The moderating effects of urbanization on carbon dioxide emissions: A latent class modeling approach

Abstract

Abstract This study proposes an alternative conceptual and analytical framework to identify the environmental impacts of urbanization, where urbanization is treated as a background/contextual factor. This study especially focuses on the issue of “in what conditions of urbanization, human activities can be more environmentally efficient” rather than “whether urbanization has a positive or negative impact on the environment,” an issue that has been explored in a number of existing studies. To capture such so-called moderating effects of urbanization, the latent class STIRPAT model is developed, which can produce urbanization-dependent elasticities. Empirical analysis is conducted to confirm the impacts of urbanization on the strength of the links between human activities and carbon dioxide (CO2) emissions. Scenario analyses based on the developed model are also carried out under the different urbanization scenarios, taking into account different development stages. The main empirical findings include: (1) the progress of urbanization could make countries more environmentally friendly when the country's GDP per capita and the percentage share of service industries in GDP are sufficiently high; and (2) it might be better to reach a certain level of urbanization before the high GDP growth associated with the increase of the share of tertiary industry.