A large body of literature has developed over the past several years on the economics of happiness. One of the key insights of this literature is that beyond a subsistence level of income, relative income is often more important than absolute income to individual well-being. This is true for both comparisons against a reference group, e.g., across a community or country, as well as comparisons for the same individual over time. Another key insight is that changes in income have only transitory effects on well-being.

In this Article, we explore the implications of this literature for understanding the relationship between climate change policies and consumption. We identify a number of ways in which accounting for the implications of the new happiness literature could lead to laws and policies that influence consumption in ways that increase the prospects for reducing greenhouse gas (GHG) emissions in developed and developing countries. We do not examine every nuance of the growing happiness literature, but we provide a brief introduction and observations that we hope will stimulate further efforts by academicians and policymakers.