Gas Consumption as a Key for Low Carbon State and its Impact on Economic Growth in Malaysia: ARDL Approach

Abstract

Natural gas consumption contributes the least to CO2 emissions than other non-renewable energy such as oil and coal. Thus, it is important to replace oil in generating economic activities and leading the country towards low carbon state. Despite the environmentally friendly energy, most previous studies did not study gas consumption. Therefore, this study investigates the effects of gas consumption and other selected macroeconomic determinants such as labour, capital, foreign direct investment, trade openness, and financial development on Malaysia's economic growth from 1980 to 2019. The Augmented Distributed Lag (ARDL) approach is employed, and the results show that gas consumption plays a vital role in boosting economic growth in the short and long run. Based on these findings, all economic sectors should consume more natural gas instead of oil, including industries and transportation. This move can conserve the environment and support clean energy for sustainable development. The remaining variables also increased economic growth except for financial development. Based on these outcomes, the country's policymakers can construct a suitable policy that can improve all the potential macroeconomic determinants besides the use of natural gas consumption in accelerating growth in Malaysia.