DETERMINANTS OF RENEWABLE ENERGY CONSUMPTION IN INDONESIA

Abstract

Energy is one of the important indicators in the economy. Using information from the World Bank shows that renewable energy consumption in Indonesia from 1990 to 2021 shows a significant downward trend over time. This decline is influenced by various factors such as Foreign Direct Investment (FDI), CO2 emissions from transport, energy use, and urban population growth. The purpose of this to examinate the short-term and long-term factors influencing Indonesia's use of renewable energy from 1990 to 2021. The Error Correction Model (ECM) is employed in this study to capture the dynamics of short-term relationships as well as the adjustment process towards long-term equilibrium. The analysis shows that an increase in FDI contributes to an increase in renewable energy consumption in both time horizons. In contrast, CO₂ emissions from transportation and energy use negatively affect the use of renewable energy consumption in both the short and long term. Meanwhile, demographic variables such as urban population growth areas show a positive but insignificant effect on renewable energy consumption. The negative and significant error correction coefficient (ECT) confirms the validity of the ECM model and shows that the system can return to equilibrium after short-term shocks. These findings emphasize the importance of policies that support sustainable investment, clean energy technology development, and emissions control to promote the transition to more optimal renewable energy utilization in Indonesia.