Urbanization, energy-use intensity and emissions: A sectoral approach

Abstract

This paper investigates the relationship between urban population and CO2 emissions from various sectors with a view towards understanding energy-use intensity as the link between urbanization and CO2 emissions, considered a key driver of climate change. In contrast to extant literature, we analyse this link from two distinct perspectives, involving disaggregation according to sectors or by level of development. Further, using econometric mediation analysis, we provide a deeper exploration of the mechanisms through which climate change manifests exploring the technological inefficiencies that lead to carbon emissions at the sectoral as well as developmental level. Our results indicate that energy-use intensity, an indicator of technological inefficiency in controlling emissions, is particularly of importance in the manufacturing sector, playing a vital role in the process through which urbanization affects CO2 emissions. We also show that the overall link between urbanization/development and emissions is a conditional one, requiring a deeper analysis that separately explores groups of countries classified by income levels as well as various sub-sectors of those economies. Furthermore, the mechanism through which these effects manifest is robust in residential and manufacturing sectors; technological inefficiencies, leading to high levels of energy use intensity are the key contributors to carbon emissions. The findings suggest a sector-based targeted approach that takes into account levels of development is more appropriate relative to a one-size-fits-all approach to global policy.