Dynamic effects of economic growth, renewable energy usage, forest area, tourism, and agriculture on CO2 emissions in Malaysia

Abstract

The substantial and unprecedented hazards posed by the production of greenhouse gases (GHGs), particularly carbon dioxide (CO2), have led to the global challenge of climate change. As a result, international attention has increasingly focused on reducing GHG emissions and promoting sustainable development to mitigate climate change and global warming. Unfortunately, limited research has been conducted in Malaysia to assess the potential of emission reduction variables in addressing this issue using econometric methods. This study aims to examine the dynamic effects of economic growth, renewable energy usage, forest area, tourism, and agriculture in Malaysia from 1996 to 2022 on achieving environmental sustainability through the reduction of CO2 emissions. The Fully Modified Ordinary Least Squares (FMOLS) model was employed to analyse time series data. The findings from the FMOLS analysis indicate that environmental degradation in Malaysia is driven by economic growth, renewable energy usage, tourism activities, and forest area, specifically through increased CO2 emissions. However, this negative impact can be mitigated by enhancing agricultural value-added. These results were also corroborated by other estimators, such as the canonical cointegrating regression (CCR) and dynamic ordinary least squares (DOLS). Additionally, the causal relationships between the variables were examined using the pairwise Granger causality test. The study concludes that CO2 emissions in Malaysia and the resulting climate change can be addressed by implementing low-carbon economy policies, promoting the use of renewable energy, ensuring sustainable forest management, encouraging environmentally-friendly tourism activities, and improving agricultural efficiency.