IJASEIT

International Journal on Advanced Science, Engineering and Information Technology, Vol. 10 (2020) No. 1, pages: 274-285, DOI:10.18517/ijaseit.10.1.10660

The Role of Natural Gas in Indonesia CO2 Mitigation Action: The Environmental Kuznets Curve Framework

Dede Udayana Laksmana, Uka Wikarya

Abstract

Indonesia is one of the developing countries in the world, which is predicted to become one of the strongest economies in the world. Many challenges facing Indonesia, along with its economic growth, include energy security and environmental problems. These problems can be overcome simultaneously with the selection and allocation of appropriate energy sources. With the constraints of dependence on fossil energy, natural gas can be a "clean fossil energy” choice that can reduce CO₂ emissions amid Indonesia's economic growth. Under the Environmental Kuznets Curve (EKC) framework and the ARDL to cointegration approach, this study estimates the long-term and short-term relationship between CO₂ emissions and per capita GDP in three different models. The estimation results show that EKC in Indonesia is generally formed in the long term, but not in the electricity sector. The existence of EKC in Indonesia indicates the effects of energy conservation. The estimation results also show that natural gas consumption has a negative correlation with CO₂ emissions in general. In the electricity sector, electricity from natural gas contributes to the smallest CO₂ emissions. Empirical evidence from this study can then be used as a reference in the formulation of policies related to the energy mix and efforts to encourage increased domestic natural gas consumption.