IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/79989.html
   My bibliography  Save this paper

Energy Conservation, Fossil Fuel Consumption, CO2 Emission and Economic Growth in Indonesia

Author

Listed:
  • Erdyas Bimanatya, Traheka
  • Widodo, Tri

Abstract

This paper discusses the relationship between fossil fuel consumption, carbon dioxide emissions and economic growth for the period of 1965-2012 in Indonesia by applying Vector Error Correction Model (VECM) Granger causality. This paper also estimate the effect of energy conservation policy that has already adopted the National Energy Conservation Master Plan (RIKEN 2005) by Indonesian Government to the pattern of energy consumption in Indonesia from 2014 until 2030. Empirical results show that in the short-run there are unidirectional Granger causalities running from coal consumption to economic growth (growth hypothesis) and from economic growth to oil consumption (conservation hypothesis). However, in the long run the results suggest unidirectional Granger causality only running from oil consumption to economic growth and CO2 emissions. Thus, Indonesia should adopts different policies for each type of energies in order to maintain the economic growth while the effort of reducing fossil fuel consumption is in progress. The projection results imply that Indonesia government should revise the energy efficiency targets in RIKEN 2005 since the result of LEAP Projection based on RIKEN target shows a lower energy saving rate (17.32 percent) compared to the target (18 percent).

Suggested Citation

  • Erdyas Bimanatya, Traheka & Widodo, Tri, 2017. "Energy Conservation, Fossil Fuel Consumption, CO2 Emission and Economic Growth in Indonesia," MPRA Paper 79989, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79989
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/79989/1/MPRA_paper_79989.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chang, Ching-Chih, 2010. "A multivariate causality test of carbon dioxide emissions, energy consumption and economic growth in China," Applied Energy, Elsevier, vol. 87(11), pages 3533-3537, November.
    2. Azomahou, Theophile & Laisney, Francois & Nguyen Van, Phu, 2006. "Economic development and CO2 emissions: A nonparametric panel approach," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1347-1363, August.
    3. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    4. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
    5. Ayres, Robert U. & Warr, Benjamin, 2005. "Accounting for growth: the role of physical work," Structural Change and Economic Dynamics, Elsevier, vol. 16(2), pages 181-209, June.
    6. Choi, Eunho & Heshmati, Almas & Cho, Yongsung, 2010. "An Empirical Study of the Relationships between CO2 Emissions, Economic Growth and Openness," IZA Discussion Papers 5304, Institute of Labor Economics (IZA).
    7. Aviral Kumar TIWARI, 2011. "Energy Consumption, Co2 Emission and Economic Growth: A Revisit of the Evidence from India," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 11(2).
    8. Chebbi, Houssem Eddine & Boujelbene, Y., 2008. "CO2 emissions, energy consumption and economic growth in Tunisia," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44016, European Association of Agricultural Economists.
    9. Wang, Dong, 2012. "A Dynamic Optimization on Energy Efficiency in Developing Countries," MPRA Paper 43749, University Library of Munich, Germany.
    10. Brock, William A. & Taylor, M. Scott, 2005. "Economic Growth and the Environment: A Review of Theory and Empirics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 28, pages 1749-1821, Elsevier.
    11. Jafari, Yaghoob & Othman, Jamal & Nor, Abu Hassan Shaari Mohd, 2012. "Energy consumption, economic growth and environmental pollutants in Indonesia," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 879-889.
    12. Tiwari Aviral, 2011. "Primary Energy Consumption, CO2 Emissions and Economic Growth: Evidence from India," South East European Journal of Economics and Business, Sciendo, vol. 6(2), pages 99-117, November.
    13. Jo-Hee Hwang & Seung-Hoon Yoo, 2014. "Energy consumption, CO 2 emissions, and economic growth: evidence from Indonesia," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(1), pages 63-73, January.
    14. Greiner, Alfred & Gruene, Lars & Semmler, Willi, 2014. "Economic growth and the transition from non-renewable to renewable energy," Environment and Development Economics, Cambridge University Press, vol. 19(4), pages 417-439, August.
    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. Azam, Muhammad, 2016. "Does environmental degradation shackle economic growth? A panel data investigation on 11 Asian countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 175-182.
    2. Buhari DOĞAN & Osman DEĞER, 2018. "The role of economic growth and energy consumption on CO2 emissions in E7 countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(615), S), pages 231-246, Summer.
    3. Al Mamun, Md. & Sohag, Kazi & Hannan Mia, Md. Abdul & Salah Uddin, Gazi & Ozturk, Ilhan, 2014. "Regional differences in the dynamic linkage between CO2 emissions, sectoral output and economic growth," Renewable and Sustainable Energy Reviews, Elsevier, vol. 38(C), pages 1-11.
    4. P. Srinivasan & Inder Siddanth Ravindra, 2015. "Causality among Energy Consumption, CO2 Emission, Economic Growth and Trade," Foreign Trade Review, , vol. 50(3), pages 168-189, August.
    5. Jaruwan Chontanawat, 2020. "Dynamic Modelling of Causal Relationship between Energy Consumption, CO 2 Emission, and Economic Growth in SE Asian Countries," Energies, MDPI, vol. 13(24), pages 1-27, December.
    6. Ahad, Muhammad & Khan, Wali, 2016. "Does Globalization Impede Environmental Quality in Bangladesh? The Role of Real Economic Activities and Energy Use," MPRA Paper 76278, University Library of Munich, Germany, revised Jul 2016.
    7. Laia Pié & Laura Fabregat-Aibar & Marc Saez, 2018. "The Influence of Imports and Exports on the Evolution of Greenhouse Gas Emissions: The Case for the European Union," Energies, MDPI, vol. 11(7), pages 1-14, June.
    8. Luzzati, T. & Orsini, M., 2009. "Investigating the energy-environmental Kuznets curve," Energy, Elsevier, vol. 34(3), pages 291-300.
    9. Chibueze, E. Nnaji & Jude, O. Chukwu & Nnaji Moses, 2013. "Electricity Supply, Fossil fuel Consumption, Co2 Emissions and Economic Growth: Implications and Policy Options for Sustainable Development in Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 3(3), pages 262-271.
    10. Shahani, Rakesh & Bansal, Aastha, 2020. "An econometric investigation of Dynamic Linkages between CO2 emissions, energy consumption, & economic growth: A Case of India and China," MPRA Paper 103591, University Library of Munich, Germany.
    11. Duyen Dang Thi Thuy & Huyen Giang Thi Thu, 2023. "Tourism with Energy Production and Consumption in the Red River Delta, Vietnam," International Journal of Energy Economics and Policy, Econjournals, vol. 13(1), pages 501-509, January.
    12. Rahman, Mohammad Mafizur & Kashem, Mohammad Abul, 2017. "Carbon emissions, energy consumption and industrial growth in Bangladesh: Empirical evidence from ARDL cointegration and Granger causality analysis," Energy Policy, Elsevier, vol. 110(C), pages 600-608.
    13. H ctor F. Salazar-N ez & Francisco Venegas-Mart nez & Miguel Tinoco-Zerme o, 2020. "Impact of Energy Consumption and Carbon Dioxide Emissions on Economic Growth: Cointegrated Panel Data in 79 Countries Grouped by Income Level," International Journal of Energy Economics and Policy, Econjournals, vol. 10(2), pages 218-226.
    14. Shahbaz, Muhammad & Mahalik, Mantu Kumar & Shah, Syed Hasanat & Sato, João Ricardo, 2016. "Time-varying analysis of CO2 emissions, energy consumption, and economic growth nexus: Statistical experience in next 11 countries," Energy Policy, Elsevier, vol. 98(C), pages 33-48.
    15. Shahbaz, Muhammad & Khraief, Naceur & Uddin, Gazi Salah & Ozturk, Ilhan, 2014. "Environmental Kuznets curve in an open economy: A bounds testing and causality analysis for Tunisia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 34(C), pages 325-336.
    16. Faridul, Islam & Muhammad, Shahbaz, 2012. "Is There an Environmental Kuznets Curve for Bangladesh?," MPRA Paper 38490, University Library of Munich, Germany, revised 30 Apr 2012.
    17. Shahbaz, Muhammad & Sbia, Rashid & Hamdi, Helmi, 2013. "The Environmental cost of Skiing in the Desert? Evidence from Cointegration with unknown Structural breaks in UAE," MPRA Paper 48007, University Library of Munich, Germany, revised 03 Jul 2013.
    18. Zhang, Qianxue & Liao, Hua & Hao, Yu, 2018. "Does one path fit all? An empirical study on the relationship between energy consumption and economic development for individual Chinese provinces," Energy, Elsevier, vol. 150(C), pages 527-543.
    19. Neophyta Empora, 2017. "Air pollution spillovers and U.S. state productivity growth," University of Cyprus Working Papers in Economics 06-2017, University of Cyprus Department of Economics.
    20. Habib Hussain Khan & Nahla Samargandi & Adeel Ahmed, 2021. "Economic development, energy consumption, and climate change: An empirical account from Malaysia," Natural Resources Forum, Blackwell Publishing, vol. 45(4), pages 397-423, November.

    More about this item

    Keywords

    Fossil Fuel Consumption; CO2 Emission; Economic Growth.;
    All these keywords.

    JEL classification:

    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:79989. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.