Uzbekistan Is Decoupling Growth From Emissions: Can Its Cities Keep Up?

Uzbekistan appears to be entering a new phase of economic development in which rising income no longer automatically drives higher carbon emissions. However, the country's urban expansion and service-sector growth are creating fresh environmental pressures that could weaken that progress if policy does not keep pace, reveals a new study published in Economies.

The study "Economic Growth, Service Sector, and Urbanization Effects on Environmental Degradation in Uzbekistan: Evidence from ARDL Analysis" by Firuza Achilova, Nurbek Rizaev, Fozil Xolmurotov, Ergash Ibadullaev, Xadicha Rashidova, Dilshodbek Salaev and Dilshod Hudayberganov examines how GDP per capita, service-sector expansion and urban population growth have shaped Uzbekistan's carbon dioxide emissions.

Economic growth is associated with lower long-run emissions, suggesting that Uzbekistan may be operating on the declining side of the Environmental Kuznets Curve. But service-sector growth and urbanization both increase emissions, indicating that the composition of development now matters as much as its speed.

Growth Is Beginning to Decouple From Emissions

The strongest result is the negative long-run relationship between GDP per capita and carbon emissions. The study estimates that a 1% increase in GDP per capita is associated with a 0.24% reduction in CO2 emissions over the long term. For a transition economy, this is significant. Uzbekistan's income has risen substantially since independence, while absolute emissions have remained within a comparatively narrow range. The study interprets this pattern as evidence that the country has moved beyond the stage where growth simply expands energy use and pollution.

This supports the Environmental Kuznets Curve hypothesis, which proposes that environmental degradation initially rises with income but later falls as economies become more efficient, institutions strengthen and public demand for environmental quality increases. In Uzbekistan's case, structural change, cleaner technologies and green-economy policies may all be contributing to this shift.

However, the result should not be read as proof that growth itself is environmentally beneficial. The negative coefficient reflects the development path and policy environment observed during the study period. If investment returns to carbon-intensive sectors or green reforms lose momentum, the relationship could change.

Emissions remained relatively stable while GDP per capita expanded sharply, but the fitted bivariate relationship does not control for urbanization, services or time trends. The stronger conclusion comes from the ARDL model, which isolates the long-run relationship after accounting for these factors.

The "Clean" Service Economy Is Not Clean Yet

The study's most counterintuitive result concerns services. A larger service sector is often assumed to reduce pollution because it replaces heavy industry with finance, technology, education and other less energy-intensive activities.

Uzbekistan's experience challenges that assumption. The study estimates that a 1% increase in the service sector's share of GDP is associated with a 1.37% rise in long-run CO2 emissions. This is the largest elasticity among the variables examined, although it is statistically significant only at the 10% level and should therefore be interpreted with some caution.

The likely explanation lies in what the service sector contains. In Uzbekistan, much of its expansion is still driven by transport, logistics, wholesale and retail trade, warehousing and other activities that depend heavily on fuel, commercial buildings and physical movement. These are services in economic classification, but they are not necessarily low-carbon.

Shifting from industry to services does not automatically produce a greener economy. Environmental outcomes depend on whether growth comes from digital, financial and knowledge-based services or from energy-intensive transport and commerce.

For businesses and investors, this creates a clear opportunity. Fintech, e-commerce platforms, digital government, low-carbon logistics, energy-efficient commercial property and fleet electrification could help change the sector's emissions profile. But digitalization should not be romanticized either; data centers, delivery networks and increased consumption can also raise energy demand unless the power system becomes cleaner.

The policy priority is not merely to grow services, but to upgrade their composition. Energy-efficiency standards for commercial buildings, incentives for electric transport, better freight planning and green financing could reduce the sector's carbon intensity while preserving employment and productivity gains.

Urban Growth Is Outrunning Urban Efficiency

Urbanization is the second major source of pressure. The study finds that a 1% increase in urban population growth is associated with a 0.37% rise in long-run emissions. It reflects the carbon cost of rapid city expansion. New housing, roads, utilities and commercial districts require cement, steel and energy. Growing urban populations also increase demand for private vehicles, cooling, electricity and logistics. Where development is dispersed and public transport remains limited, emissions rise faster.

The finding places Uzbekistan in what may be called the carbon-intensive phase of urbanization. Cities are expanding before the efficiency benefits of density, mass transit, modern building codes and integrated planning have fully emerged. This is particularly important for Tashkent, Samarkand, Bukhara and other rapidly growing urban centers. Decisions made now will shape emissions for decades. Poorly located housing, car-dependent suburbs and inefficient buildings can lock in high energy use long after construction ends.

A lower-carbon urban model would require compact development, expanded public transport, electric bus fleets, metro and bus rapid transit corridors, stricter building standards and protection of urban green space. The gains would extend beyond climate policy. Better transport reduces congestion and air pollution; efficient buildings lower household energy costs; and greener urban design improves resilience to extreme heat.

The study's error-correction estimate adds urgency. Around 66.5% of any short-term deviation from the long-run equilibrium is corrected within a year, implying that policy changes could become visible within roughly 18 months. That does not mean cities can be transformed quickly, but it suggests that targeted interventions may influence the emissions trajectory within a politically meaningful time frame.

Uzbekistan Now Faces a Quality-of-Growth Test

The study shows that Uzbekistan's environmental challenge is no longer simply whether the economy grows. It is how the economy grows, where people live and which sectors receive investment. This has direct relevance to the country's Green Economy Strategy for 2019–2030. The negative income-emissions relationship suggests that green growth is possible. But the positive effects of services and urbanization show that decoupling remains fragile.

Several policy directions follow. Renewable energy deployment must accelerate, particularly given Uzbekistan's solar potential. Fossil-fuel subsidies that weaken low-carbon investment incentives should be gradually reformed. Carbon pricing or a limited emissions-trading pilot could begin in the highest-emitting sectors if supported by credible monitoring.

Service-sector modernization should focus on digitalization, efficient buildings and cleaner logistics. Urban policy should prioritize public transport, green construction and compact development. Environmental impact assessment, public data transparency and institutional capacity also need strengthening.

The study is methodologically useful because it examines income, services and urbanization in one country-specific model over 34 years. Its diagnostic and stability tests support the internal consistency of the results.

The researchers also caution that the analysis uses national aggregates and cannot capture major differences between provinces or cities. It excludes renewable energy consumption, trade openness and foreign direct investment, all of which may influence emissions. The small sample limits the ability to test structural breaks and nonlinear effects in depth. The study also uses total CO2 emissions rather than consumption-based emissions or broader ecological indicators.

To sum up, Uzbekistan may have reached a point where economic expansion and environmental improvement can coexist, but that progress is not self-sustaining. Growth is becoming cleaner; cities and services are not yet keeping pace. The next development challenge is to make structural transformation itself low-carbon.