Inequality in major consumption categories across income quintiles

We further decompose the Gini index into six major household consumption items to analyze the internal dynamics of emission inequality. Food summarizes the emissions from food related consumption as well as alcoholic & non-alcoholic beverages. Energy captures the emissions from fuel and light, while mobility is associated with emissions from household transportation. Operations capture the emissions from communication, nondurable & durable items, maintenance and other household operations. Clothing includes emissions related to clothing, footwear and personal care while services include education, medical care and recreation. Figure 3.2 shows that the Gini index of household carbon footprint depicts a U-shaped pattern with respect to income. At the lowest quintile, households are more unequal while in the middle quintiles, households’ carbon footprint inequality is relatively equal and then at the richer quintile households are more unequal in carbon footprint. This shows that households in the middle income group are more homogenous in their carbon footprint distribution than households in the poorest and richest quintiles. This observation is consistent in both years¹⁹.

With regards to consumption categories, we would like to highlight the share of inequality related to food consumption and services. Food emission inequality is high among poor households in comparison to other household quintiles while service-related emission inequality is high among rich households in comparison to the other quintiles. These observations are plausible because poor households will prioritize their basic needs such as food while richer households spend more on service-related goods and other luxury goods.

Services include expenditures in education, medical care and recreation.

Across quintiles, the disparity in energy intensive consumption dominates the total carbon footprint inequality. Energy related consumption consistently accounts for more than 50% of the total carbon footprint inequality while mobility accounts for more than 10% of the total carbon footprint inequality. So, if policy makers are keen on reducing household carbon footprint inequality, then devising policies focusing on consumption related to energy and mobility will provide a more equitable carbon footprint distribution among households.

19 We also did a decomposition of household carbon footprint inequality by quintile and year with results similar to that of Figure 3.2 . Both years depicted a U-shaped kind of relationship between emissions inequality and household income.

65 Figure 3.2. Comparison of inequality in major consumption categories across quintiles.

3.5. Summary and Conclusion

This study investigates household carbon footprint inequality in the Philippines and decomposes it into subgroups applying the standard methods used in analyzing income inequality. The literature is abundant with evidence on emission inequality at the international level but is very limited on household level. Hence, this study adds to this strand of literature by analyzing the disparity in carbon emissions embodied in households’ consumption.

First, we rank the households based on their income and derive the concentration index of carbon footprint. We document a high and rising carbon footprint disparity among households. Poor households are more unequally distributed in carbon emissions than in income while rich households are more unequally distributed in income than in emissions.

This is because among poor households, consumption is more variable and higher relative to their income and in contrast among rich households, income is unbounded but their consumption has some threshold.

Second, the inequality decomposition by income quintiles shows that between-group inequality is more dominant than the within-group inequality, however, the opposite finding is observed when decomposing carbon footprint inequality using other household characteristics implying that income has strong influence on carbon footprint inequality.

Lastly, we look at the sources of emission inequality and results reveal that an increase in emission from energy intensive goods such as fuel, light and transportation will worsen total household emission inequality while an increase in emissions from food related consumption will contribute to easing out household inequality. In addition, energy intensive consumption contributes largely to total household carbon footprint inequality.

66 Although more urgent and bold steps have to be taken in order to reduce income inequality in the Philippines, policy makers should nevertheless take into account the rising households’ carbon footprint inequality. This is important in mitigating climate change and specifically in curtailing overall carbon emissions. Improvement in the standard of living among poor households initially promotes a declining pattern of emission inequality as manifested by the inequality decomposition across income quintiles. However, a balance has to be taken because growth will push emission inequality wider among rich households. This can possibly be altered by introducing carbon tax to certain household consumption items that are carbon or energy intensive but this should potentially target households only in the upper income quintiles so as not push poor households even further down the poverty threshold. The decomposition analysis shows that energy intensive consumption largely influences household carbon footprint inequality. Therefore, if policy makers aim to control inequality in carbon emission, then devising policies focusing on fuel, light and transportation such as fuel taxes will lead to a more equitable carbon footprint distribution among households. In addition, a more potent way of reducing carbon footprint inequality is to provide households with options for green consumption.

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Essay 4

What motivates developing countries to diversify sources of renewable

energy?

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Essay 4: What motivates developing countries to diversify sources of