What drivers the decoupling of CO2 emissions in the Indonesian manufacturing industry? An analysis of firm level factors

Abstract

This study identifies determinants (firm characteristics) that drive the decoupling of CO2 emissions in the Indonesian manufacturing industry. The estimation method applied was Seemingly Unrelated Regression (SUR). The data were sourced from Indonesia’s large and medium industry statistics survey for 2010–2015, prepared by Statistics Indonesia. The estimation results show that a reduction in tax/price of gas fuel or will encourage decoupling. Medium-tech firms are more polluting, while foreign investors-owned firms and firms in the Java-Bali region are less polluting, and could encourage decoupling. The Indonesian government should implement technology transfer by following the energy conversion pattern from petroleum fuels to gas fuels, increase capitalisation to firms that tend to be heavy polluters, small firms, and firms owned by domestic investors and outside Java-Bali. Novelty this study is linking firm characteristics as a decoupling driving factor of CO2 emissions in the manufacturing industry.

Keywords

• firm characteristics
• decoupling
• co2 emissions
• manufacturing
• seemingly unrelated regression (sur)