A Causal Relationship between the New-Type Urbanization and Energy Consumption in China: A Panel VAR Approach

Abstract

The accelerated urbanization process has been considered to be the root cause of increasingly severe energy consumption growth in China. However, energy is still an essential factor for the urbanization process, so arbitrarily mitigating energy use currently will unquestionably slow down the urbanization process. The principal contribution of this paper is to comprehensively analyze the dynamic interaction mechanism between the new-type urbanization and energy consumption, and further put forward a new idea of comparing the benefit of an increase in the level of new-type urbanization resulting from energy consumption and the negative externality of environmental damage related with energy consumption. This paper conducts an empirical study on the causal relationship between new-type urbanization and energy consumption using Chinese provincial administrative units from 1999 to 2020. And we find that new-type urbanization leads to energy consumption negatively and energy consumption leads to new-type urbanization positively for provinces in the eastern region. There is only a one-way effect of energy consumption on new-type urbanization for provinces in the central and northeastern regions, and there is negative feedback causality for provinces in the western region. Additionally, the benefit of an increase in the level of new-type urbanization resulting from energy consumption is larger than the negative externality of environmental damage related to energy consumption for provinces in the eastern, central, and northeastern regions, yet it is totally opposite for provinces in the western region. Finally, we propose some fruitful policy recommendations to construct new-type urbanization under the background of clear reduction targets for energy consumption in China.