URBANISATION, ENERGY CONSUMPTION, AND ENVIRONMENTAL DEGRADATION: A SYSTEM GMM AND PANEL CAUSALITY EVIDENCE FOR ASIAN TIGERS’ ECONOMIC GROWTH TRAJECTORY

Abstract

The intricate nexus between environmental degradation, urban expansion, and economic performance has emerged as a focal point in contemporary environmental economics. This study investigates the complex relationships among CO₂ emissions, energy consumption, economic growth, and urbanisation in the four Asian Tigers, including Hong Kong, Singapore, South Korea, and Taiwan, over the period 1990 to 2022. An unbalanced panel dataset comprising 132 observations was constructed using annual data from the World Bank. Purposive sampling was employed to select these economies due to their advanced industrialisation, high urbanisation rates, and active climate policy engagement. The research design is quantitative and longitudinal in nature, incorporating both dynamic and static panel estimators. The System Generalized Method of Moments (System GMM) estimator was employed, complemented by instrumental variables (IV) regression and Dumitrescu-Hurlin panel Granger causality tests. The empirical results indicate that urbanisation exerts a statistically significant and positive impact on energy consumption and CO₂ emissions, while economic growth is identified as a key driver of environmental degradation in the region. Bidirectional causalities among the variables further underscore the interconnectedness of development and environmental externalities. The study concludes that environmental sustainability in the Asian Tigers is undermined by rapid urbanisation and economic expansion unless mitigated by structural shifts in energy use and urban planning. The paper recommends that governments in these economies strengthen green energy transitions, invest in public transportation, and enforce environmental standards in urban development projects. The findings offer policy-relevant insights for decoupling economic growth from carbon emissions, thereby contributing to the broader discourse on sustainable development in rapidly urbanising and industrialising economies.