Modeling financial development, tourism, energy consumption, and environmental quality: Is there any discrepancy between developing and developed countries?

The main purpose of this study is to explore the dynamic association between financial development, tourism, primary and renewable energy utilization, urbanization, and carbon emission by employing the longitudinal data of 52 countries from 1995 to 2017. Empirical results of panel pooled mean group-autoregressive distributive lag (PMG-ARDL) model reveal that financial development significantly improves the environmental quality in developed countries. However, it has a detrimental but insignificant effect on the environment in developing countries. In the case of developed countries, the profound tourism sector is more harmful to the environment due to a large number of tourist arrivals in contrast to the developing countries. There is a wide difference between developed and developing countries concerning industrial, regional, and economic structure, in the effect of financial and tourism development on carbon emission, but both urbanization and primary energy utilization promote carbon emissions. The utilization of renewable energy sources improves the environmental quality in both regions. Generally, it is suggested that investment in renewable energy resources in both regions affects pollution differently and still has the potential to accelerate environmental quality. Moreover, the panel causality test explores that there exists bidirectional causality between financial development, primary energy, and carbon emission in both regions, while a unidirectional causality is observed from urbanization to carbon emission in developed countries. In developing countries, it exists from tourism to carbon emission and carbon emission to renewable energy. Finally, from policy perspectives, the results of this research recommend developing the financial system, and more funds should be allocated in modern and eco-friendly energy projects and utilized energy-efficient technologies.