The Nexus between tourism-energy-environmental degradation: Does financial development matter in GCC countries?

Abstract

Environmental sustainability, energy consumption, and tourism are the most discussed topics in the literature. However, limited studies have catered to the relationship among these variables. From this perspective: the current study aims to find the nexus between tourism, energy alternatives, financial development, and pollution emissions by targeting the Gulf Cooperation Council (GCC) economies. We employ the data of six GCC economies for the years 2000–2019 and adopt fully modified ordinary least square and generalized least square approaches to establish the regression. The findings reveal a positive impact on the number of tourist arrivals (ITAs) while a negative impact on tourism receipts on pollution emissions. Similarly, fossil fuel energy (FFE) shows a positive while renewable energy depicts a negative relationship with CO ₂ emissions. This positive impact of tourist arrivals and fossil fuel energy was moderated by financial development. In addition to individual analysis, the developed financial sector can help to reduce the negative externalities of ITA and FFE. The empirical analysis further documents the positive impact of all control variables including foreign investment, economic growth, and gross capital formation on CO ₂ emissions. Based on empirical results, it is recommended to bring financial development into the picture to reduce the negative impact of ITA and FFE on environmental quality. This study put forward the literature by adding innovative thoughts regarding the moderating role of financial development in the nexus between tourism, energy alternatives, and CO ₂ emissions.