Accepted Manuscript

The impact of renewable energy and agriculture on carbon dioxide emissions:

Investigating the environmental Kuznets curve in four selected ASEAN countries

Xuyi Liu, Shun Zhang, Junghan Bae

PII: S0959-6526(17)31514-7

DOI: 10.1016/j.jclepro.2017.07.086

Reference: JCLP 10088

To appear in: Journal of Cleaner Production

Received Date: 24 March 2017

Revised Date: 10 July 2017

Accepted Date: 10 July 2017

Please cite this article as: Xuyi Liu, Shun Zhang, Junghan Bae, The impact of renewable energy
and agriculture on carbon dioxide emissions: Investigating the environmental Kuznets curve in four
selected ASEAN countries, Journal of Cleaner Production (2017), doi: 10.1016/j.jclepro.
2017.07.086

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 ACCEPTED MANUSCRIPT
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The impact of renewable energy and agriculture on carbon dioxide emissions:

Investigating the environmental Kuznets curve in four selected ASEAN countries

Xuyi Liua, Shun Zhanga,b, Junghan Baea,*

a School of International Economics and Business, Yeungnam University, South Korea
b School of Business, Luoyang Normal University, Henan, PR China

E-mail addresses:
Xuyi Liu: liuxy1017@gmail.com
Shun Zhang: zhangshun0723@gmail.com
Junghan Bae: jhbae@ynu.ac.kr

* Corresponding author. Tel: 82.53.810.2762; fax: 82.53.810.4651

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Abstract

This study is the first attempt to explore the impact of per capita renewable energy consumption and

agricultural value added on carbon dioxide (CO2) emissions in four selected countries of the Association

of Southeast Asian Nations (ASEAN-4: Indonesia, Malaysia, the Philippines, and Thailand) from 1970

to 2013. By examining the existence of the environmental Kuznets Curve (EKC) hypothesis, our results

of long-run estimates do not support the inverted U-shape EKC in the selected countries. The estimates

indicate that increasing renewable energy and agriculture decreases CO2 emissions, while non-renewable

energy is positively correlated to emissions. Short-run Granger causal relationships exist from non-

renewable energy to emissions and to agriculture, from economic growth to agriculture, and from

agriculture to renewable energy directly. Long-run causalities indicate the existence of feedback

causalities between emissions, renewable energy and non-renewable energy. Our policy implication is

that developing sustainable agriculture can promote renewable energy and reduce emissions.

Keywords: environmental Kuznets curve; renewable energy; agricultural value added; carbon dioxide

emissions; Southeast Asia

This research did not receive any specific grant from funding agencies in the public, commercial,

or not-for-profit sectors.
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1. Introduction

As one of the main sources of greenhouse gas (GHG) emissions, the contribution of agricultural systems

to global anthropogenic GHG emissions is between 19% and 29%, including indirect emissions

associated with land-cover change (Vermeulen et al., 2012). Most agricultural tools and equipment are

driven by fossil fuels, which are the main sources of GHG to accelerate global warming (Chel and

Kaushik, 2011). However, agriculture is one of the key economic activities in the Association of

Southeast Asian Nations (ASEAN) countries. The total agricultural area is about 131Mha, representing

30.3% of the total land area. The rural population is about 334M, more than 50% of the total. The share

of the agricultural section in the economic sector is about 11% of real GDP in 2014 (ASEAN Statistical

Yearbook, 2015). Due to their favorable geographical location, ASEAN countries have several

agricultural products that rank as the global top exporters such as rice, fruits, vegetables, and coco. This

region is also the main producer and exporter of commercial crops such as palm oil, rubber, sugarcane,

and tropical fruit, due to the ASEAN countries focus on building close international trade relationships

both within the group and with extra-regional countries. Indonesia and Malaysia head the list of the

world’s palm oil producers (87% of world total), while more than 70% of global natural rubber comes

from Thailand, Indonesia and Malaysia. Thailand is the top exporter of rice (24% of global exports),

while the Philippines is the largest producer and exporter of coconut oil and the second largest banana

exporter.

According to a report of the International Panel on Climate Change (IPCC, 2014), the combination of

supply- and demand-side options can reduce emissions from the agricultural sector by up to 80% by

2030. The agricultural sector can do a lot to mitigate climate change, such as using animal manure instead

of artificial fertilizer, converting agricultural crops and residues to energy to replace non-renewable
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energy, and using renewable energy. The renewable energy sources in agriculture can be divided into

several forms: biomass, solar, wind, and hydro power (Ali et al., 2012). Recently, with the rapid growth

of renewable energy in ASEAN, a target has been set that the share of renewable energy (excluding

traditional biomass) will account for 23% of its total primary energy (956 million tons of oil equivalent,

Mtoe) for its clean, sustainable and prosperous future by 2025 (APAEC, 2015). In 2014, total primary

energy supply was about 642 Mtoe, while the rate of renewable energy was 9.4%, more than 60 Mtoe.

The annual growth rate of renewable energy is about 22%, compared with 4% of total primary energy

growth until 2025. To achieve this growth aim for renewable energy, the region should invest nearly

USD 27G per year. If this can be achieved, the GDP energy intensity will decline by around 30% by

2025, compared with the 2005 level. The deployment and application of renewable energy will save costs

of 0.2% and 1.0% of GDP, respectively. The savings from renewable energy will be tenfold, more than

the costs (IRENA, 2016).

Using the time series data from 1970 to 2013, one purpose of this paper is to examine the Granger

causality1 among per capita CO2 emissions, economic growth, renewable and non-renewable energy

consumption, and agricultural value added in a panel of four selected ASEAN countries (ASEAN-4:

Indonesia, Malaysia, the Philippines, and Thailand). Compared with other previous papers in this region,

such as Lean and Smyth (2010), Chandran and Tang (2013), Azam et al. (2015), Wang et al. (2016), and

Ahmed et al. (2017), the present study is the first to analyze the impact of per capita renewable energy

and agriculture on CO2 emissions in ASEAN countries. This analysis will support a better understanding

of the linkage between renewable energy, agriculture, and CO2 emissions in this region. Another study

1Granger causality is a statistical hypothesis test for determining whether one time series is useful in forecasting
another, first proposed in Granger (1969) by Granger, Nobel economist.
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purpose is to examine the existence of the environmental Kuznets curve (EKC) hypothesis2. Finally,

policy implications will be suggested for this region’s policymakers.

The paper is organized as follows. Section 2 reviews the recent literature, Section 3 presents the selected

data, model, and used methodology, Section 4 reports the empirical results and discussions based on the

analysis, and Section 5 concludes with the conclusions and policy implications.

2. Literature Review

The EKC hypothesis was derived from Kuznets (1955), in order to discuss the relationship between

economic growth and income inequality. The first set of empirical EKC study was proposed by Grossman

and Krueger (1991), who explored the environmental influence on the North American Free Trade

Agreement (NAFTA). Following this research, many recent econometric papers have examined the

relationship between environmental degradation and economic growth, while some have focused on the

associations between CO2 emissions, output, and other variables based on the EKC hypothesis (Table 1).

As well as examining the EKC hypothesis and energy consumption, our study also explores relationship

between carbon dioxide emissions and agriculture. Few econometric studies have focused on the

relationship between agriculture and carbon dioxide emissions (e.g. Asumadu-Sarkodie and Owusu,

2016a; 2016b; Rafiq et al., 2016; Jebli and Youssef, 2016; 2017). Employing panel co-integration and

the vector error correction model (VECM) methodology, Jebli and Youssef (2017) investigate the

causality between renewable energy, agriculture, CO2 emissions, and real GDP in five North Africa

countries from 1980 to 2011. The empirical results reveal the existence of feedback causality between

CO2 emissions and agriculture, and renewable energy Granger causes agriculture both in the short- and

2EKC is a hypothesized linkage of environmental quality and economic development with an inverted U-shape
curve. Along with the modern economic development, environment tends to worsen, until average income reaches
a turning-point over the course of development.
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long-run. The long-run estimates of three methods present that real GDP and renewable energy

significantly and positively affect CO2 emissions, whereas agriculture does so negatively. This suggests

that the increasing consumption of renewable energy improves the value of agricultural and ameliorates

climate change.

Table 1
Recent studies of the EKC hypothesis

Authors Countries Period Variables Method Support

EKC or not

Ang (2007) France 1960-2000 CO2 GDP EN ARDL Support

Cialani (2007) Italy 1861-2002 CO2 GDP OLS Not
Halicioglu (2009) Turkey 1960-2005 CO2 GDP EN TR ARDL Support
Iwata et al. (2011) 28 countries 1960-2003 CO2 GDP NU PMG MP DFE Mixed
Saboori et al. (2012) Indonesia 1971-2007 CO2 GDP EN TR ARDL Not
Baek (2015) 12 countries 1980-2009 CO2 GDP NU EN FMOLS DOLS Not
Boluk and Mert (2015) Turkey 1961-2010 CO2 GDP REN ARDL Support
Ahmad et al. (2016) Croatia 1992Q1-2011Q1 CO2 GDP ARDL FMOLS Support
DOLS
Bouznit and Pablo- Algeria 1970-2010 CO2 GDP EN EX IM ARDL Support
Romero (2016)
Hao et al. (2016) China 1995-2011 CO2 GDP URB IND FE RE Not
PD EP
Lin et al. (2016) Five African 1980-2011 CO2 GDP POP EI/S FMOLS Not
URB
countries
Saboori et al. (2016) Malaysia 1980-2008 CO2 GDP EN TR ARDL Support
Sepphton and Mann United 1830-2003(CO2) CO2 SO2 GDP OLS MARS Support
(2016) Kingdom
1850-2002(SO2)
Youssef et al. (2016) 56 countries 1990-2012 CO2 GDP EN FD TR GMM Support
Danish et al. (2017) Pakistan 1970-2012 CO2 GDP REN NRE ARDL FMOLS Support
DOLS CCR
Nassiani et al. (2017) BRICS 1990-2015 GHG NO2 EN GDP FE Support
FD TR REN TRA
Qureshi et al. (2017) 80 cities from 1995-2015 CO2 GDP FDI TR GMM Support
37 countries TO

Zhang et al. (2017) 10 newly 1971-2013 CO2 GDP EN TR DOLS FMOLS Support
industrialized
countries
Note: REN-renewable energy consumption; NRE-non-renewable energy consumption; EN-energy; NU-nuclear; URB-
urbanization; TO-tourism; TR-trade; TRA-transportation; FD-financial development; FDI-foreign direct investment; EX-
exports; IM-imports; IND-industry; EP-electric power; POP-population; PD-population density; EI/S-energy
intensity/structure; FE-fixed effects; RE-random effects; PMG-pooled mean group; MP-mean group; DFE-dynamic fixed
effects; OLS-ordinary least squares; FMOLS-fully modified OLS; DOLS-dynamic OLS; ARDL-autoregressive distributed
lag; MARS-multivariate adaptive regression splines; GMM-generalized method of moments; CCR-canonical co-
integrating regression
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3. Model, Methodology, and Data

3.1 Model and Methodology

This paper follows the model from the previous studies by Ang (2007) and Jebli and Youssef (2017). In

order to explore the potential existence of the hypothetical EKC and to examine the causal relationships

between per capita CO2 emissions (CO), real GDP (GDP), renewable (REN) and non-renewable (NRE)

energy consumption, and agriculture (AGR) in these four ASEAN countries (ASEAN-4), the

multivariate framework was established as Eq. (1).

COi t  f ( GDPi t , GDPi 2t , RENi t , NREi t , AGRi t ) (1)

After the natural logarithm, Eq. (1) is formulated as follow:

coi t  i  i t  1i gdpi t  2i gdpi2t  3i r eni t   4i nr ei t  5i agr i t  i t (2)

Where i= 1,2,3,4, stands for each panel country, and t is the time period (1970-2013). εit is the estimated

residuals for the deviations from the long-run equilibrium relationship. The parameters αi and δi allow for

the possibility of country-specific fixed effects and deterministic trends, respectively. And βi denotes the

long-run coefficients of emissions in regard of real GDP, renewable and non-renewable energy

consumption, and agricultural value added. With respect to the inverted U-shape EKC hypothesis, the

results will be accepted if the sign of β1 is positive and that of β2 is negative. The signs mainly depend on

the level of economic development and environmental protection. The sign of β3 hopes to be negative

for the less carbon emissions, while the sign of β4 hopes to be positive for the main emitter, the

consumption of non-renewable energy. Nevertheless, the sign of β5 may depend on the development of

sustainable agriculture.
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3.1.1 Panel unit root tests

For the purpose of checking the stationary of every variable in Eq. (2), five panel unit root tests are

applied, separated into two parts. The first part, termed the common unit root process, includes Levin-

Lin-Chu (LLC) (Levin et al., 2002) and the Breitung (Breitung, 2000), while the second part, termed the

individual unit root process, includes the Im-Pesaran-Shin (IPS) W (Im et al., 2003), the Fisher

augmented Dickey-Fuller (ADF) (Dickey and Fuller, 1979), and the Fisher Phillips-Perron (PP) tests

(Phillips and Perron, 1988). For all these tests, the null hypothesis is un-stationary with a unit root, while

the alternative hypothesis suggests stationary with no unit root.

3.1.2 Panel co-integration tests

In this step, panel co-integration is used in order to explore whether or not the long-run co-integrating

relationship exists in the mentioned variables. This paper uses panel co-integration developed by Pedroni

(1999, 2004) based on Engle-Granger (Engle and Granger, 1987) two-step (residual-based). It applies

several test statistics for co-integration, which are separated into two groups. The first group is named

within-dimension (panel ν-statistic, panel ρ-statistic, panel PP-statistic, and panel ADF-statistic), and the

second between-dimension (group ρ-statistic, group PP-statistic, and group ADF-statistic). If the

residuals of Eq. (2) tested by Eq. (3) are I(1) (τit stands for error terms), the null hypothesis of no co-

integration (𝜋𝑖 = 1) will be accepted, whereas if the residuals is I(0), the alternative hypothesis will be

accepted, and the variables are co-integrated.

 i t   i  i t 1   i t (3)

Besides this co-integration test, in order to ensure the accuracy and reliability, the Kao co-integration test

is also used, which is also based on the Engle-Granger two-step co-integration test (Kao et al., 1999).
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If the selected variables are co-integration, the long-run relationship can be modeled by OLS, DOLS

(Mark and Sul, 2003), and FMOLS (Pedroni, 1999; 2000). From the analyses, the specific statistics

indicate that the independent variables have positive or negative impacts on the dependent variable, i.e.,

the carbon dioxide emissions, on the long-run.

3.1.3 Panel VECM Granger causality

If all variables are co-integrating, the third step is to explore the Granger causal direction between the

selected variables in the short- and long-run in ASEAN-4. According to Engle and Granger (1987), a

two-step is applied in this step to examine the causal relationships. In the first, the long-run causal

relationships are examined by estimating the residuals from Eq. (2); in the second, the short-run estimates

are defined from Eq. (2)’s residuals, which can be described by F-statistics or χ2. The panel VECM

estimate is estimated as follows:

 coit   a1   b11,p b12,p b13,p b14,p b15,p b16,p   coit 1  c1   1it 
 gdp    b   gdp     
 it   a2   21,p b22,p b23,p b24,p b25,p b26,p   it 1  c2   2it 
 gdpit2   a3  q b31,p b32,p b33,p b34,p b35,p b36,p   gdpit21  c3   3it  (4)
           ectit 1   
 renit   a4  p 1 b41,p b42,p b43,p b44,p b45,p b46,p   renit 1  c4   4it 
 nre   a  b51,p b52,p b53,p b54,p b55,p b56,p   nreit 1  c5   
 it 
 5       5it 
 agrit   a6  b61,p b62,p b63,p b64,p b65,p b66,p   agrit 1  c6   6it 

Where Δ is the first-difference operator, t is the time from 1970 to 2013, i is the cross sections (1,2,3,4),

p (p=1,…,q) is the auto-regression lag length, and ect and μ are the lagged error correction term and the

error term, respectively. a, b, and c denote the fixed country effect, the coefficient of short-run causal

impact on the dependent variable, and the long-run adjustment coefficient, respectively.

3.2 Data

In order to explore the dynamic causality between per capita CO2 emissions, real GDP, renewable and

non-renewable energy consumption, and agriculture, the panel data of the ASEAN-4 countries (Indonesia

(IDN), Malaysia (MYS), the Philippines (PHL), and Thailand (THA)) are used over the span time of
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1970-2013. The variables in the multivariate framework consist of per capita CO2 emissions (CO, metric

tons), per capita real GDP (GDP, constant 2010 US$), per capita renewable (RE) and non-renewable

(NRE) energy consumption (tons of oil equivalents, toe), and per capita agricultural value added (AGR,

constant 2010 US$). The data of per capita CO2 emission, real GDP, and agricultural value added are

from the World Development Indicators (World Bank, 2016), and the data of per capita renewable and

non-renewable energy consumption from the BP Statistical Review of World Energy (BP, 2016). The

renewable energy contains hydropower, wind power, solar power, and biomass, while oil, natural gas,

and coal make up the non-renewable energy consumption.

Fig. 1 presents the trends of per capita CO2 emissions from ASEAN-4 from 1970 to 2013. The tendencies

of CO2 emissions in these four countries are all increasing, except for the Asian Financial Crisis of 1997.

Malaysia is the biggest emitter of the four in the study period, increasing from 1.339 metric tons per

capita in 1970 to 8.027 metric tons per capita in 2013. Thailand passed the Philippines to become the

second largest emitter in 1980, while Indonesia passed the Philippines in 1984 to rank third. The

Philippines’ emissions are relatively stable. However, Thailand is the fastest growing country in the

average emission, at 5.89% annually, followed by Indonesia (Table 2). Fig. 2 shows the real GDP

measured in constant 2010 US dollars. Malaysia is the richest country with 10,062 US dollars per capita,

while the Philippines is the lowest with 2,422 US dollars per capita. Thailand’s per capita real GDP

growth rate is the highest at 4.33% per year, and the Philippines’ the lowest (Table 2). Fig. 3 reports the

annual used non-renewable energy per capita in ASEAN-4. Malaysia is the largest consumer. After 1980,

the non-renewable consumption is almost constant in Malaysia, at an average of about 5.69 tons of oil

equivalents (toe) per capita from 1980 to 2013. The Philippines ranks last at 0.29 toe per capita. The

average growth rates of non-renewable in Thailand (6.17%) and Indonesia (5.56%) are much faster than
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Malaysia (1.96%) and the Philippines (1.06%) (Table 2). Fig. 4 shows the per capita renewable energy

consumption in ASEAN-4. Malaysia has the biggest consumption per capita in renewables, while

Indonesia is the lowest. From Table 2, the average growth rate in renewable energy is the fastest among

other variables except Malaysia. Fig. 5 shows the trends of per capita agricultural value added, measured

in constant 2010 US dollars. Malaysia reached the top in 1989 at 1,016 US dollars per capita, while in

2009, there is a sudden drop of nearly -12%. The other three countries all show an increasing tendency.

The growth rates of agricultural value added in three countries are above 1% per year.

Table 2
The average growth rate of each variable in ASEAN-4 from 1971 to 2013 (before logarithm)

Countries CO2 Real GDP Non-renewable Renewable Agriculture

Indonesia 4.77% 4.06% 5.56% 5.91% 1.61%

Malaysia 4.62% 3.93% 1.96% 0.96% 0.69%
the Philippine 1.10% 1.59% 1.06% 4.82% 1.26%
Thailand 5.89% 4.33% 6.17% 6.74% 1.67%

9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
1970 1975 1980 1985 1990 1995 2000 2005 2010
IDN MYS PHL THA
Fig.1. Per capita CO2 emissions (metric tons)
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12,000

10,000

8,000

6,000

4,000

2,000

0
1970 1975 1980 1985 1990 1995 2000 2005 2010
IDN MYS PHL THA

Fig. 2. Per capita real GDP (constant 2010 US dollars)

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00
1970 1975 1980 1985 1990 1995 2000 2005 2010

IDN MYS PHL THA

Fig. 3. Per capita non-renewable energy consumption (toe)

0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
1970 1975 1980 1985 1990 1995 2000 2005 2010

IDN MYS PHL THA

Fig.4. Per capita renewable energy consumption (toe)

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1,200

1,000

800

600

400

200

0
1970 1975 1980 1985 1990 1995 2000 2005 2010
IDN MYS PHL THA
Fig.5. Per capita agricultural value added (constant 2010 US dollars)

The correlation matrix of growth rate is reported in Table 3. Per capita CO2 emissions and agriculture

tend to be correlated with real GDP, and per capita non-renewable energy consumption with emissions.

Per capita renewable energy negatively correlates with emissions, real GDP, and non-renewable energy.

Table 3
The correlation matrix of growth rate in panel from 1971 to 2013

Variables CO2 Real GDP Non-renewable Renewable Agriculture

CO2 1
Real GDP 0.513710629 1
Non-renewable 0.491674419 0.42615179 1
Renewable -0.142313515 -0.020909617 -0.120973579 1
Agriculture 0.172881411 0.466116714 0.158485329 0.087310531 1

4. Empirical Results and Discussion

4.1 Panel unit root tests

Table 4 presents the results of panel unit root tests. The p-values are all significant at the 1% level in the

first difference in both parts of panel unit root methods, the common (LLC and Breiung tests) and

individual unit root (IPS, Fisher-ADF, and Fish-PP) processes. All processes suggest that they have unit

roots at level, while all variables are stationary in the first difference. So all variables reject the null

hypothesis of unit root after first difference, and accept the alternative hypothesis of no unit root.
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Table 4
Panel unit root tests
Common unit root process Individual unit root process
Methods
LLC Breitung IPS Fisher-ADF Fish-PP
0.560 0.540 0.271 7.277 6.470
co
(0.712) (0.705) (0.607) (0.507) (0.595)
-5.636*** -2.342*** -5.457*** 42.924*** 83.004***
Δco
(0.000) (0.010) (0.000) (0.000) (0.000)

0.541 -0.321 0.508 4.991 2.851

gdp
(0.706) (0.374) (0.694) (0.759) (0.943)

-5.388*** -5.493*** -4.519*** 34.423*** 45.258***

Δgdp
(0.000) (0.000) (0.000) (0.000) (0.000)

0.712 -0.710 0.249 6.103 3.755

gdp2
(0.772) (0.239) (0.599) (0.636) (0.879)

-5.164*** -5.456*** -4.496*** 34.316*** 45.461***

Δgdp2
(0.000) (0.000) (0.000) (0.000) (0.000)

-0.822 -0.945 -1.613* 17.104** 39.583***

ren
(0.206) (0.172) (0.053) (0.029) (0.000)

-6.789*** -4.899*** -10.033*** 86.609*** 613.341***

Δren
(0.000) (0.000) (0.000) (0.000) (0.000)

-1.050 1.406 0.447 6.179 4.100

nre
(0.147) (0.920) (0.673) (0.627) (0.848)

-1.917*** -3.115*** -3.290*** 24.328*** 76.077***

Δnre
(0.028) (0.001) (0.001) (0.000) (0.000)

1.388 -1.358* -0.410 9.008 13.376*

agr
(0.917) (0.087) (0.341) (0.342) (0.100)

-6.235*** -4.548*** -8.208*** 70.431*** 110.134***

Δagr
(0.000) (0.000) (0.000) (0.000) (0.000)
Notes: Δ is the first difference operator.

Superscripts ***, **, *denote statistical significance at 1, 5% and 10% levels respectively.

4.2 Panel co-integration tests and long-run estimates

Table 5 presents the results of Pedroni co-integration tests. In the within-dimension part, three out of four

panel statistics reject the null hypothesis at the 5% significance level, while in the between-dimension

part, all group statistics accept the alternative hypothesis. This indicates a long-run co-integrating

relationship between these selected variables in ASEAN-4. In order to ensure the accuracy and reliability

of this result, the Kao co-integration test is used based on the ADF test. Table 6 indicates the existence

of co-integration between these variables at the 1% significance level.

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Table 5

Pedroni co-integration tests

Alternative hypothesis: common AR coefs. (within-dimension)

Statistic Prob. Weighted Statistic Prob.

Panel ν-Statistic -0.037422 0.5149 0.188335 0.4253

Panel ρ-Statistic -1.78894 ** 0.0368 -2.250694 ** 0.0122
Panel PP-Statistic -4.265496 *** 0.0000 -4.832638 *** 0.0000
Panel ADF-Statistic -3.930302 *** 0.0000 -3.597349 *** 0.0002

Alternative hypothesis: individual AR coefs. (between-dimension)

Statistic Prob.

Group ρ-Statistic -2.042235 ** 0.0206

Group PP-Statistic -5.634801*** 0.0000
Group ADF-Statistic -3.750301*** 0.0001
Notes: Superscripts , denote statistical significance at the 1 and 5% levels respectively.
*** **

Table 6
Kao residual co-integration test

t-Statistic Prob.

ADF -4.487106 *** 0.0000

Residual variance 0.003972
HAC variance 0.002077
Notes: Superscripts ***denotes statistical significance at the 1% level.

To examine the existence of panel co-integration between the selected variables, the long-run estimates

of Eq. (2) are calculated by OLS, FMOLS, and DOLS methods. Table 7 presents the long-run parameters

of independent variables, per capita real GDP, renewable and nonrenewable energy, and agricultural

value added in regard to the dependent variable, CO2 emissions. With the significant p-value below the

1% level, the statistics of independent variables from each method are similar. Because of the positive

sign in real GDP and negative sign in the square of real GDP, the inverted U-shape hypothetical EKC is

not found in this panel of ASEAN-4. This result may only be generalizable to other developing countries

such as ASEAN-4. The turning-point of EKC did not appear between income and environmental

degradation because ASEAN-4 are all developing countries with rapid economic growth that is largely

based on fossil fuel consumption, which accounted for almost 75% of total primary energy supply in
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2014. Furthermore, the main energy sources of installed generation capacity are gas (37%), coal (30%),

and hydro (20%) in ASEAN countries (OIES, 2016). Improving the efficient use of energy and

implementing clean coal technology are effective ways to improve the environment and solve the lack

of energy. The result is similar with Baek (2015) for twelve major nuclear generating countries, but

different from Boluk and Mert (2015) who support the EKC hypothesis in Turkey.

The FMOLS method indicates that the long-run estimate of per capita CO2 emissions in regard to real

GDP equals 0.30gdp-1.54. Every 1% increase in per capita renewable energy or agricultural value added

decreases per capita CO2 emissions by 0.07% or 0.53%, whereas every 1% increase in per capita non-

renewable energy increases per capita CO2 emissions by 0.52%. Therefore, in ASEAN-4, increasing the

renewable energy consumption reduces the emissions, whereas non-renewable energy consumption is

positively corrected with emissions in the long-run. Thus, supporting renewable energy use while

reducing non-renewable energy, especially fossil fuels, in ASEAN-4 will be effective in protecting the

environment and ameliorating climate change. Promoting agricultural development will also reduce CO2

emissions in the long-run. By applying proper technology and management, agriculture can sequester

carbon and reduce the carbon footprint (Greenhouse Gas Working Group, 2016). This result is supported

by Jebli and Youssef (2017) with a sample of five African countries and by Rafiq et al. (2016) for 65

countries, but contradicts the result of Jebli and Youssef (2016) for Tunisia.

Table 7
Long-run estimates

OLS FMOLS DOLS

Variables
Coefficient t-Statistic Coefficient t-Statistic Coefficient t-Statistic

gdp -1.47243 *** -3.72341 -1.54274 *** -5.23283 -1.47243 ** -2.38870

gdp 2 0.14823 *** 6.42806 0.15209 *** 8.83374 0.14823*** 4.12384
ren -0.07153 *** -4.83612 -0.07383 *** -6.67843 -0.07153 *** -3.10255
nre 0.51281*** 13.69344 0.51895*** 19.59326 0.51281*** 8.78484
agr -0.53630*** -6.29726 -0.52832*** -8.78169 -0.53630*** -4.03992
Notes: Superscripts , denote statistical significance at 1 and 5% levels respectively.
*** **
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4.3 Panel VECM Granger causality test

The empirical directions of Granger causal relationship with VECM test are reported in Table 8 based

on Eq. (4). The p-values of ECTs in CO2 emissions, renewable and non-renewable energy equations

present negative significance at the 10% level. Long-run causalities are found from other dependent

variables to these three independent variables in Eq. (4).

Thus, short-run causality indicates that non-renewable energy Granger causes CO2 emissions

unidirectionally. Long-run Granger causality shows the feedback causal relationship between them. Any

change in non-renewable energy affects CO2 emissions in the short- and long-run, while emissions affect

non-renewable energy only in the long-run. A long-run feedback Granger causal relationship is found

between renewable energy and carbon emissions. The result is supported by Jebli et al. (2016) for OECD

countries, which indicates long-run feedback causality between renewable energy and emissions. In

conjunction with Section 4.2, this demonstrates the feasibility of proposed method to reduce CO2

emissions by consuming renewable energy. Long-run causality indicates that both real GDP and the

agricultural value added Granger cause the emissions. The absence of short-run causalities from

agriculture and renewable energy to emissions indicates that the development of agriculture and

renewable energy wouldn’t affect CO2 emissions with government short policy.

Short- and long-run Granger causal relationships are found from agricultural value added to renewable

energy. This finding is the first analysis of the linkage of renewable energy and agriculture in ASEAN

countries, which is similar with Jabli and Youssef (2017) for North Africa countries. In these countries

have abundant renewable energy in the agricultural sector, such as biological and agro-forestry energy

sources in their special geographical environment. Promoting sustainable agricultural development will

induce the regional renewable energy evolution to convert these sources into power to support the
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development of renewable energy. However, the absence of any causality from renewable energy to

agriculture suggests that the use of renewable energy wouldn’t influence agriculture, which may depend

on the lower proportional use of renewable energy in the agricultural sector in ASEAN-4 countries. Non-

renewable energy plays a unidirectional causal relationship role to renewable energy in the short-run

through agriculture indirectly and in the long-run directly. Any activities in non-renewable energy will

stimulate the development of these countries’ renewable sources. Economic growth unidirectional

Granger causes renewable energy indirectly in the short-run through agriculture and directly in the long-

run. Along with the prosperity offered by economic growth in ASEAN-4, renewable energy will undergo

profound renovation. The result is different from Apergis and Payne (2012) for 80 countries with short-

and long-run feedback causalities between renewable energy and real output.

Table 8
VECM Granger causality tests
Short-run Long-run
Dependent variables
Δco Δgdp Δgdp2 Δren Δnre Δagr ECT
-3.057 0.227 -0.005 0.280** -0.218 -0.045*
Δco -
(0.201) (0.131) (0.869) (0.035) (0.209) [-1.812]

-0.009 -0.133** 0.002 0.022 -0.075 0.009

Δgdp -
(0.833) (0.045) (0.892) (0.699) (0.325) [0.840]

-0.149 36.321** 0.030 0.328 -1.253 0.242

Δgdp2 -
(0.832) (0.031) (0.879) (0.721) (0.302) [1.399]

0.047 -7.640 0.483 -0.301 0.765* -0.105*

Δren -
(0.853) (0.204) (0.200) (0.362) (0.080) [-1.685]

0.068 0.743 -0.027 0.012 -0.066 -0.041**

Δnre -
(0.331) (0.656) (0.797) (0.555) (0.584) [-2.353]

-0.084 2.653** -0.160** -0.016 0.112* 0.012

Δagr -
(0.105) (0.031) (0.038) (0.277) (0.096) [0.935]
Notes: Superscripts ***, **, *denote statistical significance at 1, 5% and 10% levels respectively.

In the short-run, the agricultural value added is Granger caused by non-renewable energy and real GDP,

indicating that economic growth and non-renewable energy can advance the agricultural growth in the

short-term. Agricultural value added affects the use of non-renewable energy in the long-term. Any

variation of agricultural value added in these selected countries will reflect the development of non-

renewable energy. This result is different from Jebli and Youssef (2016) for Tunisia. Agriculture needs
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large energy to support the agricultural activities, such as agricultural machinery and irrigation.

5. Conclusion

The purpose of the present study is to explore the Granger causality between per CO2 emissions, real

GDP, renewable and non-renewable energy, and agricultural value by using a panel of four selected

ASEAN countries from 1970 to 2013. Another purpose is to examine the existence of the inverted U-

shaped hypothetical EKC in this panel. The long-run estimates, from panel OLS, FMOLS, and DOLS

methods, reject the inverted U-shaped EKC hypothesis between per capita carbon dioxide emissions and

real GDP in this sample of ASEAN-4. Renewable energy has a negative impact, while non-renewable

energy has a positive impact on carbon dioxide emissions, as expected in the long-run in these selected

countries. However, the finding of a negative impact of agricultural value added on CO2 emissions

suggests that increasing in agricultural value added reduces CO2 emissions. By changing from

conventional tillage to no-till, reducing the use of fertilizers, and replacing non-renewable energy by

renewable energy, sustainable agriculture can enhance carbon sequestration and decrease CO2 emissions.

This paper also uses panel VECM to confirm the orientation of causalities between selected variables.

Long-run bidirectional Granger causalities are found between per capita CO2 emissions, renewable and

non-renewable energy. Unidirectional linkages are found from agriculture and real GDP to emissions, to

renewable and non-renewable energy in the long-run, respectively. Short-run causalities exist

unidirectionally from non-renewable energy to CO2 emissions and to agricultural value added, from real

GDP to agriculture, and from agriculture to renewable energy consumption directly. Indirect causalities

are found from non-renewable energy and real GDP to renewable energy through, agricultural value

added.

In view of the above econometric analysis, ASEAN-4 policymakers should encourage the development
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of agricultural management, especially organic agriculture. Agriculture can not only promotes the

development of renewable energy, but also cuts down CO2 emissions to reduce the impacts on global

warming and climate change. ASEAN countries should share and develop their advanced experiences

and technologies of agricultural management, such as developing organic agriculture systems capable of

reducing CO2 emissions by 48-66% with conventional systems (Kotschi and Muller-Samann, 2004). The

relationship between renewable energy and agriculture reveals the lack of renewable energy use in the

agricultural sector in this region. Therefore, in the grand scheme, ASEAN countries should enlarge their

investment in the agricultural infrastructures of renewable energy conversion, in order to improve the

ASEAN environment.

Despite the abundant renewable resources in this area, they are underestimated and consumed with lower

efficiency, while some projects lack funds. Hence, the relevant governments should increase their

investment to improve the infrastructure of renewable energy. As the second largest source of renewable

energy after hydropower in this area, biomass represented 12.41% of total renewable energy in 2011.

Biomass is mainly used as fuel for cooking and heating in this area (ABTSR, 2014). Hence, biomass

remains underutilized by low-level efficiency, so these governments should play more attentions to the

efficient use of this strategic energy. Policymakers should enlarge the investment in other renewable

energy sources. Indonesia has nearly 40% (27 GW) of global total potential geothermal resources, by

only uses 5% (1.4 GW) of its capacity, although ranking third after the United States (3.6 GW) and the

Philippines (1.9 GW) in 2015. The Indonesia government plans to increase the capacity to 12.6 GW by

2025 (REN21, 2016). Developing micro renewable energy systems will also solve the problem of a lack

of energy while reducing emissions. According to ABTSR (2014), 21% of the population had no

electricity. The Philippines government plans to build 150-200 micro-hydropower plants in remote
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regions (REN21, 2016). The inter-ASEAN region should undertake closer cooperation in sharing

expertise and policies for renewable energy to reduce the dependence of fossil fuels and to gain a

sustainable and secure energy supply for the future.

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Highlights:
 Causalities are examined between CO2 emissions, renewable energy, and agriculture.
 No causality is found from renewable energy to agriculture.
 The inverted U-shape EKC hypothesis doesn’t exist in selected ASEAN-4.
 Developing renewable energy would improve the environment.
 Sustainable agriculture can promote the renewable energy and reduce the emissions.