A decomposition analysis of CO₂ emissions: evidence from Malaysia’s tourism industry

ABSTRACT

The most important question raised from issues of environmental degradation is how economic activities bring about changes that will result in pollution. In the pursuit of tourism economy, contrary to popular interest, the travel and tourism (T&T) industry may cause environmental damages through the emissions of carbon dioxide (CO₂) from energy consumption in areas such as transportation and delivery of amenities. Given this major concern, this paper attempts to investigate the linkage between tourism and CO₂ emissions in Malaysia between 1981 and 2011. In particular, this study fills the knowledge gap by taking a closer look at the impact of international tourist arrivals on CO₂ emissions by sector – electricity and heat generation and transport. Results from the bound test method suggest that there exists a long-run relationship among the variables under consideration when CO₂ emissions become the dependent variable. The original result is similarly robust to alternatives, which are CO₂ emissions from sectors of electricity and heat generation and transport. Furthermore, the vector error correction model causality analysis indicates a causal relationship between tourism and CO₂ emissions by transport and electricity and heat generation. Subsequently, several tourism-related policies are drawn from these findings.

KEYWORDS:

• Tourism
• CO₂ emissions
• energy consumption
• economic growth
• Malaysia
• sustainability

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. In the absence of CO₂ emissions data by the hotel industry, this study uses CO₂ emissions from electricity and heat generation as a general proxy. FDI, energy use and outputs are included in this model as control variables to distinguish the impact of other sector on CO₂ emissions from tourism.

2. This result is robust in the augmented methods by Dickey and Fuller (1979) and Phillips and Perron (1988). Due to limited space, the result is not provided and footnoted as such.

3. Solarin (2014) reported a bi-directional causality between CO₂ emissions and tourism for Malaysia. The dissimilar finding could be due to factors like the different sample period and the use of control variables in this study.