Carbon price shocks and tourism demand

David Boto-García, Juan Francisco Albert and Nerea Gómez-Fernández

Annals of Tourism Research, 2024, vol. 108, issue C

Abstract: This article studies the effect of carbon prices on tourism demand. We adopt a novel identification strategy that exploits carbon price shocks induced by policy events on the supply of emission allowances in the European Trading System (EU ETS). Using monthly panel data on tourism arrivals and stays in 26 European countries between 2005 and 2019, and applying panel local projections, we find there is a ‘V’ shaped pattern. Impulse response estimates indicate that there is a transitory drop in arrivals of 2.5 percentage points in the first three months after a carbon price shock, but demand quicky reverts to the trend after six months. Our findings underscore the dynamic responses of tourism arrivals and stays to carbon regulatory policies.

Keywords: Carbon price shocks; Tourism demand; EU trading system; Local projections; Climate change (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:anture:v:108:y:2024:i:c:s0160738324000902

DOI: 10.1016/j.annals.2024.103813

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