Energy Consumption, CO2 Emissions, and Tourist Arrivals to Small Island Economies Dependent on Tourism

Authors: Adedoyin, F. and Bekun, F.V.

Start date: 4 December 2019

In less than two decades, the global tourism industry has overtaken the construction industry as one of the bigger polluters, accounting for up to 8% of global greenhouse gas emissions. Consequently, research into the causal link between emissions and the tourism industry have increased significantly focusing extensively on top earners from the industry. However, few studies have thoroughly assessed this relationship for small island economies dependent on tourism. Hence, this study assessed the causal relationship between CO2 emissions, real GDP per capita (RGDP) and the tourism industry. The analysis is conducted for seven tourism-dependent countries for the period 1995 to 2014 using panel VAR approach. Unit root tests confirms all variables are stationary at first difference. Our VAR granger causality/block exogeneity Wald tests results show that a unidirectional causality flowing from tourism to CO2 emission, RGDP, and energy consumption, but a bi-directional causality exists between tourism and urbanization. This implies that in countries that depend on tourism, the behavior of CO2 emission, RGDP, and energy consumption can be predicted by the volume of tourist arrivals, but not the other way around. The impulse response analysis also shows that the responses of tourism to shocks in CO2 appear negative within the 1st year, positive within the 2nd and 3rd year but revert to equilibrium in the fourth year. Finally, the reaction of tourism to shocks in energy consumption is similar to its reaction to shocks in RGDP. Tourism responds positively to shocks in urbanization throughout the periods. Consequently, this study draws important energy and tourism policy implications.

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