Unequal access to air conditioning has important implications for productivity, health, and education.
(Today’s post is co-authored by Stephen Jarvis, an assistant professor in the Department of Geography and Environment at the London School of Economics.)
Sales of residential air conditioners are booming worldwide, to almost 100 million units annually. That means that every hour, 10,000 new air conditioners are sold somewhere on the planet.
Previous Energy Institute research has examined the economic and environmental impacts of air conditioning. A typical air conditioner uses 20 times as much electricity as a ceiling fan, so air conditioning adoption significantly increases electricity demand, particularly during peak periods when the grid is already stressed. In addition, the refrigerants used in air conditioning are themselves a potent greenhouse gas.
Relatively little attention has been paid, however, to the implications of air conditioning for inequality. In this newly published paper with Paul Gertler and Catherine Wolfram, we examine household-level microdata from 16 countries. We find that current trends in air conditioning adoption risk exacerbating existing inequalities, especially with the growing importance of cooling in a warming world.
At the core of our analysis are a series of “adoption curves” showing how the share of households with air conditioning varies across households with different income levels. We plot separate figures for each of our 16 countries. The horizontal axes show annual household income, converted to U.S. dollars and measured in logs, ranging from about $1,000 to $100,000. The grey line is a density plot illustrating each country’s income distribution.
We find in all countries a pronounced positive correlation between household income and air conditioning. At low income levels air conditioning is rare but then starting at annual income of about $10,000 USD air conditioning increases sharply, before eventually leveling off at high income levels.
Pooling Data Across Countries
Most previous studies rely on data from country averages, or household data from a single country. We pool data from more than a million households in 16 countries, giving us unusually broad coverage across levels of income and heat exposure.
The colors in the figure above indicate air conditioning penetration. As expected, air conditioning is most pronounced with higher income and hotter climates. We follow previous research in measuring heat exposure using cooling degree days.
Implications for 2050
We use these data to fit an econometric model of air conditioning adoption. In our model, air conditioning adoption depends flexibly on income and climate. The relationship is assumed to have the same approximate shape globally, but we also allow for differences across countries. For example, the United States has long had a particularly strong affection for air conditioning.
We combine our model with projections of future incomes and cooling degree days to predict air conditioning adoption between now and 2050. The result? Across our 16 countries, the share of households with air conditioning increases steadily from 35% in 2020 to 55% in 2050.
The figure above describes the results from a decomposition analysis we performed by country. The black points show past and predicted air conditioning penetration by decade, and the colors indicate the fraction of growth due to income and global warming, respectively.
Income growth explains 85% of increased air conditioning adoption. Global warming matters too, but many countries like India already experience high temperatures, so further temperature increases have little additional impact. Instead, where global warming matters more is in relatively cooler countries like Argentina, Italy, and Uruguay.
Our model predicts that future air conditioning adoption will be highly concentrated among high-income households. The figure below plots air conditioning adoption by income tercile.
Interestingly, a few higher income countries see evidence of convergence. China is a good example of this. Between 2030 and 2050 penetration for the high- income tercile grows from 80% to 88%, reaching near saturation. Over the same period, the low-income tercile grows more rapidly from 33% to 51%.
In many other countries inequality gets worse. Take Pakistan, for example. By 2050, 38% of households in the high-income tercile have air conditioning, compared to only 5% in the low-income tercile. A similar pattern is evident in Ghana, Nigeria, Sierra Leone, and South Africa.
Thus even by 2050 there remains a pronounced inequality gap in almost all countries, with low-income households substantially less likely to have access to air conditioning.
Productivity, Health, and Education
Air conditioning is not just about providing immediate comfort, it is also an input into the production of human capital and, ultimately, intergenerational income mobility. We argue in the paper that unequal access to air conditioning has important implications for productivity, health, and education.
Take health, for example. Research by the Energy Institute’s Joe Shapiro and coauthors finds that air conditioning decreases heat-related mortality by 80%. With less access to air conditioning, the world’s poorest households are less able to take advantage of this life-saving technology.
Education is another important example. Previous research has tied heat to slower learning and worse educational outcomes. If higher-income households can use air conditioning to insulate their children and improve their learning, this will exacerbate existing inequalities. This human capital dimension means that the impacts of air conditioning are likely to be with us for many years, or, indeed, multiple generations.
Policymakers have been sounding the alarm about the pressures that growing air conditioning use will place on electricity systems, and on the climate through increased emissions. We already knew that these costs are borne unevenly, with vulnerable communities at greater risk from the impacts of climate change. What our findings highlight is that the benefits of air conditioning are likely to be distributed unevenly too.
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Suggested citation: Davis, Lucas. “Air Conditioning and Global Inequality” Energy Institute Blog, UC Berkeley, August 8, 2021, https://energyathaas.wordpress.com/2021/08/09/air-conditioning-and-global-inequality/
For more details see “Air Conditioning and Global Inequality”, by Lucas Davis, Paul Gertler, Stephen Jarvis, and Catherine Wolfram, Global Environmental Change, 2021, 69, 10229.
Lucas Davis is the Jeffrey A. Jacobs Distinguished Professor in Business and Technology at the Haas School of Business at the University of California, Berkeley. He is a Faculty Affiliate at the Energy Institute at Haas, a coeditor at the American Economic Journal: Economic Policy, and a Research Associate at the National Bureau of Economic Research. He received a BA from Amherst College and a PhD in Economics from the University of Wisconsin. His research focuses on energy and environmental markets, and in particular, on electricity and natural gas regulation, pricing in competitive and non-competitive markets, and the economic and business impacts of environmental policy.