Green Urbanization

Large cities are more productive and generate more output per person. Using data from the UK on energy demand and waste generation, we show that they are also more energy-efficient. Large cities are therefore greener than small towns. The amount of energy demanded and waste generated per person is decreasing in total output produced, that is, energy demand and waste generation scale sublinearly with output. Our research provides the first direct evidence of green urbanization by calculating the rate at which per capita electricity use and waste decrease with city population. The energy demand elasticity with respect to city output is 83%: as the total output of a city increases by one percent, energy demand increases less than one percent, and the Urban Energy Premium is therefore 17%. The energy premium by source of energy demand is from households (13%), transport (20%), and industry (16%). Similarly, we find that the elasticity of waste generation with respect to city output is 90%. For one percent increase in total city output, there is a less than one percent increase in waste, with an Urban Waste Premium of 10%. Because large cities are energy-efficient ways of generating output, energy efficiency can be improved by encouraging urbanization and thus green living. We perform a counterfactual analysis in a spatial equilibrium model that makes income taxes contingent on city population, which attracts more people to big cities. We find that this pro-urbanization counterfactual not only increases economic output but also lowers energy consumption and waste production in the aggregate.