The impact of income inequality on consumption-based greenhouse gas emissions at the global level: A partially linear approach

The differences in consumption levels across different strata of income and income inequality give raise to differences in the effects of income inequality on the level of the consumption-based greenhouse gas (GHG) emission. However, the impact of inequality on consumption-based emissions has been scarcely analysed. Therefore, the aim of this study is to test the relationship between income inequality and consumption-based GHG emission per capita by applying the country-level data for 1990-2014. Due to the prevailing economic structures, those relationships may be non-linear and imposition of pre-defined functional relationships in the estimation may induce additional bias. In order to circumvent this issue, the partially linear regression is applied in this paper. The non-parametric part of the regression is applied to examine the linkages between the income inequality and GHG emission per capita, whereas the other controlling variables are included in the linear part of the model. The results indicate a non-liner relationship between income inequality and GHG emission per capita along with a U-shape relationship between GDP per capita and the GHG emission per capita. This suggests tailored environmental policies are required for regions with diverse economic structures. This paper reveals how to achieve the reduction of income inequality and climate change simultaneously.