprint inequality by income quintile depicts a U-shaped behavior. The poorest and richest households are more unequally distributed in their carbon footprint than the households in the middle quintile. This result is consistent with our concentration analysis showing that households in the tail end distribution are more heterogeneous in emission as compared to households in the middle-income quintile. This further implies that an increase in income at the lower end of the distribution has an equalizing effect on the carbon footprint while at the upper end of the distribution an increase in income leads to a worsening emission inequality. Greater variations in lifestyle are expected from households in the highest quintile. It is also noticeable that inequality in the highest quintile tends to increase with time while carbon footprint inequality in the lowest quintile decreases with time. This means that on the aggregate level, the increase in carbon footprint inequality is driven by the rising emission inequality in the highest quintile. Looking at the between and within-group inequality component, results shows that total inequality is largely explained by the between-group component.

When we classify households based on location, age, household size and education, results of the inequality decomposition show that the within-group component of inequality explains a greater part of the total carbon footprint inequality than the between-group component. However, this observation is in contrast when inequality is decomposed by income quintiles. Classifying households based on income quintiles shows that the between-group component of inequality is larger than the within-between-group inequality. This shows that household income has a much stronger influence on carbon footprint inequality than the other household characteristics.

61 Table 3.5. Inequality decomposition by household characteristics.

Factors Gini Index Theil Index

2000 2006 2000 2006

Location

Rural 0.465 0.465 0.378 0.377

Urban 0.443 0.449 0.369 0.372

Within group (%) 0.373 (79.7%) 0.375 (76.1%)

Between group (%) 0.095 (20.3%) 0.118 (23.9%)

Age

below 30 0.480 0.479 0.415 0.407

30 to 45 0.475 0.491 0.411 0.428

46 to 60 0.495 0.509 0.465 0.485

above 60 0.536 0.565 0.566 0.625

Within group (%) 0.462 (98.8%) 0.485 (98.4%)

Between group (%) 0.006 (1.2%) 0.008 (1.6%)

Household size

1 to 3 members 0.529 0.535 0.541 0.544

4 to 5 members 0.480 0.493 0.429 0.440

6 to 8 members 0.482 0.516 0.424 0.480

more than 8 0.505 0.515 0.467 0.476

Within group (%) 0.455 (97.3%) 0.481 (97.7%)

Between group (%) 0.013 (2.7%) 0.012 (2.3%)

Education

no formal education 0.464 0.463 0.382 0.380

elementary 0.468 0.475 0.388 0.393

high school 0.420 0.439 0.321 0.341

at least college 0.411 0.422 0.307 0.324

Within group (%) 0.348 (74.4%) 0.360 (73.1%)

Between group (%) 0.120 (25.6%) 0.133 (26.9%)

Income Quintiles

poorest 20% 0.314 0.299 0.174 0.154

2nd 0.258 0.253 0.107 0.104

middle 0.247 0.255 0.102 0.106

4th 0.229 0.243 0.089 0.099

richest 20% 0.306 0.322 0.158 0.173

Within group (%) 0.127 (27.3%) 0.127 (25.8%)

Between group (%) 0.340 (72.7%) 0.366 (74.2%)

Overall 0.498 0.516 0.468 0.493

62 Due to the limited number of available studies related to household emission inequality, we do not have much of a reference point to compare the results of our study. However, we can use information from a macro level emission inequality to check whether our results from the household level mirror the results from the country or regional level. Padilla and Serrano (2006) found that inequality in carbon emissions is mostly explained by the inequality between groups of different income levels, while the inequality within groups of similar incomes is lower. Heil and Wodon (1997) also showed that the between-group and stratification components accounted for half of the inequality in per capita emissions. Levy et al. (2009) reported in their study that there is a stable dominance of emission inequality between five income groups of countries in comparison to inequality within these groups of countries. In addition, Duro and Padilla (2006) also reported in their study about international inequality in per capita CO₂ emissions that the between-group component is the biggest contributor to total inequality and is largely explained by the income factor. These findings on the international level reflect what we found on the household level suggesting that the inequality between income groups constitutes a bigger portion to the total carbon footprint inequality than the within-group component.