Does economic complexity mitigate carbon inequality?

Abstract Despite policies to reduce carbon inequality, it remains very high. Yet, the 2023 Climate Inequality Report underlines that the bottom 50% of the world’s population that contributes to 12% of carbon emissions is exposed to 75% of income losses that are related to climate change. Whereas the literature has identified a wide range of carbon inequality drivers, this paper stands out from previous works by emphasising the role of economic complexity in explaining carbon inequality through economic development, human capital, income inequality and the intensity of greenhouse gas emissions. Therefore, the main objective of the paper is to analyse the relationship of economic complexity with carbon inequality. To make the assessment, we construct a Gini index of carbon inequality for a world sample and rely on a multidimensional approach of economic complexity measure. Using instrumental variables, we find that technology and trade complexity reduce carbon inequality, while research complexity does not have a relationship. Although these results call for measures aimed at the improvement of technology and trade complexity, they are not in line with the objective of climate change mitigation as economic complexity leads to more GHG emissions.