IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2023-06-6.html
   My bibliography  Save this article

Impact of Financial Development on Greenhouse Gas Emissions in Indonesia: A Comprehensive Analysis (2000-2019)

Author

Listed:
  • Rizky Yudaruddin

    (Department of Management, Mulawarman University, Indonesia,)

  • Pebiansyah Hafsari

    (The Regional Research and Innovation Agency, East Kalimantan Province, Indonesia)

  • Suharsono Suharsono

    (The Regional Research and Innovation Agency, East Kalimantan Province, Indonesia.)

  • Puput Wahyu Budiman

    (The Regional Research and Innovation Agency, East Kalimantan Province, Indonesia)

  • Adi Hendro Purnomo

    (The Regional Research and Innovation Agency, East Kalimantan Province, Indonesia.)

  • Bramantyo Adi Nugroho

    (The Regional Research and Innovation Agency, East Kalimantan Province, Indonesia)

  • Ari Sasmoko Adi

    (The Regional Research and Innovation Agency, East Kalimantan Province, Indonesia)

Abstract

This study aims to comprehensively analyze the impact of financial development on greenhouse gas emissions in Indonesia during the period from 2000 to 2019. Using ordinary least squares with robust standard errors, the study revealed a positive and significant relationship between financial development and total greenhouse gas emissions. The study revealed a positive and significant relationship between financial development and total greenhouse gas emissions by employing utilizing a comprehensive financial development index. The findings indicate that higher levels of financial development by employing utilizing a comprehensive financial development index led to increased greenhouse gas emissions. Moreover, sector-specific analyses demonstrated that financial development significantly and positively influences emissions across various sectors, including the energy sector, agriculture, forest, and other land uses, peatland fires, and waste. However, intriguingly, financial development was found to have a significant and negative impact on greenhouse gas emissions in the industrial processes and product use sector, suggesting its role in promoting sustainable practices and contributing to emissions reduction in this specific domain.

Suggested Citation

  • Rizky Yudaruddin & Pebiansyah Hafsari & Suharsono Suharsono & Puput Wahyu Budiman & Adi Hendro Purnomo & Bramantyo Adi Nugroho & Ari Sasmoko Adi, 2023. "Impact of Financial Development on Greenhouse Gas Emissions in Indonesia: A Comprehensive Analysis (2000-2019)," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 45-55, November.
    • Handle: RePEc:eco:journ2:2023-06-6
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijeep/article/download/14931/7542
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijeep/article/view/14931
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Tamazian, Artur & Chousa, Juan Piñeiro & Vadlamannati, Krishna Chaitanya, 2009. "Does higher economic and financial development lead to environmental degradation: Evidence from BRIC countries," Energy Policy, Elsevier, vol. 37(1), pages 246-253, January.
    2. Lamia Jamel & Samir Maktouf, 2017. "The nexus between economic growth, financial development, trade openness, and CO2 emissions in European countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1341456-134, January.
    3. Felisitas Defung & Rizky Yudaruddin, 2022. "Economic freedom on bank stability and risk-taking in emerging economy: Indonesian case study," Cogent Business & Management, Taylor & Francis Journals, vol. 9(1), pages 2112816-211, December.
    4. Tamazian, Artur & Bhaskara Rao, B., 2010. "Do economic, financial and institutional developments matter for environmental degradation? Evidence from transitional economies," Energy Economics, Elsevier, vol. 32(1), pages 137-145, January.
    5. Omri, Anis & Daly, Saida & Rault, Christophe & Chaibi, Anissa, 2015. "Financial development, environmental quality, trade and economic growth: What causes what in MENA countries," Energy Economics, Elsevier, vol. 48(C), pages 242-252.
    6. Odhiambo, Nicholas M, 2020. "Financial development,income inequality and carbon emissions in Sub-Saharan African countries: A panel data analysis," Working Papers 26645, University of South Africa, Department of Economics.
    7. Siti Amalia & Dadang Lesmana & Yanzil Azizil Yudaruddin & Rizky Yudaruddin, 2022. "The Impact of Board Structure on Voluntary Environmental and Energy Disclosure in an Emerging Market," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 430-438, July.
    8. Wei, Yi-Ming & Liu, Lan-Cui & Fan, Ying & Wu, Gang, 2007. "The impact of lifestyle on energy use and CO2 emission: An empirical analysis of China's residents," Energy Policy, Elsevier, vol. 35(1), pages 247-257, January.
    9. Kishor Sharma, Badri Bhattarai, and Salma Ahmed, 2019. "Aid, Growth, Remittances and Carbon Emissions in Nepal," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    10. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    11. Mohamed Amine Boutabba, 2014. "The impact of financial development, income, energy and trade on carbon emissions: Evidence from the Indian economy," Post-Print hal-02877966, HAL.
    12. Lin, Boqiang & Xie, Chunping, 2014. "Energy substitution effect on transport industry of China-based on trans-log production function," Energy, Elsevier, vol. 67(C), pages 213-222.
    13. Boutabba, Mohamed Amine, 2014. "The impact of financial development, income, energy and trade on carbon emissions: Evidence from the Indian economy," Economic Modelling, Elsevier, vol. 40(C), pages 33-41.
    14. Nura Sani Yahaya & Mustapha Hussaini & Abubakar Baba Bashir, 2020. "Population Growth and Environmental Degradation in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(1), pages 31-35, March.
    15. Acheampong, Alex O. & Amponsah, Mary & Boateng, Elliot, 2020. "Does financial development mitigate carbon emissions? Evidence from heterogeneous financial economies," Energy Economics, Elsevier, vol. 88(C).
    16. Shahbaz, Muhammad & Kumar Tiwari, Aviral & Nasir, Muhammad, 2013. "The effects of financial development, economic growth, coal consumption and trade openness on CO2 emissions in South Africa," Energy Policy, Elsevier, vol. 61(C), pages 1452-1459.
    17. Jiang, Xuemei & Guan, Dabo, 2017. "The global CO2 emissions growth after international crisis and the role of international trade," Energy Policy, Elsevier, vol. 109(C), pages 734-746.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Asongu, Simplice A. & Odhiambo, Nicholas M., 2021. "Inequality, finance and renewable energy consumption in Sub-Saharan Africa," Renewable Energy, Elsevier, vol. 165(P1), pages 678-688.
    2. Mirza Md Moyen Uddin, 2020. "Does financial development stimulate environmental sustainability? Evidence from a panel study of 115 countries," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2871-2889, September.
    3. Umme Habiba & Cao Xinbang, 2022. "An Investigation of the Dynamic Relationships Between Financial Development, Renewable Energy Use, and CO2 Emissions," SAGE Open, , vol. 12(4), pages 21582440221, November.
    4. Predrag Petrović & Mikhail M. Lobanov, 2022. "Impact of financial development on CO2 emissions: improved empirical results," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(5), pages 6655-6675, May.
    5. Xu, Xin & Huang, Shupei & An, Haizhong, 2021. "Identification and causal analysis of the influence channels of financial development on CO2 emissions," Energy Policy, Elsevier, vol. 153(C).
    6. Acheampong, Alex O. & Amponsah, Mary & Boateng, Elliot, 2020. "Does financial development mitigate carbon emissions? Evidence from heterogeneous financial economies," Energy Economics, Elsevier, vol. 88(C).
    7. Acheampong, Alex O., 2019. "Modelling for insight: Does financial development improve environmental quality?," Energy Economics, Elsevier, vol. 83(C), pages 156-179.
    8. Asongu, Simplice & Vo, Xuan, 2020. "The Effect of Finance on Inequality in Sub-Saharan Africa: Avoidable CO2 emissions Thresholds," MPRA Paper 103233, University Library of Munich, Germany.
    9. Shahbaz, Muhammad & Nasir, Muhammad Ali & Roubaud, David, 2018. "Environmental degradation in France: The effects of FDI, financial development, and energy innovations," Energy Economics, Elsevier, vol. 74(C), pages 843-857.
    10. Jamal Sekali & Mohamed Bouzahzah, 2019. "Financial Development and Environmental Quality: Empirical Evidence for Morocco," International Journal of Energy Economics and Policy, Econjournals, vol. 9(2), pages 67-74.
    11. Ngo, Thanh & Trinh, Hai Hong & Haouas, Ilham & Ullah, Subhan, 2022. "Examining the bidirectional nexus between financial development and green growth: International evidence through the roles of human capital and education expenditure," Resources Policy, Elsevier, vol. 79(C).
    12. Ahmed Imran Hunjra & Tahar Tayachi & Muhammad Irfan Chani & Peter Verhoeven & Asad Mehmood, 2020. "The Moderating Effect of Institutional Quality on the Financial Development and Environmental Quality Nexus," Sustainability, MDPI, vol. 12(9), pages 1-13, May.
    13. Magdalena Ziolo & Krzysztof Kluza & Anna Spoz, 2019. "Impact of Sustainable Financial and Economic Development on Greenhouse Gas Emission in the Developed and Converging Economies," Energies, MDPI, vol. 12(23), pages 1-30, November.
    14. Tomiwa Sunday Adebayo & Seyi Saint Akadiri & Ilham Haouas & Husam Rjoub, 2023. "A Time-Varying Analysis between Financial Development and Carbon Emissions: Evidence from the MINT countries," Energy & Environment, , vol. 34(5), pages 1207-1227, August.
    15. Shahbaz, Muhammad & Shahzad, Syed Jawad Hussain & Ahmad, Nawaz & Alam, Shaista, 2016. "Financial development and environmental quality: The way forward," Energy Policy, Elsevier, vol. 98(C), pages 353-364.
    16. Destek, Mehmet Akif & Sohag, Kazi & Aydın, Sercan & Destek, Gamze, 2022. "Foreign direct investment, stock market capitalization and sustainable development: Relative impacts of domestic and foreign capital," MPRA Paper 117551, University Library of Munich, Germany.
    17. Mumin Atalay Cetin & Ibrahim Bakirtas, 2020. "The long-run environmental impacts of economic growth, financial development, and energy consumption: Evidence from emerging markets," Energy & Environment, , vol. 31(4), pages 634-655, June.
    18. Yan, Bin & Wang, Feng & Dong, Mingru & Ren, Jing & Liu, Juan & Shan, Jing, 2022. "How do financial spatial structure and economic agglomeration affect carbon emission intensity? Theory extension and evidence from China," Economic Modelling, Elsevier, vol. 108(C).
    19. Hafiz Muhammad Abubakar Siddique & Areesha Aziz & Naima Shehzadi & Sumaira, 2022. "Financial Development, Exports, and Industrial Pollution: Evidence from Lower and Upper Middle-Income Countries," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(4), pages 335-343, December.
    20. Ulucak, Zübeyde Şentürk & İlkay, Salih Çağrı & Özcan, Burcu & Gedikli, Ayfer, 2020. "Financial globalization and environmental degradation nexus: Evidence from emerging economies," Resources Policy, Elsevier, vol. 67(C).

    More about this item

    Keywords

    financial development; greenhouse gas emissions; emerging countries; environmental;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2023-06-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.