Table of Contents

ABSTRACT

National industrial policies have been aiming towards an equal spread of the Indonesian manufacturing industries which also encouraging increasing energy consumption. In the meantime, the sources of fossil energy are diminishing year by year while the renewable energy sources remain underrepresented in Indonesia’s energy mix. This calls for policy actions regarding energy conservation to maintain domestic energy supply sustainability in order to ascertain stable industry outputs. The policy should also take into account Indonesia’s energy sources that are mostly from outside Java Island, even though the energy consumption is more Java-centric. This study attempts to observe the impacts of energy intensity on economic growth in 26 provinces across Indonesia. Using ordinary least squares (OLS) regression method within the 1988-2018 period, with variable economic growth (LPDRB), agglomeration (LAGG) and energy intensity (LENERGI) The results show that energy intensity affects growth differently in every province. This was due to unequal stages of industrialization between provinces inside and outside of Java, leading to the conclusion that the growth in several provinces is not parallel to their designated energy intensity. Two of the researched provinces are the most energy-dependent, namely Bali and East Nusa Tenggara. In addition, the energy intensity variables that have a negative effect on GRDP are shown by the provinces of Riau, South Sumatra, Bengkulu, DKI Jakarta, West Nusa Tenggara, Central Kalimantan, South Kalimantan, East Kalimantan, North Sulawesi, Maluku and Papua.

Keywords: economic growth, energy intensity, Indonesia, manufacturing, ordinary least square