Do welfare states have lower carbon emissions? The importance of state capacity in lower-income countries

Do societies with more extensive welfare states also perform better environmentally? Surprisingly, the empirical evidence for this relationship remains inconclusive. We focus on CO2 emissions in lower-income countries and argue that considering state capacity as a moderator helps achieving greater theoretical and empirical clarity in understanding when the welfare state – climate change mitigation relationship. We hypothesize that lower-income societies with more developed welfare states exhibit lower carbon emissions when they also have more state capacity. The underlying mechanism centers on the ability of the state to compensate losers from policy change and its enforcement power required for policy implementation. Using data on CO2 emissions, social protection, and labor market regulations, as well as state capacity in 66 lower-income countries since 2005, we find that carbon emissions tend to be lower in countries characterized both by a welfare state focused on reducing socio-economic inequality and high state capacity.