Unequal footprint drivers: A pooled Bewley approach to energy and trade dynamics in OECD

Rising carbon emissions and increasing socio-economic inequality have fueled debates on climate policies that reconcile environmental sustainability with social equity. This study develops a dynamic general equilibrium (DGE) model that distinguishes between non-Ricardian households-those that are liquidity-constrained and rely on current income-and Ricardian households-those that own capital and optimize intertemporally. By integrating various energy consumption patterns, including non-renewable and renewable sources, the model identifies key drivers of CO₂ emissions inequality among emitting groups. A comparative-static analysis yields testable hypotheses about how carbon taxes, energy use, trade flows, and emissions intensity shape unequal carbon footprints. Empirical analysis of 38 OECD countries from 1980 to 2023, using DOLS, FMOLS and Pooled Bewley estimators, shows that fossil energy consumption increases inequality while renewable energy mitigates it. Trade variables all have worsening effects on the carbon gap with magnitudes varying by estimation approaches. Robustness checks using Pooled Mean Group (PMG) and Instrumental Variables (IV) with Driscoll-Kraay standard errors confirm these findings, showing stable long-run relationships and a 22 % annual adjustment toward equilibrium in PMG models. Granger causality tests validate bidirectional relationships. These findings advocate for integrated policies to promote equitable climate action addressing both environmental and social goals (SDGs 7, 10, 13, and 16).