Guschanski, Alexander ORCID: https://orcid.org/0000-0002-7818-8264 and Wildauer, Rafael ORCID: https://orcid.org/0000-0001-6395-6286 (2026) Can a wealth tax reduce CO2 emissions in Europe? Ecological Economics, 252:109231. ISSN 0921-8009 (Print), 1873-6106 (Online) (doi:10.1016/j.ecolecon.2026.109231)

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Abstract

We analyse the potential of wealth taxes to reduce CO2 emissions through two transmission channels: the inequality channel, which links reductions in wealth inequality to lower emissions, and the consumption channel, which operates through the effect of wealth taxes on consumption by top wealth holders. We simulate the effects of various wealth tax designs over one- and ten-year horizons using harmonised microdata from 22 European countries. Our analysis accounts for survey non-response bias, heterogeneous rates of returns across households, and behavioural responses to taxation. We find that, through the inequality channel, a recurrent annual progressive wealth tax could reduce annual CO2 emissions by 7.5%–14.7% after 10 years relative to a no-tax scenario, depending on tax progressivity. Through the consumption channel, the average reduction is 1.5%–3.6% after 10 years. In addition, we show that the revenues generated cover the entire investment gap identified by the European Commission’s ‘Fit for 55’ emissions reduction programme. These findings highlight the potential of wealth taxes to serve a dual purpose: curbing wealth concentration and contributing meaningfully to climate mitigation and justice, by focusing on high-net-worth households that account for a disproportionate share of emissions.

Item Type:	Article
Uncontrolled Keywords:	wealth tax, wealth inequality, CO2 emissions, climate policy, Household Finance and Consumption Survey
Subjects:	G Geography. Anthropology. Recreation > GE Environmental Sciences H Social Sciences > H Social Sciences (General) H Social Sciences > HJ Public Finance
Faculty / School / Research Centre / Research Group:	Greenwich Business School Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) Journal of Economic Literature Classification > Political Economy, Governance, Finance and Accountability (PEGFA) Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) > Greenwich Political Economy Research Centre (GPERC) Journal of Economic Literature Classification > Political Economy, Governance, Finance and Accountability (PEGFA) > Greenwich Political Economy Research Centre (GPERC) Journal of Economic Literature Classification > Greenwich Political Economy Research Centre (GPERC) Greenwich Business School > School of Accounting, Finance and Economics
Last Modified:	23 Sep 2026 08:16
URI:	https://gala.gre.ac.uk/id/eprint/54422

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