Does private investment in the transport sector mitigate the environmental impact of urbanisation? Evidence from Asia

Abstract

Urbanisation serves as a pillar for creating prosperous economies, but its impacts on infrastructure and the environment have been a concern for policy makers. There are numerous studies that examine the impact of urbanisation on the environment but no known study has analysed whether the impact of urbanisation on the environment is dependent on the characteristics of available infrastructure. To address this gap, this study uses the STIRPAT model, panel cointegration and fully modified ordinary least square (FMOLS) estimator as well as panel data of eight Asian countries to analyse whether private sector investment in the transport sector and transport infrastructure mode influences the impact of urbanisation on transport CO2 emissions. We find that the effect of urbanisation on transport CO2 emissions depends on the covariates in the model and interactions with other factors. Increase in income and population increases transport CO2 emissions while technological improvements reduces CO2 emissions from the transport sector. Private sector investment in the transport sector and availability of rail infrastructure reduce transport CO2 emissions; and given the same level of urbanisation, Asian countries with more rail infrastructure and private sector investment in the transport sector tend to have lower CO2 emission from the transport sector. Policy makers in Asia should make efforts to boost private sector participation in the transport sector and also promote the construction and improvement of rail infrastructure in order to reduce urbanisation-induced transport CO2 emissions.