The Dynamic Linkages between CO2 Emissions, Energy Consumption and Economic Factors in ASEAN Countries

Abstract

Over the past several decades, there has been tremendous expansion in both the global economy and population, with Asia leading the way. In accordance with this, the Association of Southeast Asian Nations (ASEAN) region has been on path to achieve a variety of development goals. Some of the challenges resulted a steady performance by 2015 compared to 2000, however, many other challenges are needed to overcome such as persistent hunger, inequality, cities’ pollution, and deforestation. ASEAN has joined the rest of the world in combatting climate change. Greenhouse gases (GHG) emissions in the region have been escalating in conjunction with the region’s industrialisation based on fossil-fuel generation and associated land-use change. Therefore, this paper is conducted to examine the relationship between carbon dioxide (CO2) emissions, economic growth, foreign direct investment (FDI), energy consumption, and economic crisis in the long run equilibrium. Panel cointegration test is used for six (6) ASEAN countries spanning from 1970 to 2020. Dynamic ordinary least square (DOLS) is applied to test the relationship of the model in the long run. Finding revealed that the whole variables are cointegrated in the long run equilibrium. Energy consumption and economic growth are found to be significant in overall result. FDI and economic crisis did not reveal to be significant in affecting the emission CO2. However, mixed results are found when tested in each of the six countries in ASEAN. Considering the development of economic and the increase of energy consumption in ASEAN countries with severity of risks, including the economic crisis and pandemic, policymakers should develop effective and enforceable processes that lead to decisive solutions to control CO2 emission.