Analyzing the Nexus Between Income Inequality, Renewable Energy, and Environmental Quality: Emphasizing the Significance of Institutional Quality

This study delves into the pivotal role of institutional quality in shaping environmental policies and policies related to various economic activities. This study explores the interplay between income inequality, energy utilization, institutional quality, and carbon dioxide emissions spanning the years 2002 to 2019 in the Belt and Road Initiative (BRI) countries, employing two-step system GMM model. Determining the political system’s effect on carbon emissions requires the utilization of political system indicators and the building of a political system index. The results show that political system affects carbon emission positively. Similarly, the legal system also affects carbon dioxide emission positively, suggesting that the legal system also contributes to the increase in carbon emissions. Economic growth and increased energy consumption both contribute to an increase in carbon dioxide emissions. Likewise, carbon dioxide emission is adversely affected by both income inequality and foreign direct investment. These findings bear significant implications for countries participating in the Belt and Road Initiative, offering a pathway to mitigate income inequality, alleviate poverty, and safeguard environmental quality within these nations. This research underscores the intricate relationship between institutional quality, political and legal systems, and various socio-economic factors in shaping carbon emissions. The insights gleaned from this study can inform policy interventions aimed at promoting sustainable development, reducing inequality, and safeguarding the environment in the context of the Belt and Road Initiative countries.