Sustainable Urbanisation and the Role of Industrial Development in Modifying Environmental Change

This study examines the relationships among renewable energy, urbanisation, foreign direct investment (FDI), urban land area, trade openness, and CO₂ emissions in India and China, using data covering 1995–2024. The autoregressive distributed lag (ARDL) and nonlinear autoregressive distributed lag (NARDL) models are employed to estimate short- and long-run effects. The results indicate that the linear estimates of urbanisation have a statistically significant negative effect in China in the short run, whereas the nonlinear coefficient estimates show a positive effect on CO₂ emissions in India. FDI and renewable energy are reported to benefit both countries in the short run. The estimated coefficients for trade openness indicate a statistically significant negative relationship with CO₂ emissions in both countries. The results also suggest that positive nonlinear shocks to urbanisation in China and increases in urban land area have significant negative effects on CO₂ emissions in India and China. The study recommends that regional policymakers create an environment conducive to environmentally responsible businesses through supportive legislation and financial incentives.