Nexus between Extreme Poverty and CO2 Emissions in Indonesia: An Empirical Investigation with VECM Approach

Two sustainable development goals, poverty reduction and environmental quality, present challenges in Indonesia. While extreme poverty in Indonesia declined from 1990 to 2022, CO2 emissions rose, making Indonesia vulnerable to achieving these goals. This study investigates the conflict between extreme poverty alleviation and environmental quality improvement as measured by CO2 emissions, focusing on the relationship between the two. Using 1990-2022 time series data and the Vector Error Correction Model (VECM) approach, the results show that economic growth reduces extreme poverty but increases CO2 emissions. In addition, improving human quality (HDI) reduces CO2 emissions and extreme poverty. These findings confirm the relationship between economic growth, poverty alleviation, and environmental quality. Therefore, the government must adjust its economic development policies to be environmentally friendly and support improving human quality to overcome this challenge.