Energy transition and the income inequality–climate risk nexus in the age of financial globalization

Climate risk has become a global phenomenon that is increasing with every passing day. Greenhouse gas emissions, particularly carbon emissions, are widely believed to be the primary contributors to disrupting the balance of the ecosystem and increasing climate risk. Therefore, it is crucial to comprehend the factors that can impact the climate risk. The primary motive of the analysis is to investigate how income inequality, financial globalization, and energy transition affect climate risk by employing the novel MMQR approach. The results demonstrate that income inequality helps reduce climate risk at all levels. The results indicate that both energy transition and financial globalization significantly reduce climate risk across the 10th to 90th quantiles. In addition, ICT and urbanization enhance the climate risk, whereas natural resource rents help mitigate it. Thus, we suggest that policymakers should give equal importance to the objectives of mitigating climate change and reducing income inequality by leveraging financial globalization and global energy transition efforts.