ROLE OF HUMAN CAPITAL, INCOME INEQUALITY AND RENEWABLE ENERGY CONSUMPTION ON CO2 MITIGATION IN MALAYSIA

Abstract

The present research endeavours to investigate the interconnection among human capital, income inequality, renewable energy consumption, economic growth, and pollution. The ultimate objective is to identify effective policy approaches by uncovering empirical findings. This study employs the innovative approach of dynamic ordinary least square (DOLS) to examine data spanning from 1980 to 2018. In order to evaluate the accuracy of the DOLS estimation, we utilise the fully modified ordinary least square (FMOLS) and canonical correlation regression (CCR) techniques. In order to comprehensively investigate the association between the chosen variables, a paired Granger causality analysis was employed. Findings of this study show that using renewable energy enhances Malaysia's environmental quality, while economic growth, income inequality, and human capital all cause environmental deterioration. Therefore, it is possible that Malaysia could achieve its goal of reducing CO2 emissions and meeting its obligations under the Paris Agreement if it were to successfully adopt policy initiatives to develop human capital, increase the use of renewable energy sources, achieve a low-carbon economy, and reduce the income disparity. The research presents several new findings. The authors show that economic growth is one of the drivers of renewable energy use because it provides inputs for the development of renewable energy technology and infrastructure. But if there is pollution as a result of rapid economic growth, it will also negatively impact worker productivity. As a result, the poor get poorer, and the income inequality gap widens. This will obstruct both economic advancement and government efforts to promote the creation of renewable energy sources.