Energy consumption, economic growth and environmental pollutants in Indonesia

Abstract

This paper examines the long run Granger causality relationship between economic growth, carbon dioxide emissions and energy consumption from 1971 to 2007 in Indonesia, controlling for capital stock and urban population. Using Toda–Yamamoto (TY) procedure, it has been found that there was no relationship between these variables except the causality effect that runs from urban population to energy consumption. The absence of these linkages suggests that energy conservation strategies in Indonesia may not produce desirable effect on emission reductions, and Indonesia does not have to relinquish economic growth. However, the results may not be sufficient to warrant Indonesia's choice of specific policies and strategies to limit carbon emissions in the context of combating global climate change. This is because the study does not take into account net carbon release from deforestation and forest degradation. There seems to be substantial scope for Indonesia to limit her CO2 emission via reducing deforestation and improved forest management through the REDD Plus framework.