Start at the top: Why climate action should focus on high-emitters first

The urgency of the climate crisis continues to grow. Yet climate action is stalling in many places. A core problem is growing social resistance to climate policies, often fuelled by concerns about fairness and justice. These concerns are not unfounded. The richest 1% of people – roughly 77 million individuals – were responsible for about 16% of global CO₂ emissions in 2019, more than the entire bottom 50% of humanity combined.

Meanwhile, the top 10% of earners account for roughly 36-45% of global emissions. The share of emissions from the rich is increasing and is set to exceed the 1.5°C aligned level in 2030, regardless of what the other 90% of the population do. Those who have contributed least to climate change suffer the most from its impacts, while wealthy high-emitters have largely avoided accountability.

In light of these climate justice challenge, policy-makers should focus on climate measures that do not burden the poor, but instead target those with greater financial resources.

Fortunately, many climate policies can be designed to be socially progressive, or at least neutral, meaning they impact wealthier groups more than low-income communities. Carbon pricing tools such as carbon taxes or emissions trading systems, for example, can be progressive if the revenue is returned to the public, such as through rebates or dividends for low-income households. In short, many mainstream climate policies have the potential to be equitable.

However, two challenges remain. First, even if a policy is progressive, it may still impose significant costs on poor households. The poor are more vulnerable and have less capacity to absorb higher costs, even if the wealthy pay relatively more. Second, supporting low-income groups through compensation (e.g. subsidies or safety nets) can put a strain on public finances. Some green infrastructure projects are expensive in themselves.

From a social equity perspective, the most straightforward climate policies are those targeting the luxury or high-consumption behaviours of the wealthy. These policies are the “lowest-hanging fruit“ because they reduce emissions while ensuring that those who contributed most to the problem, and who can most afford it, bear the costs. Examples include special levies on frequent flyers, taxes on private jet flights or superyachts, higher registration fees for luxury cars, steep carbon taxes on large mansions and the phasing-out of subsidized electricity (see below).

While each policy on its own may not yield significant emission reductions, together they could make a meaningful dent. For example, instituting a frequent-flyer levy could reduce aviation emissions substantially. Another example is the company car tax privileges, allowing employees to pay low taxes based on a flat-rate system on the private use of a company car provided by their employer. It is estimated that this Dienstwagenprivileg costs Germany between €3 and €6 billion in lost tax revenues each year, as 60% of all new car registrations in the country are company cars.

In many countries, electricity is subsidized so that all consumers pay below-market prices – ostensibly to help the poor afford energy. In practice, however, these subsidies largely benefit better-off households who use the most power. Studies show that the richest 20% of society typically capture about 40-45% of energy subsidy benefits, whereas the poorest 20% receive only around 7%. Removing electricity subsidies for lavish consumption (while retaining support for basic usage) would curb wasteful energy use by the wealthy and significantly cut greenhouse gas emissions.

The International Monetary Fund (IMF) estimates that eliminating all fossil fuel subsidies worldwide could reduce global CO₂ emissions by around 5% below baseline levels. As nearly half of these subsidies benefit the top quintile, focusing the reform on the highest-consuming households could reduce CO₂ emissions by 2-3% globally. This would be a significant contribution, roughly comparable to the combined emissions of France, Italy and the UK. The fiscal savings from such a reform are also enormous. In 2020, worldwide explicit subsidies for electricity totaled around $190 billion. During the 2022 energy crisis, that number spiked to roughly $399 billion. Scrapping subsidies for the richest fifth of households could save on the order of $100-200 billion per year globally.

Direct financial transfers or price supports, i.e. explicit electricity subsidies, are more prevalent in developing and oil-rich countries. However, they also exist to some extent in affluent countries. Moreover, implicit subsidies exist in all countries. These occur when the negative environmental and health impacts of carbon emissions are not priced in. Therefore, a tiered electricity pricing approach should be applied in all countries by introducing a block tariff system, whereby wealthy households with high electricity consumption would be charged a higher tariff.

Such policies are, of course, not without challenges. For example, wealthy interest groups may lobby hard against them. Additionally, administrative obstacles such as poor household income data or inefficient tax collection systems can hinder their implementation. However, these obstacles can be overcome. Effective communication strategies are essential.

Furthermore, multilateral forums such as the G20, the IMF and the climate change COP can exert peer pressure to encourage reform. Technical assistance, policy coordination and regional compacts can mitigate political risk for governments seeking to implement reforms.

Encouragingly, recent global climate finance discussions in Seville emphasized the importance of progressive taxation and subsidy reform for sustainable development. A coalition of countries is also exploring the possibility of introducing an international levy on frequent flyers and private aviation.

Policy-makers can make real progress on emissions now by implementing these "lowest-hanging fruit" while also building public trust for the more challenging steps that lie ahead. At a time when the clock is ticking on climate change, such pro-poor climate policies offer a vital, fair and effective way forward.