The effect of urbanization on energy use in India and China in the iPETS model

Urbanization is one of the major demographic and economic trends occurring in developing countries, with important consequences for development, energy use, and well being. Yet it is only beginning to be explicitly incorporated in long-term scenario analyses of energy and emissions. We assess the implications of a plausible range of urbanization pathways for energy use and carbon emissions in India and China, using the integrated Population-Economy-Technology-Science (iPETS) model, a computable general equilibrium (CGE) model of the global economy that captures heterogeneity in household types within world regions and into which we have introduced income effects on household consumption preferences. We find that changes in urbanization have a somewhat less than proportional effect on aggregate emissions and energy use. A decomposition analysis demonstrates that this effect is due primarily to an economic growth effect driven by the increased labor supply associated with faster urbanization. The influence of income on household consumption is strong, and indicates a potentially rapid transition away from traditional fuel use and toward modern fuels such as electricity and natural gas. Results also indicate important directions for future work, including the implications of alternative types and driving forces of urbanization over time, a better understanding of possible changes in consumption preferences associated with income growth and the urbanization process, and modeling strategies that can produce disaggregated household consumption outcomes within a CGE framework.