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The environmental Kuznets curve in Indonesia: Exploring the potential of renewable energy

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  • Sugiawan, Yogi
  • Managi, Shunsuke

Abstract

There is an increasing interest in investigating the environmental Kuznets curve (EKC) hypothesis because it suggests the existence of a turning point in the economy that will lead to a sustainable development path. Although many studies have focused on the EKC, only a few empirical studies have focused on analyzing the EKC with specific reference to Indonesia, and none of them have examined the potential of renewable energy sources within the EKC framework. This study attempts to estimate the EKC in the case of Indonesia for the period of 1971-2010 by considering the role of renewable energy in electricity production, using the autoregressive distributed lag (ARDL) approach to cointegration as the estimation method. We found an inverted U-shaped EKC relationship between economic growth and CO2 emissions in the long run. The estimated turning point was found to be 7,729 USD per capita, which lies outside of our sample period. The beneficial impacts of renewable energy on CO2 emission reduction are observable both in the short run and in the long run. Our work has important implications both for policymakers and for the future development of renewable energy in Indonesia.

Suggested Citation

  • Sugiawan, Yogi & Managi, Shunsuke, 2016. "The environmental Kuznets curve in Indonesia: Exploring the potential of renewable energy," MPRA Paper 80839, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:80839
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    More about this item

    Keywords

    Renewable energy; environmental Kuznets curve; Cointegration;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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