Environmental Degradation by Economic Activity: An Empirical Comparison Study in Indonesia and Germany

Sustainable economic growth must be the primary concern in every country to avoid environmental degradation, especially in G20 members. As a form of multilateral cooperation, policies and outcome of G20 discussions can be influenced globally, including ecological issues. This study uses the ECM method to compare factors against CO2 emissions as a proxy for environmental degradation in Indonesia and Germany from 1990–2019. The results indicate that in the short term, only variable coal consumption and renewable energy significantly influence CO2 emissions in both countries. Meanwhile, the variables of economic growth and FDI has an insignificant effect. In the long run, the variables of economic growth and FDI have a significant impact on CO2 emissions in Indonesia and Germany. Coal consumption significantly has a negative effect in Indonesia and a positive effect in Germany on CO2 emissions. Renewable energy consumption in Indonesia and Germany has a negative and significant impact. There are similarities between Indonesia and Germany. The variables of economic growth and FDI in the long term have a significant effect on CO2 emissions. Meanwhile, coal consumption and renewable energy in the short and long time significantly affect CO2 emissions. The recommendations are that the government should firmly support reducing coal consumption because it impacts environmental degradation, and the government should support the use of renewable energy to be more massive by issuing legislation.