The Distributional Footprint of Carbon: Economic Development, Emissions, and Income Inequality Across 79 Economies (1995–2022)

The inequality–environment literature has mostly asked whether unequal societies emit more. The opposite direction—whether the carbon-intensive character of a country’s production is related to how income is distributed within it—has received far less attention, although it bears directly on the design of just-transition policy. This paper examines that direction using an unbalanced panel of 79 economies observed between 1995 and 2022, combining Global Carbon Budget carbon dioxide (CO2) emissions data with World Bank Gini estimates. A theoretical framework is developed first, arguing that the carbon intensity of a production process and the establishment structure that determines its labour-market footprint are jointly determined by the same underlying technology, and that decarbonization policy selects sectors for contraction along precisely the carbon margin. Four hypotheses follow. They are tested with two-way fixed effects and Driscoll–Kraay standard errors, dynamic panel generalized method of moments (GMM) estimation on five-year averages, panel error-correction estimation and heterogeneous-panel causality tests, and supported by extended specifications controlling for trade, education, redistribution, institutions and industrial structure, by alternative inequality measures, and by a decomposition of emissions by fuel that separates the carbon intensity of the energy mix from the level of energy use. The estimates suggest that, within countries and conditional on income, higher per capita emissions are associated with lower measured inequality, that the association is stronger in richer economies, and that it behaves as a slow-moving structural regularity rather than a year-to-year feedback loop. A pre-stated test of whether the relationship is specific to carbon rather than to energy-intensive production is not supported: the signature is carried by the scale of fossil energy use rather than by the carbon content of the fuel mix, so per capita emissions are best read as an index of energy- and capital-intensive production. The association nonetheless survives conditioning on trade, education, redistribution, institutional quality and industrial structure, and it is present—and somewhat stronger—in market-income rather than in disposable-income inequality, which places it before the fiscal system rather than within it. Because mitigation policy selects sectors for contraction along precisely the margin the emissions variable identifies, the transition carries a distributional risk that climate policy has reason to anticipate. All findings are reported as associations under stated identifying assumptions, not as experimental effects.