Assessing the Emission Reduction Policies on Global Value Chains: The Renewable Energy Policy Framework

Josephine Wuri (), Caecilia Wahyu Estining Rahayu, Yuliana Rini Hardanti and Ni Kadek Ayu Kristianti
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Josephine Wuri: Department of Economics, Faculty of Economics, Sanata Dharma University, Yogyakarta 55281, Indonesia
Caecilia Wahyu Estining Rahayu: Department of Management, Faculty of Economics, Sanata Dharma University, Yogyakarta 55281, Indonesia
Yuliana Rini Hardanti: Department of Economics, Faculty of Economics, Sanata Dharma University, Yogyakarta 55281, Indonesia
Ni Kadek Ayu Kristianti: Department of Economics, Faculty of Economics, Sanata Dharma University, Yogyakarta 55281, Indonesia

Energies, 2024, vol. 17, issue 23, 1-14

Abstract: To mitigate climate change problems, a low-carbon renewable energy policy is needed. Evaluating the impact of these problems on global value chains is essential to ensure an effective transition to sustainable economic development. This study analyzes the impact of emission reduction policies on Global Value Chains (GVC) using the Global Trade Analysis Project-Energy (GTAP-E) model by addressing three fundamental research questions. First, how does the implementation of B40 renewable energy policy combined with carbon tax affect Indonesia’s energy sector output and carbon emissions? Second, to what extent does this policy influence Indonesia’s participation in GVC, particularly in the crude palm oil (CPO) industry? Third, what are the implications for economic growth and social welfare? Our analysis focuses on the CPO sector, considering Indonesia’s position as the world’s largest producer and its potential for sustainable biofuel production through clean technological processes. The results of this study show that the policy effectively reduces carbon emissions through decreased fossil fuel production while promoting renewable energy adoption. It significantly increases Indonesia’s forward GVC participation in the CPO sector, enhancing value addition and international competitiveness. Furthermore, the policy generates positive impacts on economic growth and social welfare. This study emphasizes the importance of international policy coordination and the crucial role of technological innovation in achieving sustainable economic development for a low-carbon economy and strengthening Indonesia’s position in the global value chain.

Keywords: emission reduction; renewable energy; carbon tax; crude palm oil; global value chains; GTAP-E (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2024
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