Urbanization, economic growth, energy consumption, and CO2 emissions: Empirical evidence from countries with different income levels

The growth of anthropogenic CO2 emissions has been widely attributed to the combustion of energy in support of human activities associated with economic development. While the link between urbanization, economic growth, energy consumption, and CO2 emissions has, as a result, received considerable multidisciplinary scholarly attention, little work has been undertaken with respect to the how differences in the development stages or income levels of the countries studied may affect these relations. Here, we empirically explore the link between urbanization, economic development, energy consumption, and CO2 emissions, specifically taking into account the different income levels of the countries studied. A series of panel data models and a balanced dataset for a panel of 170 countries were utilized in the study, which took the period of 1980-2011 into consideration. The result of panel cointegration tests suggested that a cointegration relationship existed between variables in all the countries studied, and that a statistically significant positive relationship existed between the variables employed in the long run. The results of a Granger causality test based on the Vector Error-Correction Model (VECM) provided evidence of varied Granger causality relationships between the variables across the income-based subpanels. Moreover, we also undertook an impulse response and variance decomposition analysis that allowed us to forecast the impacts of economic growth, urbanization, and energy consumption on future CO2 emissions during the period surveyed. Our results cast a new light on the importance of a country's development stage and income level for government policy decisions relating to the reduction of CO2 emissions.