The Dynamic Trade-Off between Trade Openness and Renewable Energy Share in Indonesia

Nadia Fazira; Putri Ayu

doi:10.62794/je3s.v7i4.426

Authors

Nadia Fazira Universitas Andalas, Indonesia
Putri Ayu Universitas Andalas, Indonesia

DOI:

https://doi.org/10.62794/je3s.v7i4.426

Keywords:

trade openness, renewable energy share, dynamic trade-off, ARDL, Indonesia

Abstract

This study examines the dynamic trade-off in the relationship between trade openness and the renewable energy share in Indonesia by distinguishing between short-run and long-run dynamics. Using annual data from 1990 to 2021, the study employs the Autoregressive Distributed Lag (ARDL) approach. The results reveal a clear reversal across time horizons: trade openness is negatively and significantly associated with the renewable energy share in the short run, while the relationship becomes positive and significant in the long run. The negative short-run relationship is consistent with the scale-effect mechanism, whereby trade-related economic expansion may increase energy demand that is not immediately matched by renewable energy utilization. In contrast, the positive long-run relationship is consistent with technique-related adjustments associated with access to cleaner technologies, energy-efficient capital goods, and knowledge that require time to be adopted and implemented. These mechanisms provide a theoretical interpretation rather than being directly identified by the empirical model. The findings highlight the importance of coordinating trade and energy policies to address short-run energy pressures while strengthening Indonesia’s capacity to benefit from longer-term opportunities associated with international integration.

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