Modelling the Asymmetric Relationship Between Urbanization,Energy Consumption and CO 2 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.