Dynamic Impact of Income Inequality on Environmental Quality in Malaysia: Insights for Climate Action Using a Stochastic Impacts by Regression on Population, Affluence, and Technology Framework

This study explores the dynamic influence of income inequality on environmental quality in Malaysia and offers evidence‐based recommendations for climate action and policy. Using annual data from 1990 to 2022, the analysis utilizes the Stochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) framework combined with the Autoregressive Distributed Lag (ARDL) bounds testing and Error Correction Model (ECM) to examine both short‐ and long‐term relationships among key variables. The empirical findings confirm the Environmental Kuznets Curve (EKC) hypothesis, demonstrating an inverted U‐shaped relationship between economic growth and carbon emissions. Results further show that income inequality, energy consumption, and industrialization significantly increase CO 2 emissions, while urbanization exhibits an insignificant negative effect in the short term. However, the lagged effect of urbanization is notably negative, implying a delayed reduction in emissions due to processes such as energy efficiency improvements and infrastructure development. Diagnostic and stability tests affirm the robustness of the model and the reliability of the findings. Overall, the results emphasize the vital role of socioeconomic factors in shaping environmental outcomes and offer valuable insights for Malaysian policymakers to design integrated strategies for climate and inequality reduction aimed at decreasing carbon emissions and enhancing resilience against climate‐related risks.