ENERGY CONSUMPTION, CARBON EMISSIONS AND ECONOMIC GROWTH IN INDONESIA AND MALAYSIA

Ahmad Farabi,Azrai Abdullah,Rahmat Heru Setianto

doi:10.32479/ijeep.6573

Abstract

The main objective of this study is to examine the relationship between energy consumption, carbon emission and economic growth in the case of Indonesia and Malaysia. As every type of energy may has different impact on carbon emission and economic growth, the aggregate and disaggregate energy consumption are applied in the analysis. For the model of aggregate energy consumption, this study employs total energy consumption per capita and CO2 emission per capita based on the total of energy consumption. Meanwhile, the disaggregate models use derivatives of variable energy consumption, namely, oil, coal, and gas. Some methodologies of econometrics such as unit root, cointegration, Granger causality, and error correction model are employed in the analysis. The short and long-run relationship are exist in both countries, the increase in aggregate consumption of energy source will increase produce CO2 emission, while the increase in income also leads to the increase of CO2 emission. Moreover, gas consumption is less polluting compared with other source of energy. In addition, there is a negative relationship between income and carbon emission which indicate that the carbon emission can be reduced by using gas as source of energy without preventing economic growth.

Highlights

In the last few decades, environmental damage is increasingly threatening the lives of all living things on earth
The main objective of this paper is to evaluate the relationship between economic growth, carbon emission and energy consumption at the aggregate and disaggregate levels in the case of Indonesia and Malaysia during the period 1971–2015
For model disaggregate energy consumption, this study focus on the three main energies namely oil, coal and gas

Summary

Introduction

In the last few decades, environmental damage is increasingly threatening the lives of all living things on earth. The cases like natural damage, greenhouse effect and pollution are some of the factors that play an important role in contributing to environmental damage (Salahuddin and Alam, 2015). The CO2 is mostly produced by energy consumption in factories, transportation, and households. Energy is the engine for industrial development and the trigger of economic growth. Energy is the engine of the industry and all economic activity, it is definitely clear that to achieve the high industrial production which will trigger the high economic growth, a country needs to consume energy in the great amount. The large amount of energy consumption fossil energy produce CO2 as large as the fossil energy consumed and adversely affects the environment (Mercan and Karakaya, 2015)

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Conclusion