Promoting a Low-carbon Indonesia: How Energy Consumption and Financial Development Shape its Path

Ahmad Farabi (), Anggi Putri Kurniadi (), Zamroni Salim (), Turnad Lenggo Ginta (), Lenggogeni Lenggogeni (), Muizuddin Azka (), Hens Saputra (), Setyo Margo Utomo (), Ratna Nurmayni () and Nur Islahudin ()
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Ahmad Farabi: Research Center for Macroeconomy and Finance, National Research and Innovation Agency (BRIN), Jakarta, Indonesia
Anggi Putri Kurniadi: Research Center for Macroeconomy and Finance, National Research and Innovation Agency (BRIN), Jakarta, Indonesia
Zamroni Salim: Research Center for Macroeconomy and Finance, National Research and Innovation Agency (BRIN), Jakarta, Indonesia
Turnad Lenggo Ginta: Research Center for Process and Manufacturing Industry Technology, National Research and Innovation Agency, Kawasan Puspiptek Setu Serpong, Kota Tangerang Selatan, Banten, Indonesia
Lenggogeni Lenggogeni: Research Center for Process and Manufacturing Industry Technology, National Research and Innovation Agency, Kawasan Puspiptek Setu Serpong, Kota Tangerang Selatan, Banten, Indonesia
Muizuddin Azka: Research Center for Process and Manufacturing Industry Technology, National Research and Innovation Agency, Kawasan Puspiptek Setu Serpong, Kota Tangerang Selatan, Banten, Indonesia
Hens Saputra: Research Center for Process and Manufacturing Industry Technology, National Research and Innovation Agency, Kawasan Puspiptek Setu Serpong, Kota Tangerang Selatan, Banten, Indonesia
Setyo Margo Utomo: Research Center for Process and Manufacturing Industry Technology, National Research and Innovation Agency, Kawasan Puspiptek Setu Serpong, Kota Tangerang Selatan, Banten, Indonesia
Ratna Nurmayni: Research Center for Transportation Technology, National Research and Innovation Agency (BRIN), Indonesia
Nur Islahudin: Industrial Engineering Department, Dian Nuswantoro University, Semarang, Indonesia

International Journal of Energy Economics and Policy, 2025, vol. 15, issue 5, 114-126

Abstract: This study examines the impact of energy consumption (ENC) and financial development on environmental quality, measured by CO2 emissions in Indonesia. Financial development is represented by domestic credit to the private sector (CRD), international trade (ITR), and foreign direct investment (FDI). The ARDL methodology was selected as the most suitable approach based on the characteristics of the data. The findings reveal that, in the long term, all independent variables show a significantly negative effect on CO2 emissions, with CRD, ITR, and FDI contributing to emission reductions except ENC. However, ENC negatively affects CO2 emissions in the short term, whereas ITR and FDI show positive effects highlighting the importance of prioritizing energy efficiency and environmental considerations. This study is novel in its use of the latest data and its inclusion of several financial development variables namely domestic credit, trade, and investment.

Keywords: CO2 Emissions; Energy Consumption; Domestic Credit; International Trade; FDI; Indonesia (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:v:15:y:2025:i:5:id:18292

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DOI: 10.32479/ijeep.18292

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