Impact of environmental technology, economic complexity, and geopolitical risk on carbon emission inequality in developed and developing countries: evidence from a PVAR-GMM approach

Climate change and disparities among economic groups represent significant challenges confronting the global community today. Inadequate action against climate change is likely to worsen economic inequalities, while these inequalities can hinder the effective execution of climate change initiatives. Against this backdrop this study examines the impact of ENT on carbon emissions inequality (CEI) to develop equitable and inclusive mitigation strategies. Using a unique GMM-PVAR approach, we analyze structural dynamics in a panel dataset of 41 developing and developed countries for 1990–2020. This method is efficient and robust. It is capable of taking into account the structural dynamism in the data. Further this method can tackle the endogeneity in the concerned data sets. The empirical models account for geopolitical risk, economic complexity, total natural resource rents, and GDP growth as potential influencers of CEI. Our findings reveal that: (1) ENT negatively impacts CEI, underscoring its importance in reduction efforts; (2) economic complexity exhibits a negative relationship with CEI, implying it contributes to its reduction; (3) geopolitical risk, natural resources, and GDP growth all positively impact CEI, hindering its reduction; (4) impulse response analysis shows that shocks to ENT induce an initial inverse response in CEI, followed by oscillating inverse responses over ten periods; and (5) causality test corroborates these results and indicate no reverse causality. The robustness test based on impulse response function and heterogeneous causality test confirm the earlier findings. The empirical outcomes reveal a negative effect of ENT on CEI, showing that any upsurge of one unit in ENT leads to a decline in the CEI by 1.09 units in the long run. Remarkably, a unit increase in geopolitical risk will automatically contribute to an escalation of CEI by 5.977 units. The results from Impulse Response Analysis documents how CEI responds to the shocks in the independent variables over ten periods. The analysis demonstrates that any shock in the ENT will stimulate an inverse response to CEI in the first period and then oscillate across inverse response over a period of 10 periods Grounded on these outcomes, the study concludes with potential policy implications to promote equitable and sustainable CEI reduction strategies. The government of the concerned countries should embrace environmental policies to enhance the application of ENT to stimulate the harmonious effects. The government can implement carbon pricing system that will create economic incentive for individuals and companies to reduce emissions and invest in clean technologies.