Coal Consumption Dynamics in Indonesia: Evidence from the Coal Kuznets Curve (CKC) Framework

Widya Wahyuni; Deni Kusumawardani

doi:10.59261/inkubis.v8i3.293

Authors

Widya Wahyuni Universitas Airlangga
Deni Kusumawardani Universitas Airlangga

DOI:

https://doi.org/10.59261/inkubis.v8i3.293

Abstract

Background: Indonesia, as one of the world’s largest coal producers and consumers, faces a critical tension between coal-driven economic growth and the imperative of environmental sustainability. Despite existing studies on the Environmental Kuznets Curve (EKC), empirical evidence on the Coal Kuznets Curve (CKC) in Indonesia remains limited, particularly regarding the nonlinear dynamics of coal consumption over time.

Objective: This study analyzes the influence of economic growth on coal consumption in Indonesia within the framework of the Coal Kuznets Curve (CKC), using time-series data for the period 1994–2023.

Methods: The study employs an Autoregressive Distributed Lag (ARDL) model with an Error Correction Model (ECM) approach, along with robustness tests using Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS).

Results: The results reveal a U-shaped nonlinear relationship between economic growth and coal consumption, indicating that the relationship varies across income levels: at lower income levels, economic growth is associated with declining coal consumption, whereas beyond a certain income threshold, coal consumption rises again. This pattern deviates from the conventional inverted U-shaped Coal Kuznets Curve hypothesis. Population density and industrial activity are also found to significantly increase coal consumption.

Conclusion: Overall, these findings confirm that economic growth in Indonesia has not been accompanied by a reduction in dependence on coal, underscoring the urgent need for structural energy-transition policies that decouple economic growth from fossil-fuel consumption.

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