Nexus between Issue of Environmental Pollution and the Urban Population: Evidence of Economic Growth in Indonesia

Abstract

This study aims to analyze the factors that cause climate change that occurs in Indonesia. From every effort to increase economic growth, some elements are sacrificed. The Oil Palm Industry, high levels of CO2 emissions, Gini ratio index, and population increase in urban areas are variables used in this research. This research was conducted for thirty years, from 1990 to 2020. The analysis model used was the Vector Error Correction Model (VECM). The estimation results show that the palm oil industry, the impact of CO2 emissions, and the increase in urban population have a positive effect in the long term but do not impact economic growth in the long term because one of them is environmental quality degradation. Therefore, sometimes every effort to increase economic growth must be accompanied by mitigation of environmental impacts that will affect the short and long term.

Nexus analysis between CPO production, carbon emissions and GDP: A case study in Indonesia

“…According to Abah et al (2020), the increasing of CPO production will grow Nigeria's GDP either in the short or in the long term. Likewise researches, which are conducted in Indonesia and Malaysia by Qodri & Wahyudi (2021) and Ezechi & Muda (2019), find that there is a positive relationship between GDP and CPO production in the short term. However, there is a negative relationship between GDP and CPO production that happened in Indonesia and Malaysia especially in the long term.…”

“…There are several previous studies which find that CPO production can have a negative impact where it can create carbon emissions. Qodri & Wahyudi (2021) states that for every land clearing for a palm oil plantation of one hectare, it will generate 174 tons of carbon emissions. A finding by Brown et al (2021) also states that to produce CPO, land clearing for palm oil in Indonesia would be carried out by means of deforestation where this method could lead to an increase in carbon dioxide.…”

“…Research conducted by Abah et al (2020) found that in the short and long term, increased CPO production will contribute to growing Nigeria's GDP. Likewise, research conducted in Indonesia and Malaysia by Qodri & Wahyudi (2021) and Ezechi & Muda (2019) found that there is a positive relationship between a country's economic conditions and CPO production, especially in the short term. However, there is a negative relationship between CPO production and GDP in Indonesia and Malaysia in the long term.…”

“…The finding of Qodri & Wahyudi (2021) also state that for every one hectare of land cleared for palm oil plantations in Indonesia, it will generate 174 tons of carbon emissions. Likewise, a finding by Ezechi & Muda (2019) in Malaysia also find the same thing.…”

“…If related to the previous researches (Azwar, 2019;Ezechi & Muda, 2019;Jian et al, 2019;and Qodri & Tri Wahyudi, 2021), the novelty of this research is the incorporation of discussions about production CPO, carbon emissions and economic growth into one scope. Previous researches separate the study of all those variables not in one scope.…”