Drivers of Carbon Intensity in Indonesia: Unpacking the Effects of FDI, Energy Imports, and Economic Growth
Author: Septriani Septriani*
Department of Economic Development, Faculty of Economics and Business, University of Bengkulu, Bengkulu, Indonesia.
Published Date: 2025-02-28
Keywords: Carbon Intensity, Energy Import, Foreign Direct Investment, GDP Growth, Energy Transtition, Sustainable Development.
Abstract:
This study provides significant contributions to the literature by comprehensively examining the simultaneous effects of foreign direct investment (FDI), energy imports, and economic growth on carbon intensity in Indonesia during 2000–2022, using data from the World Bank and the International Energy Agency (IEA). By applying multiple linear regression analysis, the results reveal that the model has a coefficient of determination (R²) of 0.797, indicating that the independent variables simultaneously explain 79.7% of the variation in carbon intensity. Partially, energy imports exert a negative and significant effect on carbon intensity, primarily through the substitution of coal with cleaner fuels such as liquefied natural gas (LNG) and oil, an aspect rarely discussed in previous Indonesian studies. In contrast, FDI demonstrates a positive and significant effect, reflecting the dominance of pollution-intensive sectors and weak environmental governance, while GDP growth shows no significant impact, suggesting that economic expansion alone has not led to improvements in energy efficiency or a transition to low-carbon sources. Overall, these findings highlight the dual role of FDI, the importance of energy imports in shaping emission dynamics, and the urgent need for stricter environmental governance, a more selective FDI policy oriented toward clean technology, and an accelerated energy transition to achieve sustainable and low-carbon economic growth.
