**1. Introduction**

When the "Reform and Opening-up" policy was put into practice in the year of 1978, China's urbanization experienced a steady upward trend [1,2]. According to the statistics from the National Bureau of Statistics (NBS), China's urbanization rate increased from 17.9% in 1978 to 65.2% in 2022. Nevertheless, much of China remains to be urbanized, especially the inland regions. As China has a larger population, millions of rural residents will move into urban areas every year during to-be urbanization process. Although China's urbanization greatly raises people's living standards, it has also been deemed to be the root cause of increasingly severe energy consumption growth; for example, the heavy use of fossil energy, which undoubtedly brings about a series of environmental pollution [3]. The total energy consumption in China even made up 23.6% of the global total in the year 2018 [4]. Specifically, urban areas solely account for 75.15% of total energy consumption in China [5]. As a responsible country, China has been determined to set clear reduction targets for energy consumption. Because the urbanization process in China is still accelerating at present, energy is still an essential factor for the urbanization process. Arbitrarily mitigating

**Citation:** Chen, C.; Gao, Y.; Qin, Y. A Causal Relationship between the New-Type Urbanization and Energy Consumption in China: A Panel VAR Approach. *Sustainability* **2023**, *15*, 11117. https://doi.org/10.3390/ su151411117

Academic Editors: Luis Hernández-Callejo, Jesús Armando Aguilar Jiménez, Carlos Meza Benavides and Sergio Nardini

Received: 9 May 2023 Revised: 4 July 2023 Accepted: 10 July 2023 Published: 17 July 2023

**Copyright:** © 2023 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/).

energy use currently will unquestionably slow down the urbanization process. Therefore, there are two kinds of opposite effects simultaneously, which are the benefit of an increase in the level of urbanization resulting from energy consumption and the negative externality of environmental damage related to energy consumption respectively. Could the advantages sufficiently offset the disadvantages? Investigating these two kinds of opposite effects has vital theoretical and practical significance for promoting the urbanization process under the background of clear reduction targets for energy consumption in China. If the advantages of energy consumption outweigh its disadvantages, it pays to promote the urbanization process by increasing energy consumption. However, if energy consumption does not promote or even adversely affect the urbanization process, an energy conservation policy should be adopted to offset the negative externality of environmental damage related to energy consumption.

Previous studies have extensively investigated this subject, yet the majority emphasized the one-way effect of urbanization on energy consumption in the beginning. Many scholars found that the urbanization process leads to energy consumption growth [6–9]. In contrast, some scholars argued that urbanization may lead to energy consumption negatively [10–16]. Based on Northam [17], the third strand of research further examined the nonlinear relationship between the two due to the mixed findings. Most scholars confirmed that the nexus of the two is indeed nonlinear [2,18–20]. Another branch of the literature used city size as a proxy variable for urbanization rate, which indicated that there also was a nonlinear relationship between city size and energy consumption [21,22]. There are two kinds of explanations for the nonlinear relationship between the two. On the one hand, the essence of urbanization can be ascribed to the agglomeration effect, scale effect, and spatial spillover effect, which are conducive to reducing the energy consumption of residents or increasing energy efficiency [5,14,23–25]. On the other hand, the urbanization process reduces energy consumption through industrial structure upgrading and technical innovation [19,26–28].

The level of urbanization is mainly measured by the single index method in the above studies. These simple indicators can only mirror the level of population-oriented urbanization rather than the improvement of production and lifestyle. Especially after China issued the "National New-type Urbanization Plan" in 2014, human-centered urbanization has been put into practice. Therefore, investigating the relationship between new-type urbanization and energy consumption has much more practical significance currently. Recently, a few scholars used the comprehensive index method to measure its connotation and further examine its effect on energy consumption. Liu et al. [14] used a spatial econometric model for China's regions on this subject and found that new-type urbanization leads energy consumption negatively, yet its effect on adjacent areas or the spatial spillover effect is positive. Lin and Zhu [4] examined the effect of new-type urbanization on energy saving and its transmission channels based on Chinese cities and found that it can bring about an energy-saving effect. Yu [29] examined the ecological effect of new-type urbanization and found that China's new-type urbanization can improve energy efficiency. Feng et al. [30] examined the effect of new-type urbanization on energy efficiency based on Chinese cities and found that it has a double-threshold effect. Shao and Wang [31] examined the effect of new-type urbanization on green total factor energy efficiency and found that it has a heterogeneous effect for different cities. Not surprisingly, the relationship between the two is much more complicated compared to traditional urbanization.

Apart from that, as an essential factor of economic development, energy consumption is also conducive to promoting the level of urbanization. Ghosh and Kanjilal [32] investigated the cointegration relationship between the two for India and found that there is causality running from energy consumption to urbanization. Wu et al. [2] estimated the direct effects of various energy consumption patterns in China and found that energy consumption leads to urbanization positively, and the positive effect is dependent on energy consumption intensity, energy consumption scale, and energy consumption structure. Xu and Wang [33] examined the threshold effect of energy consumption on new-type

urbanization in China and found that there was a significant threshold effect. Some scholars further explored how energy consumption affected the urbanization process. These studies found that the carbon emission reduction effect [34], agglomeration economy effect and economies of scale [32,35,36], and the industrial structure effect [36–38] are primary transmission channels through which energy consumption affects urbanization.

The above studies in this field indicate that there should be a bi-directional causality between the two. So far, a wealth of studies primarily investigated uni-directional causality on this subject, yet the bi-directional causality between the two is still scarce. Comparatively, a large body of studies proved that economic growth and energy consumption present a bi-directional causal relationship [39–44]. As urbanization is widely considered a symbol of economic development [37–39], an abundance of support can be indirectly found for the bi-directional causality relationship on our subject. To the best of our knowledge, only Tang et al. [45] explored the two-way correlation mechanism between new-type urbanization and clean energy consumption based on Chinese provincial data and found that there is a significant two-way promoting effect between the two. To sum up, the extant literature in this field actually denotes that energy consumption probably affects urbanization by means of its effects on economic development.

Despite the existing studies in this field having explored extensively the relationship between the two, there are still a few drawbacks on this subject. Firstly, the bulk of empirical studies simply examined how urbanization affects energy consumption, or whether energy consumption promoted the level of urbanization, and these empirical results did not compare the benefit of an increase in the level of urbanization resulting from energy consumption and the negative externality of environmental damage related to energy consumption, so they cannot provide corresponding policy implications for promoting the urbanization process. Secondly, there should be a bi-directional causality between the two, and the existing studies mainly examined the one-way effect of urbanization on energy consumption. Thirdly, the empirical studies on this subject are generally conducted based on the linear relationship hypothesis, and the estimated results are always inconsistent. The nonlinear relationship hypothesis may be more realistic, especially for the effect of newtype urbanization, which remains to be further examined empirically. In this regard, our study makes the following contributions. Firstly, this paper comprehensively analyzes the dynamic interaction mechanism between new-type urbanization and energy consumption, aiming to reveal the bi-directional causality between the two and extend the depth and breadth of this subject. Secondly, this paper 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 to energy consumption, which can provide targeted policy recommendations. Thirdly, this paper creatively explains the estimated results with the concept of the well-known Environmental Kuznets Curve (EKC) hypothesis based on some energy-related data, which not only adds new empirical evidence for the EKC relation but also provides a robustness test for our regression results given that new-type urbanization and energy consumption factually present the two-way causal relationship.

The remainder of this article is arranged as follows. The following section introduces the measurement methods and analysis of the measurement results; Section 3 outlines the econometric specification and presents empirical results; and Section 4 concludes.

#### **2. Measurement Methods and Analysis of Measurement Results**

#### *2.1. Measurement Methods*

The most critical things are methods for calculating the level of new-type urbanization and energy consumption in this paper. According to Ma et al. [46], the amount of energy consumption per capital is applied to measure the level of energy consumption. Similar to the existing studies [4,47], the composite index method is used to fully measure the level of new-type urbanization. The index system is made up of two levels, which include a total of 19 computable indices, as is shown in Table 1. To overcome some shortcomings

of the subjective weighting method, the entropy method is employed to calculate the constructed comprehensive urbanization index. The "+" and "−" of Index Attributes in Table 1 signify the influence of 19 computable indices on the comprehensive index, and "+" indicates an increase in the metric of indices would promote the comprehensive index, and "−" indicates an increase in the metric of indices would decrease the comprehensive index.

**Table 1.** China's comprehensive urbanization index system. Reprinted from [48]. Copyright 5584080645167 (2023) with permission from Elsevier.


The sample data of our empirical research spans 22 years, from 1999 to 2020, and includes all provincial administrative units in China. The original data for energy consumption are obtained from the China Energy Statistical Yearbook and the China Statistical Yearbook. All relevant data for calculating the comprehensive urbanization index are obtained from the China Statistical Yearbook, China Energy Statistical Yearbook, China City Statistical Yearbook, China Statistical Yearbook on Science and Technology, each provincial statistical yearbook, and so on. Considering the data unavailability, Tibet, Hong Kong, Macao, and Taiwan are deleted from the sample in our empirical study. Consequently, the research sample finally consists of 30 provincial administrative units. And these 30 provincial administrative units can be classified into four categories according to the National Bureau of Statistics: east, northeast, central, and west. So as to cancel the impact of the price level in different years, all data related to nominal GDP are revised to a constant price based on the 1999 price index in the process of computation.
