An Empirical Analysis of the Environmental Kuznets Curve for CO2 Emissions in Indonesia: The Role of Energy Consumption and Foreign Trade

Abstract

This study examines the dynamic relationship among carbon dioxide (CO2) emissions, economic growth, energy consumption and foreign trade based on the environmental Kuznets curve (EKC) hypothesis in Indonesia for the period 1971-2007, using the auto regressive distributed lag (ARDL) methodology. The results do not support the EKC hypothesis, which assumes an inverted U-shaped relationship between income and environmental degradation. The long-run results indicate that foreign trade is the most significant variable in explaining CO2 emissions in Indonesia followed by energy consumption and economic growth. The stability of the variables in estimated models is also examined. The result suggest that the estimated model is stable over the study period.