The Renewable Energy-Growth-Inequality-Emissions Nexus: A Novel Wealth-Based Inequality Indicator and a Reconsideration of the Environmental Kuznets Curve

Alessio Cortili
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Alessio Cortili: Department of Environmental Science and Policy, University of Milan

No 2026.24, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Climate change demands an urgent transition to renewable energy that balances economic growth and social equity. This study investigates the nexus between renewable energy consumption, economic growth, wealth inequality, and CO₂ emissions across 128 countries (2000-2021), addressing three critical gaps in the literature. First, it proposes a novel wealth-based inequality indicator (INEQ) that overcomes the limitations of the Gini coefficient by focusing on distributive fractures between specific population segments. Second, it employs a system of three simultaneous equations estimated via Three-Stage Least Squares (3SLS) to account for endogeneity and cross-equation correlations. Third, it analyses structural differences across four income groups of countries. Results reveal significant heterogeneity. Renewable energy promotes growth in higher-income groups while in low-income economies it correlates with slower growth, signalling trade-offs in early development stages. Although renewable energy consistently reduces CO₂ emissions, it is associated with increased wealth inequality in most contexts. The Environmental Kuznets Curve hypothesis is not supported in simultaneous 3SLS estimations, suggesting that the apparent EKC relationship observed in single-equation models may reflect endogeneity bias rather than a structural causal link. Education emerges as a key lever for inequality reduction, with potential co-benefits for emission mitigation. These findings underscore the need for differentiated policy interventions tailored to specific developmental realities. The disappearance of the EKC under endogeneity controls reinforces the urgency of proactive measures to ensure the global energy transition advances both environmental sustainability and social equity.

Keywords: Renewable energy; Economic growth; Wealth inequality; CO₂ emissions; 3SLS; Environmental Kuznets Curve; Energy transition; Sustainable development (search for similar items in EconPapers)
JEL-codes: Q4 Q42 (search for similar items in EconPapers)
Date: 2026-10
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