Environmental Kuznets curve hypothesis in a financial development and natural resource extraction context: evidence from Tunisia

This study investigates empirically the Environmental Kuznets Curve hypothesis within a financial development and natural resource extraction context for aggregate and sectoral carbon dioxide (CO₂) emissions in Tunisia. Using annual time-series data covering the period 1971–2016 it is found that financial development increases aggregate CO₂, CO₂ emissions from the transport sector, and CO₂ consumption from liquid fuel but reduces CO₂ emissions from manufacturing and construction as well as the residential and building. Natural resource extraction exerts upward pressure on CO₂ emissions from the manufacturing and construction sector as well as from the consumption of gaseous fuels whiles the contrary is found for CO₂ emissions. The existence of the EKC hypothesis or otherwise within the context of financial development and natural resources extraction is found to be dependent on the source of CO₂ emissions in Tunisia. The findings among other things imply the enforcement of stringent environmental laws that ensure environmental quality amidst natural resources extraction and financial development.