How do institutional quality and income asymmetrically affect carbon emissions inequality? A Quantile-on-Quantile assessment for six major global emitters

Abstract

Carbon emissions inequality (CE-I) represents a significant obstacle to achieving sustainable development and social equity, highlighting the unequal distribution of environmental burdens and benefits among nations. To address this issue effectively, it is important to consider how institutional factors and economic conditions contribute to these disparities. This paper investigates the asymmetric impact of institutional quality (IQ) and income on CE-I, employing a Quantile-on-Quantile Regression (QQR) approach applied to six major global emitters—China, the United States, Germany, India, Russia, and Japan—from 1995 to 2019. The QQR method enables a detailed examination of how these relationships vary across different quantiles of the data, providing insights beyond those of traditional regression models. The findings reveal a non-linear relationship in which improvements in IQ generally decrease CE-I, particularly in contexts of weak governance; however, diminishing returns are observed at higher IQ levels. Income exhibits an inverted U-shaped effect on CE-I, where economic growth initially increases emissions inequality but moderates it at higher income levels. Robustness checks employing quantile Granger causality tests, quantile regression, and Kernel-based regularized least squares demonstrate that both institutional quality and income levels play significant roles in shaping CE-I patterns. Based on these findings, specific policy actions are recommended: in contexts of weak governance, policies should prioritize strengthening IQ to reduce CE-I, while in high-income countries, efforts should focus on promoting equitable income distribution to manage the growth-inequality relationship. Targeted interventions are essential to ensuring both environmental sustainability and social justice in reducing CE-I.