The Linkage between Economic Growth, Renewable Energy, Tourism, CO2 Emissions, and International Trade: The Evidence for the European Union

Abstract

This paper evaluates the link between economic growth, renewable energy, tourism arrivals, trade openness, and carbon dioxide emissions in the European Union (EU-28). As an econometric strategy, the research uses panel data. In the first step, we apply the unit root test, and the results demonstrated that the variables used in this study are integrated I (1) in the first difference. In the second step, we apply the Pedroni cointegration test, and Kao Residual cointegration test, and we observe that the variables are cointegrated in the long run. The panel fully modified least squares (FMOLS), panel dynamic least squares (DOLS), and generalized moments system (GMM-System) estimator are considered in this research. The econometric results proved that trade openness and renewable energy decreased climate change and environmental degradation. The empirical study also found a positive effect of economic growth on carbon dioxide emissions. Moreover, tourism arrivals are negatively correlated with carbon dioxide emissions, showing sustainability practices of the tourism sector on the environment. Furthermore, carbon dioxide emissions in the long run present a positive impact, indicating that climate change increases. In this study, we also consider the recent methodology of Dumitrescu–Hurlin to observe the causality and the relationship between renewable energy, trade openness, economic growth, tourism arrivals, and carbon dioxide emissions.