Dynamics of Carbon Emissions and Green Economy in ASEAN-4: Analysis of Causality and Government Commitments

Abstract

Carbon emissions in ASEAN-4 countries have surged with rapid economic growth, urbanization, and industrialization, posing serious sustainability challenges. This study investigates the causal dynamics among economic growth, industrialization, energy consumption, and carbon emissions, with an emphasis on the moderating role of government sustainability commitments. The novelty of this research lies in integrating the Sustainable Development Goals Transformation 3 policy index as a quantifiable variable within a dynamic environmental-economic framework and employing a Panel Vector Error Correction Model to capture both short- and long-term effects from 2014 to 2023. Methodologically, the study applies long-run cointegration tests, Granger causality analysis, and impulse response functions to examine feedback relationships. Results reveal that economic growth and industrialization significantly drive emissions, while government commitments to sustainability reduce emissions over time, although the effects are delayed. Energy consumption is identified as the strongest immediate contributor to environmental degradation. The study implies that ASEAN-4 countries must implement mandatory carbon pricing schemes, integrate SDGs indicators into national budgeting processes, accelerate the removal of fossil fuel subsidies, and offer targeted green finance to industrial sectors. Achieving sustainable, low-carbon development requires aligning fiscal, energy, and industrial policies under a unified green growth framework.