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Decomposition Factors Household Energy Subsidy Consumption in Indonesia: Kaya Identity and Logarithmic Mean Divisia Index Approach

Author

Listed:
  • Eka Sudarmaji

    (Doctoral Student, IPB University and University of Pancasila, Jakarta. Indonesia,)

  • Noer Azam Achsani

    (School of Business, IPB University, Bogor, Indonesia,)

  • Yandra Arkeman

    (Department of Agro-industrial Technology, Faculty of Agricultural Technology, IPB University, Bogor, Indonesia.)

  • Idqan Fahmi

    (School of Business, IPB University, Bogor, Indonesia,)

Abstract

For decades, the subsidy had prompted excessive waste while offering little motivation to boost energy efficiency or reduce domestic greenhouse gas emissions in Indonesia. This paper aimed to measure household subsidy energy by examining the relationship between the Ten Variables Factors with Household Energy Subsidy. The Logarithmic Mean Divisia Index (LMDI) decomposition index were deployed to recognize the determinant effects that drive a household s subsidy energy consumption. This study also presented an ARDL model applied. The robustness of the Granger Causality, Long-run, and Short-run causality during 1990-2017 was assessed. Based on LMDI analysis, we found out that Population, Income Per Capita, Ratio National Renewal Energy over Fuel Fossil, Gross Capital Stock, Urban Household Consumption, and Ratio Household Subsidy were the positive factors that aggravated the change in household energy subsidy. The negative sign of Ratio National Energy Intensity effect, Ratio Fossil Renewal Energy effect, Ratio Capital Labour substitution, and Ratio Household over Labour Force signified the decreasing of less household energy subsidy. On the ECM, we identified a negative sign speed-of-adjustment and significant at 1%. It implied that all the ten variable factors were converging in the long run after an experience shock. The equation parameters were considered stable since the CUSUM gets inside the two critical lines. Additional RESET test of the stability to ascertain whether the estimated model was linear or correctly specified has been performed.

Suggested Citation

  • Eka Sudarmaji & Noer Azam Achsani & Yandra Arkeman & Idqan Fahmi, 2022. "Decomposition Factors Household Energy Subsidy Consumption in Indonesia: Kaya Identity and Logarithmic Mean Divisia Index Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 12(1), pages 355-364.
    • Handle: RePEc:eco:journ2:2022-01-44
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    References listed on IDEAS

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    More about this item

    Keywords

    ARDL; ECM; Households Subsidies Energy; LMDI; KAYA Index;
    All these keywords.

    JEL classification:

    • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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