Abstract

This study seeks to unravel the interlinkage between economic growth, clean energy, and carbon dioxide emissions in Indonesia for the period 1980 – 2020 under the Environmental Kuznets Curve hypothesis, taking a unique perspective by focusing on the impact of private credit, along with controlling for the role of trade opennes and total energy consumption. This study applies an Autoregressive Distributed Lag Bounds Testing model for the estimation method, followed by the Granger Causality test. The results demonstrate that total credit to private non-financial sectors significantly contributes to environmental depletion by rising carbon dioxide emissions. The Environmental Kuznets Curve hypothesis is not verified, indicating that economic growth cannot be used as a sole instrument for emissions reduction. Whilst total energy consumption is positively linked with carbon dioxide, primary energy consumption from renewable resources is negatively associated with carbon dioxide. The Granger causality test signifies the feedback relationship between economic growth, credit, and carbon dioxide, as well as a unidirectional causality running from total energy consumption toward carbon dioxide. Following the findings, it is recommended that fostering clean energy transition and promoting green credit are among the pivotal policies to reduce carbon dioxide emissions.