The impact of tourism development on environmental sustainability

Tourism is one of the significant drivers of economic growth, and as such, its growth causes environmental pressure due to higher energy usage and carbon emissions in tourism-based economies. In this context, exchange rate volatility affects tourism competitiveness and shaping sustainability outcomes. These dynamics accentuate the central role of exchange rates in linking tourism growth with ecological resilience. Therefore, the present study aims to investigate the nexus between economic growth, tourism development, exchange rate dynamics, and environmental sustainability in twelve (12) tourism‑developed economies over the period 1995–2023. Employing a panel ARDL framework, it captures both short-term fluctuations and long-term pattern. Findings shows that tourism stimulates GDP growth but simultaneously drives fossil fuel consumption and CO₂ emissions, highlighting the trade‑off between growth and sustainability. Political stability and good institutions support tourism inflow and tourism competitiveness while capital accumulation and urbanization increase dependence on fossil fuels. Volatility in exchange rates confirms the applicability of the Environmental Kuznets Curve (EKC) in these economies showing its dual impact on tourism competitiveness and sustainability. The study suggests the promotion of renewable energy use in the tourism and transportation sector, channeling resources into environmentally friendly projects and improving governance can help balance tourism development and environmental sustainability. Coordinated exchange rate and energy policies, along with eco-urban planning and technology are necessary for emission reduction and sustainable tourism growth.