Socio-economic drivers of renewable energy: empirical evidence from BRICS

Abstract

There is a need to implement efficient strategies to mitigate the challenges of climate change and income inequalities in developing countries. Several studies have been conducted to address the relationship among different econometric and environmental indicators of renewable energy (RE) but overlooked the relationship between RE and income inequalities. This study investigates the influence of the distribution of income on the RE in Brazil, Russia, China, and South Africa (BRICS) between 1988 and 2017. The econometric (economic growth and trade), environmental, and institutional parameters are also integrated into the model. The outcomes reveal that reduced inequality in income distribution increases the consumption of RE. In contrast, CO2 emissions have a positive correlation with RE. The governments should implement environmentally friendly policies and increase the consumption of renewable energy in the future with regards to reducing environmental pollution. Furthermore, findings from the study indicate a positive effect on the reduction of corruption in renewable energy. This shows that institutional quality can affect the uptake of renewable energy. The study further identified that growth in a country’s economy decreases RE consumption, suggesting that these countries prefer fossil fuels to gain economic growth. The Granger causality results show that a bidirectional causality exists between income inequality and RE consumption. Bidirectional causality is observed between income distribution and CO2 emissions. The results from this study are important for policymakers to achieve sustainable development because fair income distribution and environmental quality are considered as two key factors for sustainable development. Strong institutions and control on corruption can bring sound social and economic gains. Therefore, fair distribution of income and strong institutional policies can increase RE consumption to achieve a clean environment.