An econometric analysis of the potential emission reduction components in Indonesia

Abstract

Emissions reduction and increasing environmental quality have become a global concern to ensure sustainable development and mitigate the negative impacts of global warming and climate change. However, there is a scarcity of research exploring the potential of emission reduction components by using econometric approaches. Thus, the present study investigated the role of economic growth, fossil fuel energy use, renewable energy use, technological innovation, agricultural productivity, and forested area to achieve environmental sustainability by reducing carbon dioxide emissions in Indonesia. Time series data from 1990 to 2020 were utilized by applying the Dynamic Ordinary Least Squares method. The empirical findings revealed that a 1% increase in economic growth and fossil fuel energy use will increase carbon dioxide emissions by 0.36% and 0.67% in Indonesia. Conversely, a 1% increase in renewable energy use, technological innovation, agricultural productivity, and the forested area may lead to carbon dioxide emissions reduction by 0.11%, 0.07%, 0.24%, and 2.87%, respectively in the long run. This article put forward policy recommendations in the areas of low-carbon economy, promoting renewable energy use, financing technological innovation, climate-smart agriculture, and sustainable forest management which would ensure environmental sustainability by reducing emissions in Indonesia. • This study investigates the potential of emission reduction components in Indonesia. • Dynamic Ordinary Least Squares method has been applied by using time series data. • The findings shed new light on renewable energy, technological innovation, agriculture, and forests to reduce emissions. • This article provides policy recommendations for sustainable development by reducing emissions.