A barrier to strict regulations: persistently low wages

Energy costs represent a larger share of the budget for lower-income households. Consequently, any energy regulation would have a disproportionate impact on the poor.

“Energy burden” studies indicate that carbon regulations place a heavier strain on the lower-middle class than on the affluent. This added burden exacerbates existing inequalities and contributes to the slow progress in the fight against global warming. While a small share of the upper-middle class may embrace green initiatives regardless of cost, the majority may resist, feeling unfairly burdened.

Collective action in response to the green transition has not produced decisive progress, primarily due to the persistent and growing problem of inequality.

Rising inequalities are disrupting efforts to transition away from fossil fuels through measures such as carbon pricing, energy-efficiency standards, and subsidies, which are often perceived as benefiting the wealthy. Low- and middle-income households cannot be sacrificed in the effort to combat global warming, even when policies are presented as necessary to “save the planet,” particularly if the most affluent groups remain largely unaffected. Such measures would likely provoke strong resistance, leading to the election of radical politicians who would roll back green regulations.

Low- and middle-class wages have remained stagnant for decades, while the incomes and wealth of the elite have consistently increased.

Wage inequality has been rising since the 1970s. In the years ahead, low-income workers may face further difficulties due to intensifying international competition, the expansion of robotics, and the emergence of artificial intelligence. This trend further humiliates the middle class while making the rich even richer, and it is unsustainable.

The middle class seeks wage growth that keeps pace with rising living costs, rather than additional burdens from the green transition that would further widen the income gap. Governments therefore face a significant challenge: imposing additional carbon regulations that deepen inequality could provoke electoral backlash. To date, they have not identified a solution that accelerates the green transition without exacerbating existing disparities.