Abstract
This study examines the effects of urbanization and industrialization on carbon emissions
for a panel of 156 countries and various income groups over the period 1990-2014
employing the first and second-generation tests. To address the issues of heterogeneity,
endogeneity, and cross-sectional dependence, dynamic generalization method of
moments (GMM), common correlated effects mean group (CCEMG) and dynamic
CCEMG estimation procedures are applied. Carbon emissions, urbanization,
industrialization, economic growth, financial development, and energy consumption are
integrated of order one. The results show that urbanization and industrialization have
statistically positive and significant effects on carbon emissions across all panel groups.
Whereas economic growth exerts heterogeneous effects on environmental pollution,
validating the implications of “environmental Kuznets curve”. Similarly, financial
development raises pollution in all income groups except high-income countries. The
findings did not confirm “theory of ecological urbanization” while the evidence on
“ecological modernization theory” is inconclusive. Overall findings imply that the global
challenge of environmental pollution is mainly aggravated by rapid urbanization and
industrialization whereas economic growth, financial development, and energy
consumption have heterogeneous effects depending upon the development stage of
countries. This study recommends that sustainable urbanization and industrialization need
to be promoted using green finance and clean energy sources.
Muhammad Tariq Majeed, Aisha Tauqir. (2020) Effects of Urbanization, Industrialization, Economic Growth, Energy Consumption and Financial Development on Carbon Emissions: An Extended STIRPAT Model for Heterogeneous Income Groups, Pakistan Journal of Commerce and Social Sciences, Volume 14, Issue 3.
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