DOI: https://doi.org/10.14710/jwl.14.1.1-16

Analyzing the Linkage between CO2 Emissions, Economic Growth, Energy Intensity and Consumption: A VECM Model Application

*Farah Bunga Amalia Adjie orcid  -  Politeknik Statistika STIS, Jakarta, Indonesia, Indonesia
Budiasih Budiasih  -  Politeknik Statistika STIS, Jakarta, Indonesia, Indonesia

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Abstract

Indonesia is one of the 198 countries which in 1992 signed the United Nations Framework Convention on Climate Change (UNFCCC). UNFCCC formulated international agreements to reduce global greenhouse gas emissions as an effort to combat rising global temperatures. However, in 2022, Indonesia currently is one of the largest carbon dioxide emitters in the world with a total carbon emission of 728.88 million Tons of CO2 and occupies the 6th position in the world. Fossil fuels are still used as the main energy source in Indonesia to support economic growth with a contribution of 87,7 percent. This research aims to analyze the shape of the relationship between CO2 emissions and economic growth, and to analyze the relationship between CO2 emissions, economic growth, energy intensity, and renewable energy consumption in Indonesia. Regression modeling is used in finding the shape of the relationship between CO2 emissions and economic growth, which resulted in a monotonically increasing relationship. Vector Error Correction Model (VECM) is used to analyze the relationship between CO2 emissions, economic growth, energy intensity, and renewable energy consumption, which found that in the long run economic growth and energy intensity will increase CO2 emissions with the parameters are positively significant to CO2 emission. Meanwhile, an increase in renewable energy consumption will reduce CO2 emissions with the parameter is negatively significant to CO2 emission. However, in the short term only energy intensity has a significant effect on CO2 emissions. With this research, it can be determined how to mitigate CO2 emissions and reducing the impact of the rising greenhouse gas emissions on environment.

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Keywords: CO2 emission; Economic Growth; Energy Intensity; Renewable Energy; VECM

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Language : EN
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