Global convergence of incomes in a climate-constrained world

Sustainable development aims for equal living standards in the Global North and Global South while limiting global warming as much as possible. If measured in monetary terms, it is well known that eradicating extreme poverty (so lifting people beyond $PPP 2.15 consumption expenditure per capita (pc) per day) does not threaten climate goals. However, just beyond extreme poverty is not an acceptable goal for the living standards of people. In Europe, for instance, people live between $PPP 30pc and $PPP 70pc on average depending on the country. Moreover, some research has shown that lifting all people globally to only $PPP 5.5pc per day already implies allocating a much bigger carbon budget share for poverty eradication given current techno-economic parameters. Hence, if global poverty is to be reduced substantially, high-income nations and groups require a more rapid reduction of emissions so that global climate goals remain met. Therefore, in this research, I explore global convergence scenarios of incomes, taking between-country inequality and within-country inequality into account. I do so based on data from the World Inequality Lab and consider the following constraints and parameters: (i) income level towards which countries and groups converge (e.g. $PPP 30pc consumption expenditure a day or $PPP 50pc and so forth) (ii) carbon budgets, (iii) time horizon (for example whether convergence happens until 2050, 2075 or 2100 and so forth) and (iv) technology evolution (the pace of carbon intensity reduction). By studying the trade-offs between these, I elaborate on possible growth pathways for low-income countries and low-income groups world-wide, and corresponding degrowth or steady-state pathways in Global North countries and high-income groups world-wide. I find, for example, that, if all high-income nations continue historic growth trajectories while low- and middle-income countries converge to an acceptably high level of income, strict carbon budgets are difficult to maintain and hence high-income countries might consider steady-state or degrowth trajectories to free up “growth space” in low-income countries. The results may inform country-specific and income-group specific climate-economic scenarios in integrated assessment models and the wider policy debate.