The impact of low-carbon energy transition on income inequality: Evidence from city panel data in China

Abstract

[Objective] As a systemic transformation of the economic and social system, the low-carbon energy transition will inevitably impact social issues such as equity and income. Investigating the impact of city low-carbon energy transition on income inequality can provide valuable empirical insights for coordinating the low-carbon transformation of the economy and society and for narrowing income gaps. [Methods] This study used the panel data from 281 prefecture-level cities in China from 2007 to 2020 as the research sample, and established a multidimensional indicator system to calculate city low-carbon energy transition index. Based on the nighttime light data of 2109 districts and counties, the income inequality between different urban income groups was measured. Subsequently, the intrinsic relationship between low-carbon energy transition and income inequality was examined by both theoretical modeling and empirical analysis. [Results] (1) The low-carbon energy transition significantly alleviated income inequality, with each standard deviation increase in the transition index reducing income inequality by approximately 6.1%. (2) Mechanism analysis indicated that the low-carbon energy transition affected income inequality through skill-biased technological progress and the upgrading of the labor force’s skill structure, with the alleviating effect on income inequality mainly stemming from its role in enhancing the skill structure of the labor force. (3) Heterogeneity analysis revealed regional and urban characteristic heterogeneity in the impact of low-carbon energy transition on income inequality. (4) The research using the spatial Durbin model showed that the impact of low-carbon energy transition on income inequality had spatial spillover effects, which can reduce income inequality in neighboring areas. [Conclusion] Renewable energy should be vigorously developed, and regular exchanges and cooperation in energy transition between regions should be strengthened to fully leverage the transition’s role in upgrading the labor force’s skill structure, thereby achieving coordinated development that promotes low-carbon energy transition and narrows income gaps.

Keywords

• low-carbon energy transition|income inequality|nighttime light|spatial durbin model|china