This study investigates the effects of crucial variables -notably urbanization- on CO2 emissions efficiency across 8 ASEAN countries through the utilization of the Stochastic Frontier Analysis for 2000-2019. In the first stage of estimation, the capital stock exhibited a negative relationship, while GDP, labor force, and energy showed positive values. In the outcomes of the second stage estimation, it was determined that as urbanization progresses, inefficiencies in CO2 emissions increase. Moreover, a supplementary variable was introduced to assess the impact of FDI; however, this variable yielded statistically insignificant results owing to varying business conditions across countries. Imports and Official Development Assistance (ODA) yielded positive coefficients, while exports, human capital, and forest area exhibited negative coefficients. This indicates that trade and ODA indeed contribute to the enhancement of urban infrastructure and the fostering of economic growth within the 8 ASEAN countries, coinciding with an elevation in CO2 emissions.
Nevertheless, the intentional accumulation of human capital and the preservation of domestic forest areas, directed toward addressing climate change, play vital roles in effectively mitigating these CO2 emissions. Given the vulnerability of these nations to the impacts of climate change, international cooperation becomes indispensable to enhance their capacity-building endeavors for responding to climate change and achieving sustainable urban development.