Explore the factors influencing CO2 emissions in Tunisia in the short and long term

The main objective of this paper is to examine the linkage between CO2 emissions, total factor productivity, energy consumption, financial development, trade, and foreign direct investment in Tunisia. The vector error correction model (VECM) with the breakpoint method is performed to achieve this goal. The results provide evidence for a relatively robust long-run relationship between these variables for the period 1970 to 2019. The findings show that the long-term total factor productivity parameter has a larger value than the short-term one. Additionally, our result shows that all variables affect negatively the environmental quality. As a result, Tunisian policymakers should enhance the total factor productivity, further develop the financial sector oriented to green projects, enhance the share of renewable energy consumption, and reduce the energy consumption resulting in import and export goods. These goals will be achieved by improving Tunisia’s innovation capacity and creating renewable energy projects.