Does higher income lead to more renewable energy consumption? evidence from Indonesia

Abstract

Indonesia is aimed to reach the use of renewable energy by up to 23 percent by 2025. Increasing society's income is considered as one of the effective ways to encourage society to shift to renewable energy consumption. Therefore, the aim of this study was to investigate the impact of income on renewable energy consumption in Indonesia. This study employed Engle Granger Error Correction Model and used hydroelectricity consumption as the proxy of the renewable energy consumption and real gross domestic product (GDP) per capita as the proxy of the income. The result of this study suggested that hydroelectricity consumption can be written as a quadratic function of real GDP per capita. It means that at the beginning, increasing real GDP per capita reduced the hydroelectricity consumption, and at a certain level it turns to opposite direction, where the rise of the real GDP per capita increased hydroelectricity consumption. In conclusion, higher income leads to higher renewable energy consumption. The policy implication for policymakers is straightforward, i.e., it is important to increase the income of the society, not only for the sake of the wealth of the society, but also for the protection of the environment through more clean energy consumption.