Poster Paper:
Will Reducing Income Inequality Reduce Carbon Emissions?
Thursday, July 23, 2020
Meeting Room 1 (Online Zoom Webinar)
*Names in bold indicate Presenter
The relationship between income inequality and carbon emissions is gaining importance in the environment and economic development literature. This paper examines the effect of income inequality and economic growth on per capita carbon emissions using long panel data. The work addresses a gap in the literature where the effects of inequality get concealed, become imperceptible or even manipulated by the non-consideration of stages of economic development in the time period under study. The analysis uses two blocks of countries, the OECD-16 and the emerging economies (Next-16), and examines the relationship using different inequality metrics (Gini & income shares) and model specifications. Different panel data estimation techniques are used while addressing issues such as cointegration and autocorrelation. The robustness of the model results is shown, along with an establishment of the direction of “causality” using the Granger test. The results support the Environmental Kuznets Curve hypothesis and show that the inequality-emissions relationship varies based on the country group. The results also show the long-run elasticity and the turning point on the environment degradation curve for the two sets of countries.
From a policy perspective, the findings can help suggest policy design to promote social equity while the Next-16 countries indulge in a race to the bottom, weakening environmental regulations for economic development & poverty reduction. Other interesting results are observed from the impacts of redistribution through higher taxes and in the political debate on carbon taxation in many countries. Some avenues for future work are also presented.
