The objective of this research is to examine the effects of income inequality, governance quality, and their interaction on environmental quality in Asian countries. Time series data are obtained from 45 Asian countries for the period 1996–2020 for this empirical analysis. The research has performed various econometric tests to ensure the robustness and reliability of the results. We have addressed different econometric issues, such as autocorrelation, heteroskedasticity, and cross-sectional dependence, using the Driscoll-Kraay (DK) standard error estimation and endogeneity issues by the system generalized method of moments (S-GMM). The results of the study revealed that income inequality and governance quality have a positive impact on environmental degradation, while the interaction of governance quality with income inequality has a negative effect on it. In addition, economic growth, population growth, urbanization, and natural resource dependency are found to deteriorate the quality of the environment. The findings of the study offer insightful policies to reduce environmental degradation in Asian countries.

Abbas, Q., Junqing, L., Ramzan, M., et al. (2021). Role of Governance in Debt-Growth Relationship: Evidence from Panel Data Estimations. Sustainability, 13(11), 5954. https://doi.org/10.3390/su13115954

Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The Colonial Origins of Comparative Development: An Empirical Investigation. American Economic Review, 91(5), 1369–1401. https://doi.org/10.1257/aer.91.5.1369

Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies, 58(2), 277-297. https://doi.org/10.2307/2297968

Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68 (1), 29–51. https://doi.org/10.1016/0304-4076(94)01642-D

Baloch, A., Shah, S. Z., Noor, Z. M., et al. (2017). The nexus between income inequality, economic growth and environmental degradation in Pakistan. Geo Journal, 83(2), 207–222. https://doi.org/10.1007/s10708-016-9766-3

Baloch, M. A., Danish, & Meng, F. (2019). Modeling the non-linear relationship between financial development and energy consumption: statistical experience from OECD countries. Environmental Science and Pollution Research, 26(9), 8838–8846. https://doi.org/10.1007/s11356-019-04317-9

Baloch, M. A., Danish, Khan, S. U.-D., et al. (2020). Analyzing the relationship between poverty, income inequality, and CO2 emission in Sub-Saharan African countries. Science of The Total Environment, 740, 139867. https://doi.org/10.1016/j.scitotenv.2020.139867

Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87 (1), 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8

Boyce, J. K. (1994). Inequality as a cause of environmental degradation. Ecological Economics, 11 (3), 169–178. https://doi.org/10.1016/0921-8009(94)90198-8

Buchanan, J., Chai, D. H, & Deakin, S. (2013). Empirical analysis of legal institutions and institutional change: multiple-methods approaches and their application to corporate governance research. Journal of Institutional Economics, 10(1), 1–20. https://doi.org/10.1017/s1744137413000349

Busse, M., & Hefeker, C. (2007). Political risk, institutions and foreign direct investment. European Journal of Political Economy, 23(2), 397–415. https://doi.org/10.1016/j.ejpoleco.2006.02.003

Ching, S.-L., Lau, L.-S., & Choong, C.-K. (2022). Income inequality, educational attainment and environmental degradation: evidence from global panel. Environmental Science and Pollution Research, 30(15), 43056–43067. https://doi.org/10.1007/s11356-022-19256-1

Chong, A., & Gradstein, M. (2007). Inequality and Institutions. Review of Economics and Statistics, 89(3), 454–465. https://doi.org/10.1162/rest.89.3.454

Cooray, A. (2009). Government Expenditure, Governance and Economic Growth. Comparative Economic Studies, 51(3), 401–418. https://doi.org/10.1057/ces.2009.7

Danish, Baloch, M. A., & Wang, B. (2019). Analyzing the role of governance in CO2 emissions mitigation: The BRICS experience. Structural Change and Economic Dynamics, 51, 119–125. https://doi.org/10.1016/j.strueco.2019.08.007

Dehdar, F., Fuinhas, J. A., Karimi Alavijeh, N., et al. (2022). Investigating the determinants of carbon emissions in the USA: a state-level analysis. Environmental Science and Pollution Research, 30(9), 23023–23034. https://doi.org/10.1007/s11356-022-23831-x

Demir, C., Cergibozan, R., & Gök, A. (2018). Income inequality and CO2 emissions: Empirical evidence from Turkey. Energy & Environment, 30(3), 444–461. https://doi.org/10.1177/0958305x18793109

Drabo, A. (2011). Impact of Income Inequality on Health: Does Environment Quality Matter? Environment and Planning A: Economy and Space, 43(1), 146–165. https://doi.org/10.1068/a43307

Driscoll, J. C., & Kraay, A. C. (1998). Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data. Review of Economics and Statistics, 80(4), 549–560. https://doi.org/10.1162/003465398557825

Farooq, U. (2021). Foreign direct investment, foreign aid, and CO2 emissions in Asian economies: does governance matter? Environmental Science and Pollution Research, 29(5), 7532–7547. https://doi.org/10.1007/s11356-021-16115-3

Felipe, J. (2018). Asia’s Industrial Transformation: The Role of Manufacturing and Global Value Chains (Part 1). SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3339076

Gnangoin, D., Assamoi, E., & Kassi. (2019). Public Spending, Income Inequality and Economic Growth in Asian Countries: A Panel GMM Approach. Economies, 7(4), 115. https://doi.org/10.3390/economies7040115

Greene, W. H. (2000). Econometrics Analysis. NJ: Prentice Hall.

Grunewald, N., Klasen, S., Martínez-Zarzoso, I., et al. (2017). The Trade-off Between Income Inequality and Carbon Dioxide Emissions. Ecological Economics, 142, 249–256. https://doi.org/10.1016/j.ecolecon.2017.06.034

Gujarati, D. N. & Porter, D. C. (2009). Basic Econometrics. Available online: https://www.cbpbu.ac.in/userfiles/file/2020/STUDY_MAT/ECO/1.pdf (accessed on 12 November 2023).

Hailemariam, A., Dzhumashev, R., & Shahbaz, M. (2019). Carbon emissions, income inequality and economic development. Empirical Economics, 59(3), 1139–1159. https://doi.org/10.1007/s00181-019-01664-x

Hao, Y., Chen, H., & Zhang, Q. (2016). Will income inequality affect environmental quality? Analysis based on China’s provincial panel data. Ecological Indicators, 67, 533–542. https://doi.org/10.1016/j.ecolind.2016.03.025

Haseeb, M., Hassan, S., Azam, M., et al. (2018). The dynamics of governance, tourism and environmental degradation: the world evidence. International Journal of Global Environmental Issues, 17(4), 340. https://doi.org/10.1504/ijgenvi.2018.095155

Hassan, S. A., Zaman, K., & Gul, S. (2015). The Relationship between Growth-Inequality-Poverty Triangle and Environmental Degradation: Unveiling the Reality. Arab Economic and Business Journal, 10(1), 57–71. https://doi.org/10.1016/j.aebj.2014.05.007

Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrics, 46(6), 1251-1271. https://doi.org/10.2307/1913827

Huang, C.-J., & Ho, Y.-H. (2017). Governance and economic growth in Asia. The North American Journal of Economics and Finance, 39, 260–272. https://doi.org/10.1016/j.najef.2016.10.010

Huynh, C. M., Nguyen, V. H. T., Nguyen, H. B., et al. (2019). One-way effect or multiple-way causality: foreign direct investment, institutional quality and shadow economy? International Economics and Economic Policy, 17(1), 219–239. https://doi.org/10.1007/s10368-019-00454-1

International Energy Agency (IEA). CO2 Emissions in 2022. Available online: https://www.iea.org/reports/co2-emissions-in-2022 (accessed on 9 November 2023).

Jamil, B., Yaping, S., Ud Din, N., et al. (2021). Do governance indicators interact with technological innovation and income inequality in mitigating CO2 emissions in Belt and Road Initiative countries? Environmental Science and Pollution Research, 28(37), 51278–51296. https://doi.org/10.1007/s11356-021-14096-x

Jarrett, M. B. (2017). Lights out: Poor governance and Africa’s energy crisis. Available online: https://www.theafricareport.com/826/lights-out-poor-governance-and-africas-energy-crisis (accessed on 12 November 2023)

Kahuthu, A. (2006). Economic Growth and Environmental Degradation in a Global Context. Environment, Development and Sustainability, 8(1), 55–68. https://doi.org/10.1007/s10668-005-0785-3

Karimi Alavijeh, N., Ahmadi Shadmehri, M. T., Nazeer, N., et al. (2023). The role of renewable energy consumption on environmental degradation in EU countries: do institutional quality, technological innovation, and GDP matter? Environmental Science and Pollution Research, 30(15), 44607–44624. https://doi.org/10.1007/s11356-023-25428-4

Karimi Alavijeh, N., Salehnia, N., Salehnia, N., et al. (2022). The effects of agricultural development on CO2 emissions: empirical evidence from the most populous developing countries. Environment, Development and Sustainability, 25(10), 12011–12031. https://doi.org/10.1007/s10668-022-02567-1

Khan, I., Han, L., Zhong, R., et al. (2023). Income inequality, economic growth, renewable energy usage, and environmental degradation in the Belt and Road initiative countries: dynamic panel estimation. Environmental Science and Pollution Research, 30(19), 57142–57154. https://doi.org/10.1007/s11356-023-26273-1

Khan, M., & Rana, A. T. (2021). Institutional quality and CO2 emission–output relations: The case of Asian countries. Journal of Environmental Management, 279, 111569. https://doi.org/10.1016/j.jenvman.2020.111569

Khan, S., Yahong, W., & Zeeshan, A. (2022). Impact of poverty and income inequality on the ecological footprint in Asian developing economies: Assessment of Sustainable Development Goals. Energy Reports, 8, 670–679. https://doi.org/10.1016/j.egyr.2021.12.001

Kinda, S. R. (2011). Democratic Institutions and Environmental Quality: Effects and Transmission Channels. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2714300

Korkut Pata, U., Yilanci, V., Hussain, B., et al. (2022). Analyzing the role of income inequality and political stability in environmental degradation: Evidence from South Asia. Gondwana Research, 107, 13–29. https://doi.org/10.1016/j.gr.2022.02.009

Kousar, S., Ahmed, F., López García, M. de las N., et al. (2020). Renewable Energy Consumption, Water Crises, and Environmental Degradation with Moderating Role of Governance: Dynamic Panel Analysis under Cross-Sectional Dependence. Sustainability, 12(24), 10308. https://doi.org/10.3390/su122410308

Levin, A., Lin, C.-F., & Chu, C.-S. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics, 108, 1–24. https://doi.org/10.1016/S0304-4076(01)00098-7

Liu, X., Latif, K., Latif, Z., et al. (2020). Relationship between economic growth and CO2 emissions: does governance matter? Environmental Science and Pollution Research, 27(14), 17221–17228. https://doi.org/10.1007/s11356-020-08142-3

Masud, M. M., Kari, F. B., Banna, H., et al. (2018). Does income inequality affect environmental sustainability? Evidence from the ASEAN-5. Journal of the Asia Pacific Economy, 23(2), 213–228. https://doi.org/10.1080/13547860.2018.1442146

Méon, P.-G., & Sekkat, K. (2005). Does corruption grease or sand the wheels of growth? Public Choice, 122(1–2), 69–97. https://doi.org/10.1007/s11127-005-3988-0

Mohsin, M., Abbas, Q., Zhang, J., et al. (2019). Integrated effect of energy consumption, economic development, and population growth on CO2 based environmental degradation: a case of transport sector. Environmental Science and Pollution Research, 26(32), 32824–32835. https://doi.org/10.1007/s11356-019-06372-8

Muhammad, B., Khan, M. K., Khan, M. I., et al. (2021). Impact of foreign direct investment, natural resources, renewable energy consumption, and economic growth on environmental degradation: evidence from BRICS, developing, developed and global countries. Environmental Science and Pollution Research, 28(17), 21789–21798. https://doi.org/10.1007/s11356-020-12084-1

Nathaniel, S. P., Nwulu, N., & Bekun, F. (2020). Natural resource, globalization, urbanization, human capital, and environmental degradation in Latin American and Caribbean countries. Environmental Science and Pollution Research, 28(5), 6207–6221. https://doi.org/10.1007/s11356-020-10850-9

New UN report reveals that climate pledges by countries in the Asia-Pacific are off track with the 1.5°C pathway. (2022). United Nations ESCAP. Available online: https://www.unescap.org/news/new-un-report-reveals-climate-pledges-countries-asia-pacific-are-track-15degc-pathway#:~:text=Collectively%2C%20the%2049%20countries%20in,the%201.5%C2%B0C%20pathway. (accessed on 9 November 2023).

O’Neil, B. C., Liddle, B., Jiang, L., et al. (2012). Demographic change and carbon dioxide emissions. Lancet, 380, 157-164. https://doi.org/10.1016/S0140-6736(12)60958-1

Pao, H.-T., Yu, H.-C., & Yang, Y.-H. (2011). Modeling the CO2 emissions, energy use, and economic growth in Russia. Energy, 36(8), 5094–5100. https://doi.org/10.1016/j.energy.2011.06.004

Pesaran, M. H. (2020). General diagnostic tests for cross-sectional dependence in panels. Empirical Economics, 60(1), 13–50. https://doi.org/10.1007/s00181-020-01875-7

Qamruzzaman, M. (2023). An asymmetric nexus between clean energy, good governance, education and inward FDI in China: Do environment and technology matter? Evidence for chines provincial data. Heliyon, 9(5), e15612. https://doi.org/10.1016/j.heliyon.2023.e15612

Raheem, I. D., & Ogebe, J. O. (2017). CO2 emissions, urbanization and industrialization: Evidence from a direct and indirect heterogeneous panel analysis. Management of Environmental Quality: An International Journal, 28(6), 851–867. https://doi.org/10.1108/meq-09-2015-0177

Rahman, M. M. (2020). Environmental degradation: The role of electricity consumption, economic growth and globalisation. Journal of Environmental Management, 253, 109742. https://doi.org/10.1016/j.jenvman.2019.109742

Ramzan, M., Sheng, B., Shahbaz, M., et al. (2019). Impact of trade openness on GDP growth: Does TFP matter? The Journal of International Trade & Economic Development, 28(8), 960–995. https://doi.org/10.1080/09638199.2019.1616805

Ravallion, M., Heil, M., & Jalan, J. (2000). Carbon emissions and income inequality. Oxford Economic Papers, 52(4), 651–669. https://doi.org/10.1093/oep/52.4.651

Ritchie, H. (2019). Who emits the most CO2 today? Published online at OurWorldInData.org. Our World in Data. https://ourworldindata.org/annual-co2-emissions

Roy-Mukherjee, S., & Udeogu, E. (2020). Neo-liberal Globalization and Income Inequality: Panel Data Evidence from OECD and Western Balkan Countries. Journal of Balkan and Near Eastern Studies, 23(1), 15–39. https://doi.org/10.1080/19448953.2020.1852004

Safar, W. (2022). Income inequality and CO2 emissions in France: Does income inequality indicator matter? Journal of Cleaner Production, 370, 133457. https://doi.org/10.1016/j.jclepro.2022.133457

Samimi, A. J., Ahmadpour, M., & Ghaderi, S. (2012). Governance and Environmental Degradation in MENA Region. Procedia-Social and Behavioral Sciences, 62, 503–507. https://doi.org/10.1016/j.sbspro.2012.09.082

Sarkodie, S. A., & Adams, S. (2020). Electricity access, human development index, governance and income inequality in Sub-Saharan Africa. Energy Reports, 6, 455–466. https://doi.org/10.1016/j.egyr.2020.02.009

Sarkodie, S. A., & Strezov, V. (2019). Effect of foreign direct investments, economic development and energy consumption on greenhouse gas emissions in developing countries. Science of The Total Environment, 646, 862–871. https://doi.org/10.1016/j.scitotenv.2018.07.365

Shi, A. (2003). The impact of population pressure on global carbon dioxide emissions, 1975–1996: evidence from pooled cross-country data. Ecological Economics, 44, 29–42. https://doi.org/10.1016/S0921-8009(02)00223-9

Shrinkhal, R. (2019). Economics, Technology, and Environmental Protection. Phyto management of Polluted Sites, 569–580. https://doi.org/10.1016/b978-0-12-813912-7.00022-3

The World Bank Data. Available online: https://data.worldbank.org (accessed on 8 November 2023).

The World Bank, Worldwide Governance Indicators Data. Available online: https://databank.worldbank.org/source/worldwide-governance-indicators (accessed on 8 November 2023).

United Nations. (2019). The sixth edition of the global environment outlook (GEO-6). Available online: https://www.unep.org/resources/global-environment-outlook-6 (accessed on 8 November 2023)

Uzar, U. (2020). Is income inequality a driver for renewable energy consumption? Journal of Cleaner Production, 255, 120287. https://doi.org/10.1016/j.jclepro.2020.120287

Wang, Y., Uddin, I., & Gong, Y. (2021). Nexus between Natural Resources and Environmental Degradation: Analyzing the Role of Income Inequality and Renewable Energy. Sustainability, 13(15), 8364. https://doi.org/10.3390/su13158364

Wang, Z., Danish, Zhang, B., et al. (2018). The moderating role of corruption between economic growth and CO2 emissions: Evidence from BRICS economies. Energy, 148, 506–513. https://doi.org/10.1016/j.energy.2018.01.167

Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. Cambridge: MIT Press.

World Inequality Database (WID) Data. (2023). Available online: https://wid.world/ (accessed on 8 November 2023).

World Inequality Database. (2023). What’s new about inequality in South and Southest Asia in 2023? Available online: https://wid.world/news-article/2023-wid-update-south-and-southeast-asia (accessed on 8 August 2023).

Yang, B., Ali, M., Hashmi, S. H., et al. (2022). Do Income Inequality and Institutional Quality affect CO2 Emissions in Developing Economies? Environmental Science and Pollution Research, 29(28), 42720–42741. https://doi.org/10.1007/s11356-021-18278-5