The Case for Taxing Luxury Emissions

In a campaign season marked by populist rhetoric, climate change is presumed not to connect to swing state voters in the way that “kitchen table” issues of affordability and job quality do. But it could, if approached and framed differently. As everyday Americans have faced soaring food, housing, and energy expenses, the billionaire class has benefitted exorbitantly. In turn, the ultra-wealthy have funneled their largesse into a range of activities with tremendously damaging climate consequences, including luxury yachts, private air travel, and sprawling third, fourth, and fifth homes. Recent research estimates that the richest 1 percent of households emit carbon at levels 175 times higher than households in the bottom 10 percent. Cumulatively, the top 10 percent of emitters worldwide are responsible for half of all emissions, while the bottom 50 percent of the global population produces only 10 percent.

These figures illustrate that climate change is also a class issue. But the design of most of our climate policies does not adequately reflect its class dimensions. In fact, recent research suggests that carbon pricing often disproportionately harms low-income and low-emitter groups. This fact may help explain why politicians struggle to broach the topic with everyday Americans and win the support they need for an aggressive climate agenda.

But there is a way out of this conundrum. In a recent article, we make the case for designing climate policy that differentiates luxury emissions and imposes stringent taxes on such emissions. There are three good reasons for treating luxury emissions differently.

First, from a moral angle, luxury emissions are distinct from subsistence levels of carbon. While people cannot easily alter the sources of their electricity or commuting methods, no one must commute by superyacht to keep food on the table. In addition, luxury emissions involve a significant amount of choice. Given the limited amount of carbon that can be emitted before the atmosphere reaches dangerous tipping points, it is irresponsible to waste it on the extravagances of the wealthy. Although there are thorny boundary questions about where need ends and luxury begins, there is a category of irredeemably superfluous emissions that is morally distinguishable and deserving of targeting and condemnation.

Second, there are social reasons to treat luxury emissions differently, as lavish lifestyles of the wealthy are broadcast over social media in ways that create memetic desires for such conspicuous consumption. Regulating the behavior of super-emitters could significantly influence perceptions of acceptable behavior and consumption patterns across classes. Even if many luxury emitters do not change their behaviors—a likely outcome, given their ability to absorb any tax—policies aimed at luxury carbon would broadly signal a disapproval of excesses potentially curbing extravagant displays of superfluous consumption. Research indicates that the consumption preferences of the most well-off and most conspicuous members of society have a “cascading” effect on the preferences of the masses. These dynamics render a focus on the consumption habits of luxury emitters in an efficient way to drive broader societal change.

Finally, there are political reasons to focus climate policy on luxury emissions—a point that brings us back to where we began. Much of the climate discourse has focused on how individuals can reduce their “carbon footprint” through lifestyle changes. This framing suggests that climate culpability is widespread and solutions must be as well. But if the wealthiest  10 percent of the global population reduced their emissions to levels conducive to a stable atmosphere, total annual carbon emissions could decrease by over one-third. Why not, then, focus climate policy here, where it can do the most good while constraining a limited number of people that possess ample tools to pivot their lifestyles in more carbon-conscious directions?

The most workable way to craft such a policy is through a luxury carbon tax. Such a tax could target high‑emitting goods perceived as luxuries, with high tax rates aimed at altering the carbon consumption behavior of the ultra‑wealthy. We explore an excise tax on the use of private jets, super yachts and other extreme luxuries, each of which produce emissions that are gratuitous and constitute easy and effective emissions reduction targets. For example, there are around 13,500 private jets in the U.S. which produce the equivalent emissions of more than 50 million cars—as much as 940 megatons of carbon equivalent emissions over a three-year period, by one measure. Popular support for such a tax could be bolstered by allocating the revenue generated to low‑carbon quality of life improvements, such as enhanced public transit and public spaces.

Some jurisdictions around the world are starting to embrace the idea of fairer climate change regulations. For example, Canada has adopted a new luxury tax that will apply to certain vehicles, planes, and vessels.  Los Angeles has recently increased taxes on the sales of mansions. These early forays are a small step towards making good on the potential we see to make carbon emissions an issue of economic fairness. To make a real and necessary dent in emissions in a way that combats inequality rather than exacerbates it, taxing luxury emissions is a good place to start.