Investigating The Environmental Kuznets Curve: A Dynamic Panel Data Analysis Of Economic Growth, Energy Consumption, Urbanization And Tourism’s Impact On Environmental Degradation In Selected Developed And Developing Countries

Abstract

The growing concern over global carbon emissions and their impact on climate change has made it crucial to understand the economic and environmental drivers of emissions across different economies. This study aims to explore the long-run and short-run relationships between carbon emissions and key determinants such as income, energy consumption, urbanization, and tourism in a panel of eight selected developed and developing countries from 1990 to 2020. The research applies dynamic panel estimation techniques including Mean Group, Pooled Mean Group, and Dynamic Fixed Effects models to assess these relationships. Rooted in the Environmental Kuznets Curve (EKC) theory, which posits an inverted U-shaped relationship between income and environmental degradation, this study examines whether carbon emissions increase with economic growth up to a certain point and then decrease as economies adopt cleaner technologies. The sample includes data from both developed and developing countries, allowing for a comprehensive analysis of heterogeneous effects across different stages of development. The results indicate a long-run causal relationship between carbon emissions and its explanatory variables, as evidenced by the significant error correction terms across all models tested. Income, energy consumption and urbanization were found to significantly increase carbon emissions in the long run, while tourism (measured by the number of tourist arrivals) has a significant negative impact on carbon emission. The study's empirical results further confirm the EKC hypothesis, revealing an inverted U-shaped relationship between income and carbon emissions. These findings highlight the urgent need for policy measures that foster sustainable urbanization and energy efficiency to mitigate the long-term environmental consequences of economic growth.

The negative effect of tourism on emissions suggests that promoting environmentally sustainable tourism could be an effective strategy to balance economic growth with environmental protection.