The Effect of Energy Subsidy on the Environmental Quality in Indonesia

Hadi Sasana, Achma Hendra Setiawan, Fitri Ariyanti, Imam Ghozali


Energy subsidy has boosted energy consumption and energy consumption has triggered high emissions of carbon dioxide (CO2), which might reduce environmental quality. This problem occurs around the world, especially in the developing countries undergoing a period of industrialization, such as Indonesia. The aim of this study was to analyze the effect of energy subsidy, energy consumption, and population growth on CO2 emissions in Indonesia. The method used was multiple linear regression analysis with ordinary least square approach using time series data within the period of 1990-2014. The results showed that energy subsidy, fossil energy consumption, and population growth have a positive and significant impact on CO2 emissions in Indonesia. Meanwhile, the consumption of renewable energy has a negative effect on the emissions of carbon dioxide emissions produced.

Keywords: carbon dioxide emissions, fossil energy consumption, energy subsidy, renewable energy consumption

JEL Classifications: Q42, Q43

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