The heterogeneous effects of urbanization and income inequality on CO2 emissions in BRICS economies: evidence from panel quantile regression

Abstract

This paper empirically examines the effects of urbanization and income inequality on CO₂ emissions in the BRICS economies (i.e., Brazil, Russia, India, China, and South Africa) during the periods 1994-2013. The method we used is the panel quantile regression, which takes into account the unobserved individual heterogeneity and distributional heterogeneity. Our empirical results indicate that urbanization has a significant and negative impact on carbon emissions, except in the 80^th, 90^th, and 95^th quantiles. We also quantitatively investigate the direct and indirect effect of urbanization on carbon emissions, and the results show that we may underestimate urbanization's effect on carbon emissions if we ignore its indirect effect. In addition, in middle- and high-emission countries, income inequality has a significant and positive impact on carbon emissions. The results of our study indicate that in the BRICS economies, there is an inverted U-shaped environmental Kuznets curve (EKC) between the GDP per capita and carbon emissions. The conclusions of this study have important policy implications for policymakers. Policymakers should try to narrow the income gap between the rich and the poor to improve environmental quality; the BRICS economies can speed up urbanization to reduce carbon emissions, but they must improve energy efficiency and use clean energy to the greatest extent in the process.

Keywords: BRICS economies; Carbon emissions; Income inequality; Panel data; Quantile regression; Urbanization.