Income inequality and carbon dioxide emissions in Asia

Reducing CO2 emissions and poverty are two of the greatest challenges in Asia. Previous studies focus on how income levels affect CO 2 emissions, which follow an inverted U-shape curve known as "Environmental Kuznets Curve". However, this finding does not provide justification for differences of CO2 emission among countries with similar income levels. Using panel data among 32 Asian countries from 1960 to 2010, the relationship between income inequality and CO2 emissions is found to be inverted U-shape in overall Asia, East Asia, and South Asia. CO2 emissions firstly increase as one country becomes more unequal, after a certain income inequality threshold, CO2 emissions start to decline. The result suggests that policies related to income must be cognizant of the level economic development in the country. There is an important tradeoff between more income inequality and lower CO2 emissions after a threshold level of inequality is reached. The results also review that countries can lower emissions by other means. They include developing more trade, promoting alternative energy, developing service sector, and slowing urbanization rates.