Tourist arrivals and macroeconomic determinants of CO₂ emissions in Malaysia

Abstract

This paper investigates the determinants of carbon dioxide emission with special emphasis on tourism development in Malaysia. Within a multivariate framework, which includes real GDP, energy consumption, financial development, and urbanization, cointegration and causality tests were applied to determine the relationship in the variables. The results reveal long-run relationships between the series and a positive unidirectional long-run causality running from tourist arrivals and the other series to pollution. The study fails to establish any causal relationship between tourism and economic growth in the long-run. These findings suggest that tourist arrivals are active contributors to pollution, but arrivals do not translate into sufficient upsurge in GDP. It is recommended that policy-makers should entrench cleaner energy programmes in their tourism development policies.

Keywords::

• CO₂ emissions
• tourism development
• cointegration
• causality

Notes

^1. RM denotes Malaysia Ringgit (currency) and the exchange rate is averaged at RM3 = US$1.

^2. Statistics that show the portion of tourism in transportation activities are not available. Nevertheless, a link can be established between tourism and transportation because a large percentage of arrivals originate from neighbouring countries and utilize vehicular transportation in the process. Out of the possible 24 million arrivals in 2009, 78% came from short-haul markets, especially from neighbouring countries (Performance Management and Delivery Unit, 2010). In a survey conducted by Jayaraman et al. (2010) on Singaporean tourists, a large number of the respondents visited Malaysia using surface transportation, in which 37.6% of them used personal/private cars to stop over in the country. Singapore accounts for more than 50% of the tourist arrivals. Moreover, this is particularly more relevant than air transport, which may not contribute much of the emissions inside the country but en route to Malaysia, unlike surface transport.

^3. The study does not include proxy for income at a higher level as required by the EKC because of severe multicollinearity. Fortunately, the STIRPAT framework allows for the exclusion of income at higher levels.

^4. To determine the optimal lag length, we adopt the procedure suggested by Ng and Perron (1995).

^5. However, as the long-run estimates revealed earlier, the long-run causality from energy consumption to pollution is partially determined by income and tourism, which are collectively responsible for a large percentage of the energy consumption in the country.