Inequality repercussions of financing negative emissions

Negative emissions technologies are attracting the interest of investors in the race to make them effective and profitable. When deployed at scale, they will be financed through public funds, reducing the fiscal space for a socially inclusive climate transition. Moreover, if the private sector owns negative emissions technologies, potentially large profits would disproportionally benefit investors and equity holders. Here we quantify the inequality repercussions of direct air capture of CO2 in a 1.5 degrees C scenario, using a regional integrated assessment model that features within-country income heterogeneity. We find that, under a single carbon market, financing negative emissions technologies could double the increase in income inequality of climate policy. The effects are highest around the time of net zero and in scenarios with carbon budget overshoot. We identify the drivers of the inequality increase and discuss policy provisions to mitigate the equity concerns of CO2 removal strategies. Negative emissions technologies at scale are seen as essential for the overall decarbonization effort to achieve the Paris Agreement targets. However, private ownership of these technologies could largely increase regional or international inequality by financing them through carbon markets.