Rising Incomes, Transport Demand, and Sector Decarbonization

Abstract

As income increases, people become more mobile and spend more on carbon-intensive transport goods and services. This paper estimates income elasticities of transport consumption for 18 countries, which are then used to simulate future carbon footprint and carbon inequality. It first shows that in low-income countries (i) many households walk and do not use transport services, (ii) elasticity of private transport expenditure is high, and (iii) many households do not own a car. Both results suggest a future steep growth of emissions as incomes expand. Using these estimates, the paper shows that CO2 footprint will increase on average by 52% for these countries by 2035. Finally, it decomposes CO2 emissions along the within-country income distribution. Car ownership and emissions are highly concentrated at the top. By 2035, carbon inequality will increase in some countries but decrease in others. Such results can be used for modeling distributional implications of climate policies.

Keywords: Transport expenditures, vehicle ownership, household surveys, carbon emissions, climate change, income distribution