The impact of economic factors and carbon dioxide emissions on tourism demand in Malaysia using an ARDL approach

Abstract The Malaysian economy relies primarily on the tourism sector, which contributes substantially to the country’s Gross Domestic Product (GDP). This study aims to fill the gap in tourism demand by expanding the traditional economic demand model to incorporate environmental factors, thereby highlighting the significance of sustainability in travel decisions. By applying the Autoregressive Distributed Lag (ARDL) model, the study examines the short-run and long-run factors influencing tourism demand in Malaysia from 1970 to 2022. The findings reveal that income per capita and carbon dioxide (CO 2 ) emissions are significant factors influencing tourism demand in the short-run and long-run. While higher income per capita stimulates greater tourism demand, increasing CO 2 emissions exert a negative influence, reflecting tourists’ growing environmental awareness and preference for destinations that demonstrate sustainability and low-carbon practices. The inclusion of CO 2 in the tourism demand model captures the environmental dimension of travel decisions, where rising emissions not only signal environmental degradation but also affect destination attractiveness, transportation costs, and global perception of environmental responsibility. Tourism prices and trade primarily play a crucial role in the short term. This suggests that economic factors have a more temporary impact on tourism demand. The results underscore the need for environmentally responsible tourism policies that balance economic benefits with climate action. These insights provide policymakers with valuable guidance to align tourism development strategies with sustainable economic growth, carbon-reduction goals, and climate resilience.