Does urbanization increase pollutant emission and energy intensity? evidence from some Asian developing economies

ABSTRACT

This paper aims to investigate the effects of urbanization on pollutant emissions and energy intensity in selected Asian developing countries after controlling for the effects of disaggregated (renewable and non-renewable) energy consumption, trade liberalization, and economic growth. We use both linear and nonlinear panel data econometric techniques and employ recently introduced mean group estimation methods, allowing for heterogeneity and cross-sectional dependence. However, to check the robustness of our panel results, we also apply the autoregressive distributed lag (ARDL)-bound testing approach to country-level data. In addition, the relationship between affluence and CO₂ emissions is examined in the context of the Environmental Kuznets Curve (EKC) hypothesis. The estimation results identify the population, affluence, and non-renewable energy consumption as major factors in pollutant emissions in Asian countries. However, the results of the EKC hypothesis show that when countries achieve a certain level of economic growth, their emissions tend to decline. Whereas nonlinear results show that renewable energy, urbanization, and trade liberalization reduce emissions, linear estimations do not confirm these outcomes. Thus, substitution of non-renewable for renewable energy consumption, cautious and planned urbanization programs and more liberal trading regimes may be viable options for sustainable growth of these developing Asian economies.

KEYWORDS:

• Renewable energy consumption
• urbanization
• pollutant emission
• openness
• EKC hypothesis
• panel data

JEL CLASSIFICATION:

• C33
• E40
• Q20

Acknowledgments

The earlier version of this paper was presented at a workshop on ‘Urbanization and Infrastructure in Asia’ in Beijing, China, organized by the Asian Development Bank Institute (ADBI). That version is also available as an ADBI working paper. The authors are grateful to the audience at this workshop for making useful comments which materially improved the quality and presentation of the paper. The authors are also grateful to the anonymous referee and the editor of this journal for useful and constructive comments. However, the authors are responsible for any error remains.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ To conserve space, we do not report these tests’ results; however, the results are available upon request.

² Because of space limitations, we do not provide these co-integration test results; however, the results are available upon request.

³ The concept of compact city originates from the works of Leon Krier, Andres Duany and Elizabeth Plater-Zyberk – the initiators of compact city movement in the United States of America (Krier 1998; Duany, Plater-Zyberk, and Speck 2001). The compact city hypothesis indicates urban development incorporating energy and environmental aspects of urban housing, transport and infrastructure. Therefore, the compact city is likely to be ‘more energy efficient and less polluting because compact city dwellers can live closer to shops and work and can walk, bike, or take transit’ (Neuman 2005, 12).

⁴ To save space, we do not specify here the unrestricted error correction version for each model or the details of the ARDL approach. We also present our key variable, urbanization, in Tables 13 and 14 for the same reason.

⁵ Three estimated coefficients of ECM_t-1 in the urbanization-pollutant emissions model, specifically, for Pakistan, the Philippines and Sri Lanka, and two in the urbanization-energy intensity model, for Bangladesh and Pakistan, are greater than one in magnitude, implying that the economic system is not stable. We suspect this may be due to limited observations.