Analysis of the Existence of Environmental Kuznets Curve (EKC) Hypothesis on CO2 Emission, Energy Consumption, and Economic Growth in Indonesia

Silvia Tri Rahayuningrum

Abstract


This research explains environmental issues, in the context of Kuznets' theory that links economic growth, energy consumption and CO2 emissions. The focus of the research is to test the Kuznets Environment Curve (EKC) hypothesis in Indonesia in the period 1990-2019 using time series analysis Vector Error Correction Model (VECM). Research findings show that, both in the long and short term, CO2 emissions and energy consumption have a significant impact, while economic growth has no significant impact. These results indicate that the ECC hypothesis is not supported in Indonesia. Emerging policy implications include the transition to clean energy, sustainable farming and forestry management, waste and pollution control, and increased environmental awareness and education. Faced with the complexity of environmental challenges, the implementation of this policy has become crucial toining a balance between environmental sustainability and economic growth.

Keywords


EKC; CO2 Emissions; Energy Consumption; Economic Growth

Full Text:

PDF

References


Al-Mulali, U., Saboori, B., & Ozturk, I. (2015). Investigating the environmental Kuznets curve hypothesis in Vietnam. Energy Policy, 76, 123–131. https://doi.org/10.1016/j.enpol.2014.11.019

Anser, M. K., Usman, M., Godil, D. I., Shabbir, M. S., Sharif, A., Tabash, M. I., & Lopez, L. B. (2021). Does globalization affect the green economy and environment? The relationship between energy consumption, carbon dioxide emissions, and economic growth. Environmental Science and Pollution Research, 28(37), 51105–51118. https://doi.org/10.1007/s11356-021-14243-4

Azomahou, T., Laisney, F., & Nguyen Van, P. (2006). Economic development and CO2 emissions: A nonparametric panel approach. Journal of Public Economics, 90(6–7), 1347–1363. https://doi.org/10.1016/j.jpubeco.2005.09.005

Basuki, A. T. (2018). Aplikasi Model VAR dan VECM dalam Ekonomi. Fakultas Ekonomi Universitas Muhammadiyah Yogyakarta.

BPS-Statistics Indonesia. (2021). Energy Balances of Indonesia 2017-2021. https://www.bps.go.id/en/publication/2023/02/07/3e4c4125bdafee25433e3da0/neraca-energi-indonesia-2017-2021.html

Dickey, D. A., & Fuller, W. A. (1981). Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica, 49(4), 1057. https://doi.org/10.2307/1912517

Feng, Y. Y., Chen, S. Q., & Zhang, L. X. (2013). System dynamics modeling for urban energy consumption and CO2 emissions: A case study of Beijing, China. Ecological Modelling, 252, 44–52. https://doi.org/10.1016/j.ecolmodel.2012.09.008

Grossman, G., & Krueger, A. (1991). Environmental Impacts of a North American Free Trade Agreement. National Bureau of Economic Research. https://doi.org/10.3386/w3914

Hamit-Haggar, M. (2012). Greenhouse gas emissions, energy consumption and economic growth: A panel cointegration analysis from Canadian industrial sector perspective. Energy Economics, 34(1), 358–364. https://doi.org/10.1016/j.eneco.2011.06.005

Iskandar, A. (2019). Economic Growth and CO2 Emissions in Indonesia: Investigating The Environmental Kuznets Curve Hypothesis Existence. Jurnal BPPK: Badan Pendidikan Dan Pelatihan Keuangan, 12(1), 42–52. https://doi.org/10.48108/jurnalbppk.v12i1.369

Johansen, S., & Juselius, K. (1990). Maximum Likelihood Estimation and Inference on Cointegration - With Applications to The Demand for Money. Oxford Bulletin of Economics and Statistics, 52(2), 169–210. https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x

Khan, M. B., Saleem, H., Shabbir, M. S., & Huobao, X. (2022). The effects of globalization, energy consumption and economic growth on carbon dioxide emissions in South Asian countries. Energy and Environment, 33(1), 107–134. https://doi.org/10.1177/0958305X20986896

Kuznets, S. (1955). Economic Growth and Income Inequality. American Economic Association, 65(1), 386–408.

Lau, L. S., Choong, C. K., & Eng, Y. K. (2014). Investigation of the environmental Kuznets curve for carbon emissions in Malaysia: DO foreign direct investment and trade matter? Energy Policy, 68, 490–497. https://doi.org/10.1016/j.enpol.2014.01.002

Muhammad, I., Ozcan, R., Jain, V., Sharma, P., & Shabbir, M. S. (2022). Does environmental sustainability affect the renewable energy consumption? Nexus among trade openness, CO2 emissions, income inequality, renewable energy, and economic growth in OECD countries. Environmental Science and Pollution Research, 29(60), 90147–90157. https://doi.org/10.1007/s11356-022-22011-1

Nugroho, S. W., Nugroho, S., & Rizal, J. (2016). Analisis Indeks Harga Saham Gabungan dengan Pendekatan Vector Error Correction Model (VECM). Universitas Bengkulu.

Nurlaila, & Yuianto, A. T. (2019). Perkembangan Energi Terbarukan di Beberapa Negara. Prosiding Seminar Nasional Infrastruktur Energi Nuklir, 11–21.

Osabuohien, E. S., Efobi, U. R., & Gitau, C. M. W. (2014). Beyond the Environmental Kuznets Curve in Africa: Evidence from Panel Cointegration. Journal of Environmental Policy and Planning, 16(4), 517–538. https://doi.org/10.1080/1523908X.2013.867802

Ozturk, I., & Acaravci, A. (2013). The long-run and causal analysis of energy, growth, openness and financial development on carbon emissions in Turkey. Energy Economics, 36, 262–267. https://doi.org/10.1016/j.eneco.2012.08.025

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616

Robalino-López, A., García-Ramos, J. E., Golpe, A. A., & Mena-Nieto, Á. (2014). System dynamics modelling and the environmental Kuznets curve in Ecuador (1980-2025). Energy Policy, 67, 923–931. https://doi.org/10.1016/j.enpol.2013.12.003

Robalino-López, A., Mena-Nieto, Á., García-Ramos, J. E., & Golpe, A. A. (2015). Studying the relationship between economic growth, CO2 emissions, and the environmental Kuznets curve in Venezuela (1980-2025). Renewable and Sustainable Energy Reviews, 41, 602–614. https://doi.org/10.1016/j.rser.2014.08.081

Saboori, B., & Sulaiman, J. (2013a). CO2 emissions, energy consumption and economic growth in association of Southeast Asian Nations (ASEAN) countries: Acointegration approach. Energy, 55, 813–822. https://doi.org/10.1016/j.energy.2013.04.038

Saboori, B., & Sulaiman, J. (2013b). Environmental degradation, economic growth and energy consumption: Evidence of the environmental Kuznets curve in Malaysia. Energy Policy, 60, 892–905. https://doi.org/10.1016/j.enpol.2013.05.099

Sephton, P., & Mann, J. (2013). Further evidence of an Environmental Kuznets Curve in Spain. Energy Economics, 36, 177–181. https://doi.org/10.1016/j.eneco.2013.01.001

Shahbaz, M., Khraief, N., & Mahalik, M. K. (2020). Investigating the environmental Kuznets’s curve for Sweden: evidence from multivariate adaptive regression splines (MARS). Empirical Economics, 59(4), 1883–1902. https://doi.org/10.1007/s00181-019-01698-1

Shahbaz, M., Mahalik, M. K., Shah, S. H., & Sato, J. R. (2016). Time-varying analysis of CO2 emissions, energy consumption, and economic growth nexus: Statistical experience in next 11 countries. Energy Policy, 98, 33–48. https://doi.org/10.1016/j.enpol.2016.08.011

Song, T., Zheng, T., & Tong, L. (2008). An empirical test of the environmental Kuznets curve in China: A panel cointegration approach. China Economic Review, 19(3), 381–392. https://doi.org/10.1016/j.chieco.2007.10.001

Sufyanullah, K., Ahmad, K. A., & Sufyan Ali, M. A. (2022). Does emission of carbon dioxide is impacted by urbanization? An empirical study of urbanization, energy consumption, economic growth and carbon emissions - Using ARDL bound testing approach. Energy Policy, 164, 112908. https://doi.org/10.1016/j.enpol.2022.112908

Sugiawan, Y., & Managi, S. (2016). The environmental Kuznets curve in Indonesia: Exploring the potential of renewable energy. Energy Policy, 98, 187–198. https://doi.org/10.1016/j.enpol.2016.08.029

Wang, X., Zhang, T., Nathwani, J., Yang, F., & Shao, Q. (2022). Environmental regulation, technology innovation, and low carbon development: Revisiting the EKC Hypothesis, Porter Hypothesis, and Jevons’ Paradox in China’s iron & steel industry. Technological Forecasting and Social Change, 176, 121471. https://doi.org/10.1016/j.techfore.2022.121471

Xie, P., & Jamaani, F. (2022). Does green innovation, energy productivity and environmental taxes limit carbon emissions in developed economies: Implications for sustainable development. Structural Change and Economic Dynamics, 63, 66–78. https://doi.org/10.1016/j.strueco.2022.09.002

Zhang, Z., Bashir, T., Song, J., Aziz, S., Yahya, G., Bashir, S., & Zamir, A. (2022). The effects of Environmental Kuznets Curve toward environmental pollution, energy consumption on sustainable economic growth through moderate role of technological innovation. Environmental Science and Pollution Research, 29(1), 405–416. https://doi.org/10.1007/s11356-021-16956-y




DOI: https://doi.org/10.18196/jerss.v8i1.19310

Refbacks

  • There are currently no refbacks.



Office:
Redaksi Journal of Economics Research and Social Sciences, Gedung E2 Lantai 2, Fakultas Ekonomi dan Bisnis, Universitas Muhammadiyah Yogyakarta
Jalan Brawijaya, Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta 55183

Email: jerss@umy.ac.id

Telp: +62 812-3233-6697

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.