Does Green Transition Hurt the Poor? Evidence from Developing Countries

This study examines whether the green transition alleviates or exacerbates poverty in developing countries, utilizing a dynamic panel dataset of 74 developing economies from 2000 to 2022. The paper investigates four key dimensions of the green transition: ecological footprints, green finance (proxied by public investment in renewable energy), renewable energy production, and renewable energy consumption. The findings reveal a compelling “green transition paradox”. While renewable energy production, green finance, and economic growth contribute significantly to poverty reduction, renewable energy consumption is adversely associated with higher poverty levels. This suggests that, in the absence of sufficient supply capacity and robust institutional support, the demand-side transition toward renewable energy may impose short-term economic burdens on vulnerable populations. Furthermore, ecological footprint exhibits a poverty-reducing effect, underscoring the reliance on resource-intensive economic expansion in developing economies, albeit with potential long-term environmental trade-offs. The results remain robust across alternative model specifications and exhibit heterogeneous across income and regional groups. The study contributes to the extant literature by disentangling the supply and demand mechanisms of renewable energy, thereby highlighting the complex distributional consequences of green transition policies. Ultimately, the policy implications emphasize the critical need to align renewable energy expansion with social protection, skill development, and inclusive financial frameworks to ensure that green transformation fosters both environmental sustainability and poverty alleviation.