An empirical study on the relationship between urbanization, transportation infrastructure, industrialization and environmental degradation in China, India and Indonesia

Abstract

In certain densely populated Asian countries (China, India, and Indonesia), unsustainable urban development may be directly or indirectly related to the environment and may cause environmental problems due to low industrial structure and poor transportation infrastructure. Thus, this study uses AMG, CCEMG and MG estimators to reveal the relationship between urbanization, transportation infrastructure, industrial structure, renewable energy use, economic growth and per capita carbon dioxide emissions in densely populated Asian countries from 1995 to 2020. Relying on the AMG estimator, the results show that urbanization, industrial structure, and transportation infrastructure investment significantly accelerate per capita carbon dioxide emissions in the long run. However, the use of renewable energy has a significant adverse impact on per capita CO2 emissions in the long run. The second model based on urbanization structure clearly shows that, except for the insignificant impact of renewable energy consumption, other explanatory factors (transportation infrastructure, industrial structure and GDP) have significant progressive effects on urbanization. Considering the moderating role of institutional quality, the analysis succinctly argues that in the long run, institutional quality intensifies the negative impact of renewable energy utilization on environmental pollution. Institutional quality turns the strong positive effects of urbanization, industrial structure, and transportation infrastructure on per capita carbon emissions into negative effects. Furthermore, the quality of existing institutions in specific country panel can even interact with industrial structure and transportation infrastructure to improve urban structure and thereby reduce environmental harm. Finally, the specific threshold level is examined to determine that the impact of baseline regression variables (urbanization, transportation infrastructure, renewable energy utilization, industrial structure) on per capita carbon dioxide emissions has fully penetrated into the institutional quality level. Strategic empirical evidence shows that sustainable urban growth goals that contribute to a sustainable environment can be achieved by upgrading two major components of cities—industrial structures and transport infrastructure. The good performance of industrial structure and transportation infrastructure can be improved through institutional quality. Compared with weak institutional quality, a sound institution can expand the ability of transportation infrastructure and industrial structure to improve the urbanization structure, thereby slowing down environmental degradation. Furthermore, in this pursuit, the role of institutional quality in developing policies to support renewable energy is also becoming increasingly important.