THE INFLUENCE OF CLIMATE CHANGE AND ENERGY CONSUMPTION ON ECONOMIC GROWTH IN INDONESIA

Abstract

Climate change and energy consumption are two important factors that can affect economic growth. This study aims to analyze the influence of climate change and energy consumption on Indonesia's economic growth. This study employs multiple linear regression on time-series data from 1992 to 2023 and finds that climate change and renewable energy consumption harm Indonesia's economic growth, whereas non-renewable energy consumption has a positive effect. The findings of this study confirm that the quality and resilience of electricity services can mediate the impact of climate change on the economy. When access is not accompanied by reliability, climate change can render such access fragile, thereby hampering economic growth. These findings imply the need for various efforts to reduce the vulnerability of the electricity system to climate shocks, the Government needs to encourage private capital participation and design incentives that focus on improving efficiency and innovation, combining energy transition policies with labor reskilling programs and technological incentives to maintain the long-term effects of renewable energy consumption to support growth sustainable economy, the need for a prudent energy transition strategy so that its short-term benefits can be transformed into the foundation of a sustainable energy transition, the Government can utilize the contribution of fossil energy to economic growth as capital to fund investments in renewable energy infrastructure so that it can reduce dependence on current non-renewable energy and strengthen renewable energy capacity in the future.