Is Growth Good or Bad For the Environment in Indonesia?

Abstract

This paper attempts to contribute to the literature on the growth-environment nexus by asking: What is the effect of growth on Indonesia’s CO₂ emissions, controlling for energy consumption and urbanization? To that end, an autogressive distributed lag (ARDL) approach to cointegration is applied to annual data for the period 1971-2013. Results show that income growth tends to increase CO₂ emissions monotonically in Indonesia. It is also found that there is strong evidence that energy consumption increases CO₂ emissions and little evidence that urbanization causes significant environmental degradation.

Keywords: ARDL, CO₂ emissions, environment, growth, Indonesia

JEL Classifications: C2, Q4, Q5