Contrasting Roles of Geothermal Energy and Fossil Fuels in Indonesia's Carbon Emissions

Authors

  • Ghalieb Mutig Idroes Energy and Green Economics Unit, Graha Primera Saintifika, Aceh Besar 23371, Indonesia
  • Sofyan Syahnur Department of Economics, Faculty of Economics and Business, Universitas Syiah Kuala, Banda Aceh 23111, Indonesia
  • M. Shabri Abd. Majid Department of Economics, Faculty of Economics and Business, Universitas Syiah Kuala, Banda Aceh 23111, Indonesia
  • Dimas Bagus Wiranatakusuma Department of Economics, Faculty of Economics and Business, Universitas Muhammadiyah Yogyakarta, Bantul 55183, Yogyakarta, Indonesia

DOI:

https://doi.org/10.60084/eje.v4i2.471

Keywords:

Energy, Environmental quality, Fossil fuels, Geothermal, Sustainability

Abstract

The transition toward renewable energy is essential for improving environmental quality and mitigating climate change, particularly in fossil fuel-dependent emerging economies. Indonesia has substantial geothermal energy potential, yet its energy mix remains heavily reliant on fossil fuels, highlighting the importance of assessing geothermal energy's contribution to carbon emission reduction. This study investigates the dynamic impacts of geothermal energy in comparison with coal, oil, and gas on environmental quality in Indonesia, proxied by CO2 emissions from 1990Q1 to 2024Q4. The analysis employs the Autoregressive Distributed Lag (ARDL) and Bootstrap Quantile Regression (BQR). The ARDL long-run results indicate that geothermal energy significantly reduces CO2 emissions in the long run. In contrast, coal and oil consumption significantly increase CO2 emissions, while gas shows no significant long-run effect. Among the control variables, FDI and manufacturing value added contribute to CO2 emission reductions in the long run. The BQR results further reveal pronounced heterogeneity, showing that the adverse effects of coal consumption are more pronounced at higher emission quantiles, while oil consumption increases CO2 emissions across all quantiles. Meanwhile, the emission-reducing effect of geothermal energy becomes more evident at higher quantiles of the CO2 emissions distribution. Overall, the results underscore the importance of expanding geothermal energy deployment while reducing reliance on coal and oil to achieve long-term environmental sustainability in Indonesia, providing strong empirical support for policies that promote renewable energy investment and a gradual transition toward cleaner energy systems.

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2026-10-28

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Idroes, G. M., Syahnur, S., Majid, M. S. A. and Wiranatakusuma, D. B. (2026) “Contrasting Roles of Geothermal Energy and Fossil Fuels in Indonesia’s Carbon Emissions”, Ekonomikalia Journal of Economics, 4(2), pp. 141–159. doi: 10.60084/eje.v4i2.471.

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Vol. 4 No. 2 (2026): October 2026

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Copyright (c) 2026 Ghalieb Mutig Idroes, Sofyan Syahnur, M. Shabri Abd. Majid, Dimas Bagus Wiranatakusuma

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