Implications of different income distributions for future residential energy demand in the U.S.

Future income distribution will affect energy demand and its interactions with various societal priorities. Most future model simulations assume a single average consumer and thus miss this important demand determinant. We quantify long-term implications of alternative future income distributions for state-level residential energy demand, investment, greenhouse gas (GHG), and pollutant emission patterns in the United States (U.S.) by incorporating income quintiles into the residential energy sector of the Global Change Analysis Model with 50-state disaggregation (GCAM-USA). We find that if the income distribution within each U.S. state becomes more egalitarian than present, what means that the difference on income between the richest and poorest decreases over time, residential energy demand could be 10% (4-14% across states) higher in 2100. This increase of residential energy demand will directly reduce energy poverty, with a very modest increment on economywide CO2 emissions (1-2%). On the other hand, if U.S. states transition to a less equitable income distribution than present, with the difference between richest and poorest increasing over time, residential energy demand could be 19% (12-26% across states) lower. While this study focuses on a single sector, we conclude that to improve understanding of synergies and tradeoffs across multiple societal goals such as energy access, emissions, and investments, future model simulations should explicitly consider subregional income distribution impacts.