Income Inequality, Economic Complexity, and Renewable Energy Impacts in Controlling Consumption-Based Carbon Emissions

Abstract

Although many studies have been conducted on the role of renewable energy in the environment, literature has ignored the potential role of socioeconomic indicators in renewable energy and pollution nexus. Also, critical questions arose with the critical factors, such as income inequality and economic complexity, have not been answered properly. This study explores the nexus between income inequality, economic complexity, renewable energy consumption, GDP per capita, and pollution and thus aims to reach efficient policy strategies by revealing empirical evidence. The study follows an environmental impact model structure and conducts the panel-corrected standard errors and fixed effect regression. BRICS countries (Brazil, Russia, India, China, and South Africa) are selected to conduct our research. Annual data covering the period 1990–2017 for the sample countries are employed. Consumption-based carbon dioxide emissions as an indicator of environmental pollution are used since income inequality makes more sense in terms of the consumption side of an economy and is more related to consumers rather than the production sector. The obtained results reveal that income inequality has a positive and significant impact on consumption-based carbon dioxide emissions. However, GDP per capita, renewable energy, and economic complexity reduce pollution. It is also observed that the interaction term of inequality and renewable energy decreases emissions. Findings confirm that socioeconomic indicators, such as economic complexity and income inequality with the interaction of renewable energy, are crucial factors in reducing emissions and designing a greener future.