Economic growth, energy consumption, financial development, international trade and CO2 emissions in Indonesia

Our results confirm that the variables are cointegrated; it means that the long run relationship exists in the presence of structural breaks. The empirical findings indicate that economic growth and energy consumption increase CO2 emissions, while financial development and trade openness compact it. The VECM causality analysis has shown the feedback hypothesis between energy consumption and CO2 emissions. Economic growth and CO2 emissions are also interrelated i.e. bidirectional causality. Financial development Granger causes CO2 emissions. The study opens up new policy insights to control the environment from degradation by using energy efficient technologies. Financial development and trade openness can also play their role in improving the environmental quality.