The role of financial development, tourism, and energy utilization in environmental deficit: evidence from 20 highest emitting economies

This study establishes a long-run relationship between ecological footprint, financial development, energy utilization, and tourism in 20 highest emitting economies under the environmental Kuznets curve (EKC) framework by utilizing the longitudinal data covering the period from 1995 to 2017. In the procedure of panel data estimation, conventional methodologies usually overlook the problem of cross-sectional dependence and heterogeneity across cross-sections. The other concern linked to the published literature is that only a small number of studies have estimated the effect of financial development and tourism on the environment in the presence of EKC framework simultaneously, even though these sectors have potentially substantial impact on environmental quality. To bridge these analyzed gaps, this study employs two different unit root tests: Cross-section Augmented Dickey Fuller (CADF) and Cross-section Augmented Im, Pesaran and Shin (CIPS) to confirm that the series are stationary at first difference after confirming the cross-sectional dependency. Westerlund cointegration test applied to confirm the long-run association among variables. Augmented mean group (AMG) results discovered that financial development and the energy utilization significantly enhance the pollution level, while tourism sector reduces the environmental deficit. Moreover, these findings do not validate the EKC hypothesis. Based on the empirical findings, multiple policy implications are suggested to control and reduce the environmental degradation without hindering economic growth and development for the underlying highest emitting countries.