Can tourism growth drive environmental improvements in the Eurozone economic space: A panel data analysis

Abstract

Tourism extensively exploits natural resources and uses ecosystem services to expand its potential and increase market share. The present study investigates potential tourism's effects and causalities on the environmental quality levels in the context of the tourism-induced Environmental Kuznets Curve hypothesis (T-EKC). We conceptualize tourism as a function of its contribution to a country's Gross Domestic Product (GDP), whereas we consider capital investment spending directly connected with the travel and tourism sector as an additional determinant of environmental quality. We contextualize environmental degradation as a means of greenhouse gas emissions (GHGs), methane, and nitrous oxide emissions. Furthermore, our models include primary and energy consumption patterns to emphasize energy efficiency in limiting environmental degradation levels. This study's approach also discusses the role of renewables as an explanatory variable. This set of variables remains less visible in the relevant literature, whereas it extensively covers the T-EKC hypothesis concept. We process panel data analyses for the Eurozone member states from 1996 to 2019. Research findings confirm the inverted U-shaped curve for all models regarding tourism's contribution to GDP. Moreover, capital investment spending does not Granger cause air pollution. Additionally, the percentage of renewables should be increased from a long-term perspective since they decrease environmental degradation. Practical implications call for enhancing sustainable growth in the tourism system in light of energy efficiency issues and eco-friendly investments.