The Future of Carbon Dioxide Emission in Indonesia: Does Deforestation Matter?

Abstract

Indonesia is a country with one of the highest rates of deforestation in the world. Ten million hectares of main forests in Indonesia had disappeared in the past two decades and 71% of trees in natural forests in Indonesia have been cut during 2013 to 2021. It is estimated that 10% of the CO2 emissions triggered by human actions are from deforestation. Since high CO2 emissions is a negative externality, it will become a burden to society if this problem exists. One of the possibilities to reduce the CO2 emissions problem is through the protection of the forests. Since the presence of forests is important to absorb the carbon produced by human activities, this study tries to find the fact whether there is an impact of deforestation on CO2 emissions in Indonesia by using econometrics modelling. This study applies Dynamic Ordinary Least Square (OLS) method to examine the impact of deforestation on CO2 emissions. Two models are set with two different data as the representation of deforestation variable. First data is forest area coverage as the independent variable, and the second data is the annual deforestation rate as the independent variable, this study uses CO2 emissions as the dependent variable. The results of both models confirm solid evidence that deforestation is contributing to higher level of CO2 emissions in Indonesia. In term of policy implications, some suggestions for the Indonesian government are (1) enforces reforestation as it is the best way to prevent deforestation, (2) applies more strict punishment for illegal logging, and (3) promotes inclusive and sustainable forest management.