Fossil Fuels Consumption, Carbon Emissions, and Economic Growth in Indonesia

Authors

  • Traheka Erdyas Bimanatya Faculty Economics and Business Gadjah Mada University
  • Tri Widodo Faculty of Economics and Business Gadjah Mada University

Abstract

Environmental issues have become an issue of recent interest due to climate change associated with increased levels of pollution and degradation of environmental quality as a result of increased human economic activity. This paper discusses the relationship between fossil fuel consumption, carbon dioxide emissions, and economic growth, the impacts of energy conservation, as well as the projection of energy mix in Indonesia by applying Vector Error Correction Model (VECM) Granger causality, and Long-run Energy Alternative Planning (LEAP). Empirical results show that in the short-run there are unidirectional Granger causalities running from coal consumption to output (growth hypothesis) and from output to oil consumption (conservation hypothesis). However, in the long-run the results suggest unidirectional Granger causality only running from oil consumption to output and carbon emissions. The projection results show that the result of LEAP Projection based on National Master Plan for Energy Conservation (RIKEN) 2005 target has a lower energy saving rate (17.32 percent) compared to the Vision 25/25 target (18 percent).

Keywords: Fossil Fuel Consumption; CO2 Emission; Economic Growth.

JEL Classifications: Q43; Q53; O44

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Published

2018-07-16

How to Cite

Bimanatya, T. E., & Widodo, T. (2018). Fossil Fuels Consumption, Carbon Emissions, and Economic Growth in Indonesia. International Journal of Energy Economics and Policy, 8(4), 90–97. Retrieved from https://www.econjournals.com/index.php/ijeep/article/view/6578

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