Role of human capital, income inequality and renewable energy consumption on CO2 mitigation in Malaysia

Abstract

Abstract Global climate change caused by greenhouse gases (GHGs), particularly carbon dioxide (CO2) emissions, poses unprecedented risks to the environment, development, and sustainability. This study incorporates human capital and renewable energy as potential factors of the connection between income inequality and CO2 emissions. Data from 1980–2018 are analyzed using the novel method of dynamic ordinary least square (DOLS) in this study. To assess the validity of the DOLS estimate, we employ the fully modified ordinary least square (FMOLS) and canonical correlation regression (CCR). To more thoroughly examine the relationship between the selected variables, a paired Granger causality test was used. Findings of this study show that using renewable energy enhances Malaysia's environmental quality, while economic growth, income inequality, and human capital all cause environmental deterioration. As a consequence, it is possible that Malaysia could achieve its goal of reducing CO2 emissions and meeting its obligations under the Paris Agreement if it were to successfully adopt policy initiatives to develop human capital, increase the use of renewable energy sources, achieve a low-carbon economy, and reduce the income disparity.