How effective are renewable energy, tourism, trade openness, and foreign direct investment on CO2 emissions? An EKC analysis for ASEAN countries.

Abstract

The effects of renewable energy, tourism, foreign direct investment, and income on environmental degradation have attracted the attention of many researchers, but to date, no researcher has examined the concurrent effects of these variables on CO2 emissions for the Association of Southeast Asian Nations (ASEAN) countries. Motivated by this gap in the literature, this study aims to analyze the determinants of carbon dioxide (CO2) emissions under the environmental Kuznets curve (EKC) hypothesis for six ASEAN countries. To this end, the study utilizes the panel ARDL estimator and the Dumitrescu-Hurlin panel causality test from 1995 to 2018. The results show that (i) tourism and foreign direct investment increase CO2 emissions. (ii) Real income and trade openness reduce environmental degradation. (iii) Since the long-run income elasticity is lower than the short-run, the EKC hypothesis is valid. (iv) Renewable energy reduces carbon emissions only in the short term and has no effect on environmental quality in the long term. There is also no causal relationship between renewable energy and environmental degradation. This could be due to the ineffective deployment of renewable energy in ASEAN countries. Based on these results, this study suggests that ASEAN countries should effectively use renewable energy, reduce the amount of fossil energy in the tourism sector, and support economic development to achieve a sustainable environment.