Examining the Relationship between CO2 Emissions and Economic Efficiency in Malaysia: A Longitudinal Analysis
DOI:
https://doi.org/10.22452/IJIE.vol18no4.2Keywords:
CO2 emissions, Economic efficiency, Green total factor productivity, Sustainability, MalaysiaAbstract
Current statistics reveal that Malaysia’s greenhouse gas emissions have risen
in recent decades, notably carbon dioxide (CO2) emissions, mostly attributable to a surge
in the nation’s energy demand. Comprehending the impact of CO2 emissions on economic
efficiency is significant, as Malaysia needs to optimise efficiency to achieve high-income
status. Nonetheless, there have been limited previous studies on the impact of CO2
emissions on Malaysia’s economic efficiency. Therefore, this study aims to determine how
CO2 emissions affect Malaysia’s economic efficiency through two phases: quantitative and
qualitative approaches. This study contributes to the existing knowledge by examining
the effect of CO2 emissions on Malaysia’s economic efficiency (1970-2018) through the
ARDL (Autoregressive Distributed Lag) cointegration method. The findings indicate that
CO2 emissions and economic efficiency have a favourable correlation in the short term,
but a negative correlation in the long term. The green total factor productivity (GTFP)
is also used in this study as an additional indicator of how efficient the economy is. A
positive GTFP shows that Malaysia is making quick progress in becoming economically
efficient. Appropriate environmental protection policies related to CO2 emissions, such as
a carbon pricing scheme, were suggested to increase economic efficiency and accomplish
sustainability in Malaysia.
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