The Effects of Income Inequality on Carbon dioxide Emissions: A Cross-country Analysis

Income inequality and environmental pollution are two growing threats humanity faces ‎in the twenty-first century. We analyze how income inequality affects carbon dioxide ‎emissions through consumption behaviour (economic) and policy (public policy) ‎channels. We analyzed 103 countries using Random Effects Regression model for ‎annual data from 2015 to 2021. The analysis was done for all the countries in the study ‎and separately for OIC and non-OIC member countries. We found that a rise in income ‎inequality leads to increased carbon dioxide emissions in all countries and sub-panels. ‎In non-OIC member countries, the increase in poor people leads to increased CO2 ‎emissions through the consumption channel, but the impact is much smaller. In OIC ‎countries, the relationship is positive, and the impact is much more. An increase in FDI ‎leads to increased CO2 emissions in all countries, but it is the opposite in OIC countries. ‎Therefore, policymakers should focus on the link between energy efficiency and social ‎inequality to stop the cycle of energy inefficiency and energy poverty.‎