Promoting a Low-carbon Indonesia: How Energy Consumption and Financial Development Shape its Path

Authors

  • Ahmad Farabi Research Center for Macroeconomy and Finance, National Research and Innovation Agency (BRIN), Jakarta, Indonesia
  • Anggi Putri Kurniadi Research Center for Macroeconomy and Finance, National Research and Innovation Agency (BRIN), Jakarta, Indonesia
  • Zamroni Salim Research Center for Macroeconomy and Finance, National Research and Innovation Agency (BRIN), Jakarta, Indonesia
  • Turnad Lenggo Ginta Research Center for Process and Manufacturing Industry Technology, National Research and Innovation Agency, Kawasan Puspiptek Setu Serpong, Kota Tangerang Selatan, Banten, Indonesia
  • Lenggogeni Lenggogeni Research Center for Process and Manufacturing Industry Technology, National Research and Innovation Agency, Kawasan Puspiptek Setu Serpong, Kota Tangerang Selatan, Banten, Indonesia
  • Muizuddin Azka Research Center for Process and Manufacturing Industry Technology, National Research and Innovation Agency, Kawasan Puspiptek Setu Serpong, Kota Tangerang Selatan, Banten, Indonesia
  • Hens Saputra Research Center for Process and Manufacturing Industry Technology, National Research and Innovation Agency, Kawasan Puspiptek Setu Serpong, Kota Tangerang Selatan, Banten, Indonesia
  • Setyo Margo Utomo Research Center for Process and Manufacturing Industry Technology, National Research and Innovation Agency, Kawasan Puspiptek Setu Serpong, Kota Tangerang Selatan, Banten, Indonesia
  • Ratna Nurmayni Research Center for Transportation Technology, National Research and Innovation Agency (BRIN), Indonesia
  • Nur Islahudin Industrial Engineering Department, Dian Nuswantoro University, Semarang, Indonesia

DOI:

https://doi.org/10.32479/ijeep.18292

Keywords:

CO2 Emissions, Energy Consumption, Domestic Credit, International Trade, FDI, Indonesia

Abstract

This study examines the impact of energy consumption (ENC) and financial development on environmental quality, measured by CO2 emissions in Indonesia. Financial development is represented by domestic credit to the private sector (CRD), international trade (ITR), and foreign direct investment (FDI). The ARDL methodology was selected as the most suitable approach based on the characteristics of the data. The findings reveal that, in the long term, all independent variables show a significantly negative effect on CO2 emissions, with CRD, ITR, and FDI contributing to emission reductions except ENC. However, ENC negatively affects CO2 emissions in the short term, whereas ITR and FDI show positive effects highlighting the importance of prioritizing energy efficiency and environmental considerations. This study is novel in its use of the latest data and its inclusion of several financial development variables namely domestic credit, trade, and investment.

Downloads

Published

2025-08-20

How to Cite

Farabi, A., Kurniadi, A. P., Salim, Z., Ginta, T. L., Lenggogeni, L., Azka, M., … Islahudin, N. (2025). Promoting a Low-carbon Indonesia: How Energy Consumption and Financial Development Shape its Path. International Journal of Energy Economics and Policy, 15(5), 114–126. https://doi.org/10.32479/ijeep.18292

Issue

Vol. 15 No. 5 (2025)

Section

Articles

License

Submission of an article implies that the work described has not been published previously , that it is not under consideration for publication elsewhere, that its publication is approved by all authors and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, will not be published elsewhere in the same form, without the written consent of the Publisher. The Editors reserve the right to edit or otherwise alter all contributions, but authors will receive proofs for approval before publication.