Bridging energy transition and income inequality: The moderating effect of institutional transparency

Abstract

AbstractThe emergence of the United Nations' Sustainable Development Goals has instigated a transformative phase in policy formulation, emphasizing the multifaceted approach required to attain these objectives. Central to this pursuit is the management of diverse goals and their intricate interactions. This paper rigorously examines the pivotal role of institutional transparency in the nexus between energy transition and income inequality across 127 countries from 2012 to 2020, within the framework of the Sustainable Development Goals. The estimated results from the non‐balanced panel threshold model suggest the existence of a threshold effect of institutional transparency in the impact of energy transition on income inequality. On the whole, the process of energy transition has had a detrimental effect on income inequality, with institutional transparency serving to moderate it. When institutional transparency falls within the first regime (lnCPI ≤3.3322), the second regime (3.3322 < lnCPI <4.3041), and the third regime (lnCPI >4.3041), a 1% increase in the proportion of renewable energy consumption results in average increases in disposable income inequality of 0.0165%, 0.0143%, and 0.0128%, respectively. This suggests that institutional transparency has a positive moderating effect on the detrimental impact of energy transition on disposable income inequality. However, this result does not hold true for market income inequality. Additionally, there is an “inverted U‐shaped” relationship between economic growth and income inequality, indicating the negative impact of energy transition on income inequality would be offset by its contribution to economic growth.