Nexus Between Carbon Emissions, Energy Consumption, Urbanization and Economic Growth in Asia: Evidence From Common Correlated Effects Mean Group Estimator (CCEMG)

Chai Aun Ooi,Amar Hisham Jaaffar,Say Keat Ooi,Yusuf Babatunde Adeneye

doi:10.3389/fenrg.2020.610577

Abstract

This study investigates the dynamic relationships between carbon emission, urbanization, energy consumption, and economic growth in a panel of 42 Asian countries for the period 2000–2014 using dynamic common correlated effects panel data modeling. This study employs second generation cross-sectional Pesaran (J. Appl. Econom., 2007, 22(2), 265-312) panel unit root, Westerlund panel cointegration tests (Econom. Stat., 2007, 69(6), 709-748), and Pesaran’s (Econometrica, 2006, 74(4), 967-1012) common correlated effects mean group estimation technique. These approaches allow for cross-sectional dependence, and are robust to the presence of common factors, serial correlation, and slope heterogeneity. The Common Correlated Effect Mean Group test reveals a high average coefficient of 0.602 between carbon emission and energy consumption while low coefficients of 0.114 and 0.184 for the pairs of carbon emission-urbanization and carbon emission-GDP, respectively for the panel as a whole, suggesting a cointegration between carbon emission, urbanization, energy consumption, and economic growth. The results indicate that there is relatively high carbon emission especially for highly populated and geopolitical risk Asian countries in the short run. Findings reveal long run relationships between the variables, which is attributed to the on-going carbon taxation and energy prices. Our results are robust to PMG-ARDL estimator. Overall, these findings cast important implications on renewable energy policy and urban planning insights for the policymakers.

Highlights

As the debate surrounds anthropogenic carbon emissions and climate change typifies sustainable development dilemma, the global climate effort put forward by the Paris Agreement advocates urgent attention towards carbon mitigation and adaptation strategies
While economic development is crucial for the emerging markets, it is noteworthy to assess the nexus between energy consumption, urbanization, and carbon emission, especially from the Asian countries’ perspective
The upsurge in economic development, income level, and perhaps the geopolitical risk and war situations have influenced the link between energy consumption, urbanization, carbon emissions, and economic growth

Summary

Introduction

As the debate surrounds anthropogenic carbon emissions and climate change typifies sustainable development dilemma, the global climate effort put forward by the Paris Agreement advocates urgent attention towards carbon mitigation and adaptation strategies. Continental and regional issues are important to devise regional energy programs and improve strategies on rapid urbanization growth especially in Asia, where the continent receives the largest tourist arrivals with an increasing level of industrialization (Farzaneh, 2019; International Energy Agency, 2019). Such energy strategies including secure, affordable, and sustainable energy, reduction in the importation of fossil fuels, and energy efficiency are formulated and implemented to improve social welfare and quality of life for its citizens. The energyenvironment spectrum for regional energy efficiency in Asia is important for policymakers, researchers, and respective governments to understand which strategy would foster the reduction in environmental impacts of carbon emissions on economic activities, perhaps with the goals of low carbon emissions, and urbanization sustainability

Methods

Results

Conclusion