The role of energy diversification in the average income and pollution intensity of OECD economies

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 (≈2.6% short run and ≈9.6% long run per unit decrease in the index), while also supporting higher per-capita income (≈1.3% and ≈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.