Urbanization, Energy Consumption, and Pollutant Emission in Asian Developing Economies: An Empirical Analysis | Asian Development Bank

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Urbanization, Energy Consumption, and Pollutant Emission in Asian Developing Economies: An Empirical Analysis

Publication | April 2017
Urbanization, Energy Consumption, and Pollutant Emission in Asian Developing Economies: An Empirical Analysis

Large urban populations and nonrenewable energy use increase pollution, but urban planning, renewable energy use, and more liberal trade reduce emissions and support sustainable growth in emerging Asian economies.

We investigate the effects of urbanization, renewable and nonrenewable energy consumption, trade liberalization, and economic growth on pollutant emissions and energy intensity in selected Asian developing economies from 1980 to 2010. We use both linear and nonlinear panel data econometric techniques and employ the recently introduced mean group estimation methods, allowing for heterogeneity and cross-sectional dependence. However, to check robustness of our panel results, we also apply the autoregressive distributed lag 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 population, affluence, and nonrenewable energy consumption as the main factors in pollutant emissions in Asian economies. 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 such outcomes. Thus, substitution of nonrenewable for renewable energy consumption, as well as cautious and planned urbanization programs, and more liberal trading regimes may be viable options for the sustainable growth of these emerging Asian economies.

WORKING PAPER NO: 718