Economic Growth, Service Sector, and Urbanization Effects on Environmental Degradation in Uzbekistan: Evidence from ARDL Analysis

Balancing economic growth with environmental sustainability remains a serious challenge for many transition economies. This study analyzes the relationship between economic growth, service sector expansion, urbanization, and environmental degradation in Uzbekistan. Employing yearly temporal series data from 1991 to 2024, the research implements an autoregressive distributed lag (ARDL) bounds testing methodology to investigate the short-run and long-run relationships among the variables. Carbon dioxide (CO2) emissions are used as proxies for environmental degradation, while GDP per capita, service sector value added, and urban population growth represent key economic and structural factors. The empirical results show that there is a stable long-run cointegration relationship between the variables. The findings show that economic growth significantly reduces CO2 emissions in the long run, which supports the Environmental Kuznets Curve (EKC) hypothesis for Uzbekistan. Conversely, the expansion of the service sector and rapid urbanization are found to increase CO2 emissions and contribute to environmental degradation. The error correction model shows a rapid adjustment rate of approximately 66.5% to the long-run equilibrium after short-term shocks. Through these results, we attempted to reveal the importance of sustainable urban development, green economic policies, and the development of an environmentally friendly service sector in Uzbekistan.