The effect of income inequality on renewable energy consumption in Europe

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As climate change and its consequences increase in magnitude, the urgency to achieve the climate pledges set out by the EU increases. Simultaneously, the increase in climate hazards puts extra financial pressure on the European welfare states. Thereby suggesting that in the future, social policy objectives will become more difficult to attain. In light of these developments, an analysis is carried out to investigate the effect of socioeconomic factors on the sustainability transition. This is carried out through a random effects- and ARDL-PMG model, that investigates the relation between income inequality and renewable energy consumption in Europe. A regional analysis is performed based on the five main welfare state models present, while also controlling for the political identity of a government. The ARDL-PMG results indicate possible synergies to be utilized by policymakers, as a negative relation between income inequality and renewable energy consumption is found. Indicating that in some European countries, a decrease in income inequality may lead to an increase in renewable energy consumption. It can be concluded that the type of welfare state and political identity serve a minor role in this relationship, but further analysis is required.
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