Analyzing extended STIRPAT model of urbanization and CO2 emissions in Asian countries

CO2 emissions tend to increase more rapidly in underdeveloped economies as compared to developed countries mainly in China, India, and Asia. One of the aspects that accounts for the increasing CO2 emissions is urbanization (UR) and it is increasing all over the world particularly in Asian and African regions. The present study examines the impact of energy use and UR on carbon emissions over the period 1995 to 2018 while using the extended STIRPAT model for Asian countries. Panel co-integration techniques and Granger causality test are applied on selected variables. FMOLS and DOLS methods are also applied to check for robustness. Findings confirm the presence of long-run co-integration among variables. The outcomes propose that energy consumption and UR have positive impact on CO2 emissions and output. Outcomes also reveal that financial development (FD) has negative effect on emissions of CO2 but positive effect on economic growth. Results of Granger causality technique indicate that long-run causality association exists among emissions of CO2, economic growth, and UR. In the short run (SR), bidirectional causal relationship has been found between trade openness and FD.