Modelling the Asymmetric Relationship Between Urbanization, Energy Consumption and CO2 Emissions: A Study of Income Classified Economies

Abstract

This study investigates how CO2 emissions behave with the increase or decrease in urbanization and energy consumption, employing pooled ordinary least square (OLS) estimator on a panel of 137 countries from 1961–2019. The findings indicate that there is asymmetry between the process of urbanization, energy consumption and CO2 emissions. From a global perspective, the asymmetry of urbanization on CO2 emissions is more prominent than energy consumption, although CO2 emissions are more responsive towards energy consumption in symmetric cases. For low-income economies, urbanization does not exhibit any significant impact on carbon emission, but energy consumption does. For lower-middle income economies, a lower level of urbanization has a greater impact on CO2 emission than an increase in urbanization, but carbon emissions are more reactive towards energy consumption. Moreover, both urbanization and energy consumption posit a significant impact on carbon emission for upper-middle income economies. Therefore, environment-friendly urbanization and efficient energy consumption should be prioritized to offset the negative externalities.