Assessing The Effects of GDP and FDI Inflows on Carbon Dioxide Emission

Anindita Virgia Fanny Sazuli

doi:10.21776/jdess.2025.04.1.22

Authors

Anindita Virgia Fanny Sazuli Department of Economics, Faculty of Economics and Business, University of Brawijaya

DOI:

https://doi.org/10.21776/jdess.2025.04.1.22

Keywords:

Carbon Dioxide Emissions, Environmental Kuznets Curve (EKC), Sectoral GDP, FDI Inflows

Abstract

Indonesia is one of the world's largest emitters of carbon dioxide. This aligns with the Environmental Kuznets Curve (EKC) hypothesis, which states that economic growth initially causes environmental damage. This study uses the Error Correction Model (ECM) with time series data from 2002-2022 to definitively examine the relationship between sectoral GDP and FDI inflows with CO2 emissions in Indonesia. The results show that sectoral GDP significantly negatively affects CO2 emissions in the long and short run. In contrast, the quadratic form of GDP has a positive effect, indicating an anomaly in the expected EKC pattern. Moreover, FDI inflows significantly affect CO2 emissions only in the long run. These findings highlight the urgent need for policymakers to implement environmentally sustainable economic development strategies in Indonesia.

Abstrak

Indonesia merupakan salah satu penghasil emisi karbon dioksida terbesar di dunia. Hal ini sejalan dengan hipotesis Environmental Kuznets Curve (EKC) di mana pertumbuhan ekonomi pada awalnya akan menyebabkan kerusakan lingkungan. Penelitian ini menggunakan Error Correction Model (ECM) dengan periode data dari tahun 2002-2022 untuk menguji secara definitif hubungan antara PDB sektoral dan FDI Inflows dengan emisi CO2 di Indonesia. Hasil penelitian menunjukkan bahwa PDB sektoral memiliki pengaruh negatif yang signifikan terhadap emisi CO2, baik di jangka panjang maupun jangka pendek. Sebaliknya, bentuk kuadrat dari PDB memiliki efek positif, yang mengindikasikan adanya anomali dalam pola EKC. Selain itu, FDI Inflows memiliki pengaruh yang signifikan terhadap emisi CO2 hanya dalam jangka panjang. Temuan-temuan ini menyoroti adanya kebutuhan mendesak bagi para pembuat kebijakan untuk menerapkan strategi pembangunan ekonomi yang ramah lingkungan di Indonesia.

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