An assessment of the progress of energy-related CO₂ emissions decoupling effort from industrial growth in Indonesia’s manufacturing sector

The manufacturing industry is a sector that can be relied on to accelerate national economic growth. However, the growth of Indonesia's manufacturing sector is coupled with CO₂ emissions due to dependence on fossil fuels. Motivated by these issues, especially the energy inefficiency and environmental impacts, in doing so, this study aims to assess the progress of CO₂ emissions decoupling effort from growth in Indonesia's manufacturing sector. LMDI decomposition analysis is used to evaluate the progress made CO₂ emissions changes as decoupling indicators which are the important factors that affect the decoupling effort. The analysis was performed based on the firm characteristics in the period 2010–2018. The comparative analysis of industry subsectors and strong characteristics reveals that economic activity determines the CO₂ emissions decoupling from industrial growth in Indonesia's manufacturing sector. The contribution of all the effects of CO₂ emissions inhibiting components and determinants of decoupling effort are found in the subsectors of basic metals, paper, chemicals, and computers & electronics. Relative decoupling is observed in some regions and firm types, indicating progress towards decoupling emissions from growth in Indonesia's manufacturing sector. The government can provide incentives to domestically-owned and export-oriented firms that already have decoupling effort in Java-Bali, Sumatra, and Maluku-Papua. In addition, the government also can provide subsidies to firms that emit high levels of CO₂ emissions, namely firms in Kalimantan and Sulawesi, which are domestically owned and not yet export-oriented.