Economic Growth, FDI, Tourism, and Agricultural Productivity as Drivers of Environmental Degradation: Testing the EKC Hypothesis in ASEAN Countries

This study examines the long-run relationship between carbon dioxide (CO2) emissions and key macroeconomic and sectoral drivers in ten ASEAN economies from 1995 to 2023. Employing Driscoll–Kraay standard errors, Prais–Winsten regression, heteroskedastic panel-corrected standard errors, Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), and Canonical Cointegrating Regression (CCR) estimators, the analysis accounts for cross-sectional dependence, slope heterogeneity, and endogeneity. Results indicate that GDP exerts a more-than-unitary positive effect on emissions, with a negative GDP-squared term supporting the Environmental Kuznets Curve. Agriculture raises emissions through land-use change and high-emission cultivation practices, while tourism shows a negative association likely reflecting territorial accounting effects. Trade openness increases emissions, highlighting the carbon intensity of export structures, whereas foreign direct investment exerts no significant net effect. These results suggest that ASEAN economies must accelerate renewable energy adoption, promote climate-smart agriculture, embed enforceable environmental provisions in trade policy, and implement rigorous sustainability screening for FDI to achieve low-carbon growth trajectories.

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