Indonesia's Greenhouse Gas Puzzle: VECM Unravels Impact

Elvina Primayesa (), Sucihatiningsih Dian Wisika Prajanti (), Etty Puji Lestari () and Indah Maya Sari ()
Additional contact information
Elvina Primayesa: Department of Economics, Faculty of Economics and Business, Universitas Andalas, Padang, Indonesia
Sucihatiningsih Dian Wisika Prajanti: Department of Economics, Faculty of Economics, Universitas Negeri Semarang, Semarang, Indonesia
Etty Puji Lestari: Department of Economics, Faculty of Economics, Universitas Terbuka, Jakarta, Indonesia
Indah Maya Sari: Department of Economics, Faculty of Economics and Business, Universitas Andalas, Padang, Indonesia

International Journal of Energy Economics and Policy, 2025, vol. 16, issue 1, 878-889

Abstract: This study investigates the dynamic relationship between greenhouse gas (GHG) emissions, agricultural activity, forest area, and other industrial sectors in Indonesia using the Vector Error Correction Model (VECM) approach. The analysis employs annual data from 1990 to 2023 to capture both short-run adjustments and long-run equilibrium among the variables. The results indicate that in the short run, agricultural and industrial activities significantly increase GHG emissions, while changes in forest area have a negative but statistically insignificant effect. The negative and significant error correction term confirms the existence of long-run equilibrium, with approximately 30% of deviations from equilibrium corrected each period, indicating moderate adjustment speed. In the long run, agricultural and industrial sectors remain key contributors to emission growth, whereas forest expansion mitigates emissions over time. Diagnostic and stability tests confirm that the model is statistically sound, stable, and free from serial correlation and heteroskedasticity. The impulse response analysis further reveals that shocks from agriculture and industry lead to persistent increases in emissions, while forest shocks exert stabilizing effects. The findings underscore the need for integrated and sustainable policy interventions across sectors. Policymakers should promote climate-smart agricultural practices, enhance industrial energy efficiency, and strengthen forest conservation efforts to achieve balanced economic and environmental outcomes. Moreover, coordinated cross-sectoral policies and investments in green technology are crucial to ensure Indonesia's transition toward a low-carbon and sustainable growth path.

Keywords: Greenhouse Gas Emissions; Agriculture Land; Forest Land; Indonesia; VECM (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://econjournals.com/index.php/ijeep/article/download/22005/9660 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:v:16:y:2025:i:1:id:22005

Ordering information: This journal article can be ordered from
https://econjournals.com/index.php/ijeep

DOI: 10.32479/ijeep.22005

Access Statistics for this article

More articles in International Journal of Energy Economics and Policy from International Journal of Energy Economics and Policy
Bibliographic data for series maintained by Monica Sinhat ().