Table of Contents

ABSTRACT

The target of the national industrial policy is to encourage an even distribution of the manufacturing industry throughout Indonesia, and this will also drive the increasing utilization of energy. The supply of energy sourced from fossils continues to decline from year to year, while the use of renewable energy still stands at 12% in the composition of energy mix. This encourages energy conservation policy as a solution for maintaining the availability of domestic energy to accomplish a continuous condition of industry output. Energy conservation policy has been stipulated in government regulations but the awareness of the industry in Indonesia to imply it is still not massive. Therefore, it is necessary to see the relationship of economic growth and agglomeration in the sector of the manufacturing industry on energy intensity in 26 provinces. The results of the Vector Error Correction Model (VECM). Panel regression shows that economic growth has a positive relationship with energy intensity in the long term. Meanwhile, agglomeration has a negative relationship with energy intensity. The research implications show that the provincial government can consider industrial agglomeration to increase energy efficiency by looking at provinces that have the same economic structure as their expansion areas. In addtition, the government can evaluate the implementation of energy conservation in Indonesia, especially in agglomerated areas.

Keywords: agglomeration, energy intensity, energy conservation, VECM