Can tourism and trade make financial growth greener?

This study investigates whether tourism and trade can help make financial growth more environmentally sustainable by examining their impact on CO2 emissions in Bangladesh as a case of a developing country context. Using annual time series data for 1984-2019 and applying the Autoregressive Distributed Lag (ARDL), the analysis reveals that financial development, while promoting economic growth, tends to increase CO2 emissions, thereby posing a challenge to ecological sustainability. In contrast, both tourism and trade openness play a significant role in reducing environmental harm. Tourism contributes by promoting greener practices and sustainable consumption, while trade openness facilitates the adoption of cleaner technologies and environmental standards. The study further finds that when combined with tourism and trade, financial development can support more sustainable outcomes, effectively balancing economic expansion with environmental preservation. The study concludes that integrating green financing, sustainable tourism initiatives, and trade-friendly environmental policies is crucial for developing nations. Policy implications suggest that central-banks should introduce green refinancing schemes for eco-tourism and ISO-certified exporters, while governments should reduce import duties on clean technologies to harness the “technique effect” of trade. The study provides actionable insights for policymakers, development planners, and environmental stakeholders aiming to foster economic growth without compromising ecological integrity.