Testing the Dynamic Relationship Among CO2 Emissions, Economic Growth, Energy Consumption and Tourism Development. Evidence for Uruguay

Abstract

Carbon dioxide (CO2) emission is directly linked with energy usage and plays an essential role in the debate on sustainable tourism development and environmental protection. Some authors argue that tourism faces the problem of being “addicted” to growth, which is incompatible with sustainable goals. The literature shows that the environmental Kuznets curve (EKC) hypothesis induced by tourism is verified, with some differences between developed and developing economies. Previous country-studies usually apply linear cointegration techniques and Granger causality tests in order to test the EKC hypothesis. This study explores the linkages between CO2 emissions, economic growth, energy consumption and tourism development for Uruguay without imposing—a priori—any parametric model, in order to investigate the presence of nonlinearity in the relation, as postulated by the EKC hypothesis. This paper examines the dynamic long-run relationship among these variables, using data from 1960 to 2014. We test the existence of nonlinear cointegration relationship and the causality applying nonparametric tests. We find that this methodology provides a more suitable way to represent linkages between the variables under study for Uruguay. Nevertheless, the evidence regarding the causality between tourism growth and CO2 emissions is weak. Finally, we discuss policy implications, limitations, and future research.