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Does the Linkage between GDP, Renewable Energy, and Methane Validate the EKC hypothesis? Evidence from Indonesia

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  • Mohamad Egi Destiartono

    (Faculty of Economics and Business, Universitas Diponegoro, Semarang, 50275, Indonesia)

  • Firmansyah Firmansyah

    (Faculty of Economics and Business, Universitas Diponegoro, Semarang, 50275, Indonesia)

Abstract

Is it feasible for Indonesia to sustain economic growth while simultaneously reducing methane emissions? This paper aims to unravel the Environmental Kuznets Curve (EKC) hypothesis for methane by integrating the role of renewable energy by employing annual data for the period 1990-2020. Autoregressive distributed lag (ARDL)-bounds testing is applied to estimate the dynamic and cointegration relationships. Also, this paper performs both traditional and breakpoint unit root tests. The EKC hypothesis is confirmed since there is an inverse U-curve nexus between GDP and methane per capita. The income turning point is 14,516 USD per capita. Indonesia’s income level is still below its estimated EKC threshold, implying that economic growth forces methane emissions to scale up. A 1% increase in GDP per capita leads to a 4.59% increase in methane per capita. However, renewable energy has a beneficial role in tackling methane emissions. A 1% increase in the share of renewable energy use leads to a 0.36% decrease in methane per capita. It is therefore recommended that to mitigate the damaging impact of economic growth, governments should enhance the share of energy use from renewable sources.

Suggested Citation

  • Mohamad Egi Destiartono & Firmansyah Firmansyah, 2024. "Does the Linkage between GDP, Renewable Energy, and Methane Validate the EKC hypothesis? Evidence from Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 14(2), pages 711-720, March.
    • Handle: RePEc:eco:journ2:2024-02-70
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    More about this item

    Keywords

    Methane; Renewable Energy; EKC; Indonesia; ARDL;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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