Indonesia's Forest Management Progress: Empirical Analysis of Environmental Kuznets Curve

Purpose. High dependence on land resources is often the main cause of large-scale land conversion and deforestation in Indonesia. However, as a country vulnerable to climate change, Indonesia continues to increase its efforts to improve forest management and reduce deforestation. This is also in line with Indonesia’s commitment to reduce emission levels to achieve Net-Zero Emissions by 2060, where the forestry sector will be the base of this achievement. This study aims to measure Indonesia’s progress during 1970–2018, especially in reducing deforestation. With this study, we can see trends in forest management in developing countries, especially Indonesia. In addition, based on available data, we can see which factors are most closely related to Indonesia’s deforestation rate. Methodology / approach. This study uses a time-series data analysis with Error Correction Method (ECM). This ECM is used to detect the existence of the Environmental Kuznets Curve (EKC), which describes the relationship between environmental degradation and economic variables. In this study, EKC is used to assess further relationship pattern between the Gross Domestic Product (GDP) per capita and deforestation. The relation pattern between this GDP and deforestation is tested using quadratic and cubic models. Results. Under the quadratic model, a classic inverted U-shape EKC is detected in this study. It means that with economic growth and technological improvement, deforestation can be reduced. In other words, Indonesia has improved its forest management. However, as the N-shape relation was also detected in further cubic model simulation, it is also an indication that, at some point, Indonesia is also prone to increase its deforestation again. Another finding from the model is that the palm oil plantation area strongly relates to the deforested area. At the same time, the simulation detects a negative relationship between the horticulture cropland and the deforested area. The result may capture an insight into the forest transition period in Indonesia. In this transition, the government has started to slow down the speed at which forests are exploited in various ways. Originality / scientific novelty. Although the forestry sector is an important economic sector for Indonesia, there is still limited research on this topic, especially at the national level. This study uses more updated statistical information to better describe the Indonesian forestry condition. Moreover, the analysis is aligned with the Indonesian land policy by introducing additional variables from palm oil and crop areas. Moreover, the previous EKC assessments in Indonesia usually only use the quadratic model, which has some limitations in detecting other turning points and seeing the existence of N-shaped or inverted N-shaped EKC. This study also tries to add a bit on cubic model assessment to detect this N-shaped EKC in Indonesia. Practical value / implications. This study gives broader information based on the available data and statistics on the country’s deforestation situation and how the economic situation affects it. Policymakers can use the materials from this study to develop an effective forest management system throughout Indonesia.