Climate inequality deepening: “Tax the carbon content of assets and investments held by the wealthiest”

Even as the demand for a complete global ban on new fossil fuel investments grows louder, an alternative of taxing the carbon content of assets and financial portfolios seems to be more effective in bringing down carbon intensity.

Economists Lucas Chancel and Cornelia Mohren make this recommendation in the Climate Inequality Report 2025 released on October 29, though as an interim option when there is no outright ban on fossil fuel investments.

The latest report, published by the World Inequality Lab, has made the link between wealth inequality and how it is leading to climate inequality. “Climate crisis and wealth inequality are deeply interconnected,” says Lucas.

Making a distinction between wealth and consumption-sourced emission of greenhouse gases (GHGs), the report says, “Wealthy individuals fuel the climate crisis through their wealth, even more than their consumption.”

Consumption is limited to wealthy individuals’ lifestyle and other such similar activities and resultant emissions. But the capital and investment these wealthy individuals hold in industries account for much of the emissions.

“Emissions attributed to the wealthiest 1% based on their asset ownership are up to 2-3 times higher than estimates based on their consumption,” says the report.

“The jets wealthy individuals use doesn’t account for much of their emissions. But the deals that they sign in these jets account for the maximum,” says Lucas.

“At the world level, the top 1% cause 15% of global consumption-based emissions, while they account for 41% of global emissions associated with private capital ownership,” the Climate Inequality Report says.

To put it in perspective, using the consumption-based term, the per capita emission of an individual belonging to the global top one per cent wealthiest group is 75 times higher than that of a person belonging to the bottom 50 per cent group. But based on the asset ownership of these individuals in high-emitting industries, the calculation looks alarming: one individual per capita emission belonging to the top one per cent is 680 times higher than one belonging to the bottom 50 per cent group.

It is widely estimated that just 100 companies are responsible for 71 per cent of industrial GHG emissions since the Industrial Revolution. Based on this premise that wealth holding and investments in high emitting industries are responsible for most of the climate crisis, the report has suggested taxing the carbon contents of such investments to make it more equal.

“When you tax fossil fuels, it is entirely passed on to the consumers,” says Chancel. Consumers don’t always have the option or alternative means to switch over to other sources. This makes the transition unequal, says Cornelia Mohren, one of the editors of the report.

“So, the taxing system is bizarre this way. By taxing the carbon content of investments and financial portfolios, you are taxing the producers. This might encourage diversification as well,” says Chancel.

“Introducing a tax on the carbon intensity of financial portfolios could help redirect capital flows away from high-carbon assets, especially in the absence of an outright ban,” the report says.