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The role of energy diversification in the average income and pollution intensity of OECD economies
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DOI：10.1080/15567249.2025.2588260.png)
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Abstract
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We investigate the nexus between economy (per-capita income), ecology (pollution intensity), and energy (mix diversification). The research problem arises from the lack of studies incorporating energy mix diversification into the energy - growth nexus and energy - environment nexus. We construct a concentration - diversification index of energy sources satisfying the cardinality property and apply it to 32 OECD countries over 1970-2017. Annual country-level panels are analyzed through dynamic semi-log specifications with fixed effects and instrumental variables to address endogeneity. Results indicate that greater diversification of the energy mix is associated with reductions in pollution intensity (approximate to 2.6% short run and approximate to 9.6% long run per unit decrease in the index), while also supporting higher per-capita income (approximate to 1.3% and approximate to 5.7%). Robustness checks, including alternative unit-root and cointegration diagnostics and controls for cross-sectional dependence, confirm the findings. From a policy perspective, promoting diversified energy portfolios aligns with simultaneous improvements in economic performance and environmental quality.
Keywords:
Concentration
diversification
energy-environmental nexus
energy-growth nexus
energy mix
OECD
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