The Impact of Climate Change on Income Inequality. Evidence from European Union Countries

We will investigate in this paper the relation between income inequality and climate change, taking into account that the increase of carbon emissions has among consequences the increase of inequalities. The most vulnerable to climate change are the poorest and less developed countries. Climate change represents an important challenge for EU policymakers and the transition to zerocarbon emissions will lead to greater social inclusion and convergence among EU countries. We use in this paper two-stage OLS in order to analyse the relationship between income inequality and carbon emissions in case of EU countries.. We apply our model to two groups of European Union countries, the old member states - EU15 and new member states - EU13. Our results confirm that there are important differences between the two groups regarding the relationship between climate change and income inequalities. Therefore, policies implemented at EU level are extremely important in order to mitigate the adverse effects of climate change on growing inequality and poverty in EU countries. Governments must invest in new technologies, industries and innovation in order to address the complex challenge posed by mitigating climate change.