Determinants of environmental pollution: Evidence from Indonesia

Abstract

This study explores the nexus between electricity consumption, fossil fuel use, renewable energy adoption, population growth, GDP, and environmental pollution in Indonesia, incorporating open innovation dynamics as a novel dimension of analysis. The study uncovers significant long-term relationships between the variables using time series data from 2000 to 2023 and applying econometric techniques such as cointegration analysis, Granger causality tests, and Vector Error Correction Models (VECM). The results indicate that electricity consumption drives economic growth and CO₂ emissions, while fossil fuel dependency significantly contributes to environmental pollution. Renewable energy adoption, though growing, is insufficient to offset the environmental damage caused by fossil fuel use. The study also identifies the potential of renewable energy to mitigate pollution levels, though challenges such as technological barriers and high initial investment costs remain. Population growth intensifies energy demand and pollution, underscoring the necessity for sustainable energy policies. Additionally, the research highlights the role of open innovation, particularly in renewable energy, mobile payment platforms, and collective intelligence, in addressing Indonesia's energy-environment challenges. Policy recommendations emphasize the need for more substantial incentives for renewable energy, the regulation of fossil fuel consumption, and the development of an open innovation ecosystem that engages both the public and private sectors.

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