Examining the drivers of CO2 Emission: Evidence from Indonesia

Abstract

CO2 emissions are a significant risk and threat not only to the economy, environment, and agriculture but also to public health. In this study, we examine empirical evidence of the impact of economic growth, renewable energy use, and agricultural sector improvement on reducing CO2 emissions and environmental degradation in Indonesia based on the Environmental Kuznets Curve (EKC) hypothesis. This study uses annual time series data from 1988 to 2020 by applying Dynamic Least Squares (DOLS) and Fully-Modified Least Squares (FMOLS) econometric estimation techniques. Based on empirical evidence, the EKC phenomenon in Indonesia cannot be validated and justified because it correlates with increasing economic growth rates as well as increasing CO2 emissions. In addition, technological innovation and renewable energy applied to Indonesia’s more modern agricultural sector have a significant impact on reducing carbon emissions and improving environmental quality. Furthermore, the consumption of renewable energy in Indonesia is limited to the manufacturing and service sectors, which means it does not contribute to carbon emissions.