Environmental Pollution, Income Inequality, and Household Energy Consumption: Evidence from the United Kingdom

Abstract

This study explored the impact of income inequality, household energy consumption, government expenditure, and investment on carbon dioxide emissions at the household level over the period 1970–2015 in the United Kingdom. The study applied Clemente–Montanes–Reyes unit root test to identify structural break in the time series. Further, the cointegrating relationship of the time series observations was explored by applying the autoregressive distributed lag model (ARDL) (linear) bounds test approach along with the nonlinear ARDL for making fruitful comparisons in the long-run relationship among the variables. The paper used Bayer–Hanck combined cointegration method for robustness test in the cointegrating methods. In addition, the causality analysis was explored using the Toda–Yamato (1995) method of Granger causality. The results confirmed the existence of cointegration among the variables.The estimated NARDL results show that in the long run the negative asymmetric impact of the income inequality is stronger than the positive impact. The paper concludes that there is an urgent need to reduce income inequality in the United Kingdom to improve equitable consumption of energy at the household level. Last the causality test shows that there exists unidirectional causality from inequality transmission to carbon emissions.