Environmental Engel Curves over four decades – The case of the Republic of Ireland

The relationship between income and carbon dioxide (CO₂) emissions has been debated in the environmental economics literature, primarily through two complementary but conceptually distinct frameworks. At the macro level, the Environmental Kuznets Curve (EKC) hypothesis posits a non-linear relationship between economic development and emissions, whereby emissions initially increase with income growth before stabilising or declining at higher income levels. At the micro level, Environmental Engel Curves (EECs) describe how household-level emissions vary with income within a given country, reflecting differences in consumption patterns, energy use, and access to carbon-intensive goods and services. These two literatures typically developed separately, leaving a gap: we have limited evidence on how the within-country income-emissions relationship evolves as an economy moves along its development path. To our knowledge, only one study examine temporal changes in the distribution of household CO₂ emissions within a single country, notably Sager (2019) for the United States. This paper studies the evolution of Environmental Engel Curves over time using six waves of the Irish Household Budget Survey (HBS) from the early 1980s to 2015, a period during which Ireland experienced exceptionally rapid income growth and major changes in consumption opportunities and energy use. We estimate income-emissions relationship for multiple points along Ireland’s development trajectory and ask: How does the shape of the EEC change as a country transitions from lower- to higher-income status? In doing so, we explicitly separate two mechanisms that are easily confounded in cross-sectional work: (i) changes in the carbon content of given consumption categories (i.e. carbon intensity of heating) and (ii) changes in the prevalence of carbon-intensive durables (i.e. personal vehicles) across the income distribution (extensive margin). We focus, in particular, on direct household energy use, focusing on residential heating fuels and private transport (vehicle ownership), which are plausible channels through which development alters EEC shape. These categories are where diffusion, infrastructure constraints, and policy-induced technology change are most likely to generate non-linearities. By documenting how EECs shift and re-shape across three decades of development within a single country, the paper complements cross-country evidence on heterogeneous distributional incidence (Dorband et al., 2019) and time-series evidence for the United States (Sager, 2019). We show that the EKC can be understood as the outcome of changing Environmental Engel Curves over the development process, driven by the diffusion and saturation of carbon-intensive household technologies. References Dorband, I. I., Jakob, M., Kalkuhl, M., & Steckel, J. C. (2019). Poverty and distributional effects of carbon pricing in low- and middle-income countries – A global comparative analysis. World Development, 115, 246–257. https://doi.org/10.1016/j.worlddev.2018.11.015 Sager, L. (2019). Income inequality and carbon consumption: Evidence from Environmental Engel curves. Energy Economics, 84, 104507. https://doi.org/10.1016/j.eneco.2019.104507