Relationship between Urbanization and CO2 Emissions Depends on Income Level and Policy

Abstract

We investigate empirically how national-level CO2 emissions are affected by urbanization and environmental policy. We use statistical modeling to explore panel data on annual CO2 emissions from 80 countries for the period 1983-2005. Random- and fixed-effects models indicate that, on the global average, the urbanization-emission elasticity value is 0.95 (i.e., a 1% increase in urbanization correlates with a 0.95% increase in emissions). Several regions display a statistically significant, positive elasticity for fixed- and random-effects models: lower-income Europe, India and the Sub-Continent, Latin America, and Africa. Using two proxies for environmental policy/outcomes (ratification status for the Kyoto Protocol; the Yale Environmental Performance Index), we find that in countries with stronger environmental policy/outcomes, urbanization has a more beneficial (or, a less negative) impact on emissions. Specifically, elasticity values are -1.1 (0.21) for higher-income (lower-income) countries with strong environmental policy, versus 0.65 (1.3) for higher-income (lower-income) countries with weak environmental policies. Our finding that the urbanization-emissions elasticity may depend on the strength of a country's environmental policy, not just marginal increases in income, is in contrast to the idea of universal urban scaling laws that can ignore local context. Most global population growth in the coming decades is expected to occur in urban areas of lower-income countries, which underscores the importance of these findings.