Climate change and income inequality: Does renewable energy matter?

Asia, the continent most vulnerable to climate change, presents policymakers with the dual challenges of significant income inequality and a scarcity of alternative energy sources. This paper investigates the impact of climate change on income inequality, and the role of renewable energy in moderating this impact for a panel data set of 36 Asian countries over the period of 1990-2021. Results from panel data analysis techniques show that climate change exacerbates the income inequality while renewable energy not only reduces income inequality but also lessens the detrimental impact of climate change on income equality through the channels of job creation and access to renewable energy. Remarkably, the role of renewable energy becomes stronger in those countries that are more exposed to climate change. The findings are robust with different estimation methods as well as various proxies of climate change and income inequality. These results highlight the critical role of renewable energy policies in promoting both environmental sustainability and socioeconomic equity. Through this paper, we aim to provide invaluable insights that can aid policymakers in making informed decisions to advance a future marked by sustainability, equity, and resilience.