Exploring the influence of financial development, renewable energy, and tourism on environmental sustainability in Tunisia

Abstract We examine the case of Tunisia to empirically assess the impact of financial development, renewable energies, tourism, capital formation, and industrialization on environmental protection from 1988 to 2021. Given the heterogeneity between countries in terms of environmental conditions, energy consumption and production, and infrastructure, the results may be distinct from the previous studies. Using the Autoregressive Distributed Lag (ARDL) model, the findings show that tourism and industrialization increase carbon emissions, whereas financial development, renewable energy, and capital formation lower them. One percent increase in renewable energy helps reduce carbon dioxide emissions by 0.80% in the long run and 0.57% in the short run. The rate of adjustment towards equilibrium was 0.48%. Other methods, including Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), and Canonical Cointegrating Regression (CCR), confirm the accuracy of our results. These findings provide policymakers in Tunisia and other countries with similar contexts with a solid basis for designing programs to improve environmental protection.