CO2 EMISSION AND ECONOMIC DEVELOPMENT IN ASEAN COUNTRIES

TABLE OF FIGURESFigure 1: An estimated Environment Kuznet Curve EKC...3 Figure 2: A description of variables in the equation 1...4 Figure 3: Main sources of CO2 emissions...5 Figure 4: H

Lê Huyền Trang, 1613340096 Phạm Quang Minh, 1613340060

TABLE OF CONTENTS

Content

ABSTRACT

INTRODUCTION

I Introduction

II Objectives of the study .

TERMINOLOGY

I CO2 Emssions

II Environment Kuznet curve

1 The environmental Kuznets Curve (EKC)

2 Explanation of EKC shape

3 Econometrics Framework

CONTENT

I Main sources of CO2 emissions

1 Human resources

2 Natural Sources

II State of economy and CO2 emission in ASEAN countries

1 State and classification of economy in ASEAN countries

2 State of CO2 emssions in ASEAN countries

III Testing the Environment Kuznet Curve (EKC) in ASEAN countries

1 High and upper middle income ASEAN countries

2 Low – middle ASEAN countries

IV The effects of CO2 emission on the development in ASEAN countries

1 Greenhouse effect

2 Ocean acidification

3 Changes to plant nutrition & growth levels

4 Smog & ozone pollution

5 Ozone layer depletion

V Challenges of reducing CO2 emission in ASEAN countries

VI Recommendations

VII Conclusion

APPENDIX 1

APPENDIX 2

REFERENCES

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TABLE OF FIGURES

Figure 1: An estimated Environment Kuznet Curve (EKC) 3

Figure 2: A description of variables in the equation 1 4

Figure 3: Main sources of CO2 emissions 5

Figure 4: Human sources of Carbon Dioxide 6

Figure 5: Carbon Dioxide emissions from fossil fuel combustion 6

Figure 6: Natural sources of Carbon Dioxide 8

Figure 7: Summary Statistic of GDP per capita and some emissions per capita in ASEAN countries 10

Figure 8:Classification of ASEAN countries in terms of income level 11

Figure 9: An analysis of CO2 per capita and population in ASEAN countries 11

Figure 10: An Environment Kuznet Curve of high and upper middle income ASEAN countries 13

Figure 11: An Environment Kuznet Curve of low middle income ASEAN countries 15

Figure 12: Temperature changes in 5 ASEAN countries 16

CO 2 EMISSION AND ECONOMIC DEVELOPMENT IN ASEAN COUNTRIES

Vũ Hữu Quyền, 1613340141

Lê Quang Thế Anh, 1613340003

Hồ Thị Phương, 1613340073 Nguyễn Thị Hồng Hoài, 1613340043 Nguyễn Kỳ Mi, 1617340058

Lê Huyền Trang, 1613340096 Phạm Quang Minh, 1613340060

Foreign Trade University

91 Chùa Láng Street, Dong Da District, Hanoi

ABSTRACT

Development and urbanization are very important for developing countries, but rapid economicgrowth alone is not an indicator of development for a dynamic and sustainable economy.Recently, studies on the environmental Kuznet Curve (EKC) revealed that environmentaldegradation occurs in tandem with economic growth This profound result has led manyeconomists interested to study about economic growth and environmental degradation.Environmental Kuznets Curve (EKC) hypothesis describes relationship between environmentaldegradation and level of income follows an upside down U path Our asignment aims todemonstrate EKC for the ASEAN case, using emissions data from variety sources

In this article, we focus on emphasizing the relationship between economic development andenvironmental destruction Using realistic models and data, we will explain how fossil fuelcombustion, transportation and industrialization massively increase CO2 concentrations in ASEANcountries, which further contributed to global warming We use time series data from 1990

-2016 in 10 ASEAN countries namely Malaysia, Indonesia, Vietnam, Thailand, Philippines,Laos, Brunei, Cambodia, Myanmar and Singapore At the end, we also implicate some the effect

of CO2 emission that cause deterioration in the environment as well as holding a number ofsolutions to these issues and long-term plan to minimize its volume and effects

Key words: ASEAN countries, Environmental Kuznets Curve (EKC), CO 2 emission.

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of fossil fuel in the late eighteenth century, CO2 had been stable for about 20 million years Due toanthropogenic (human-caused) emissions, atmospheric CO2 is now significantly higher than at anytime in the last 800,000 years and probably in the last 20 million This change has happened in amere 200 years, which is instantaneous by geological standards.

Secondly, the amount of CO2 in the atmosphere has increased greatly since human beingsbegan burning large amounts of coal and petroleum in the nineteenth century In more recenttimes, this source of CO2 emissions has increased rapidly, while destruction of forests has alsobecome a major source of CO2 Atmospheric concentrations of several other gases, includingmethane (CH4) and nitrous oxide (N2O), have also been increased recently by human activitiesand are contributing to greenhouse warming of the planet

Thirdly, to ASEAN countries, this problem has become serious recently According to the data in theIEA report, in 2005, the total emissions from transport in Vietnam were 20.3 million tons; nationalroad transport emissions totaled 16.8 million tons Motorcycles are the largest emitters in Vietnam,contributing 53 percent of CO2 emissions in 2005 Under the business as usual scenario, carbonemissions from transport sector are expected to be increase to 144 million tons while road transportwill have reached 126 million tons It is estimated that there will be an annual increase in total CO2 emissions of 4.5 percent A later report provided that, in 2009, Indonesia ranked sixteenth in the world,and also the first in ASEAN for carbon dioxide emissions with total 413.29 million tons The next wasThailand (253.58 million tons, 3.8 tons per capital) and then Vietnam (98.76 million tons in total, 1.12tons per capital ) If the International Energy Agency (IEA) is to be believed, the amount of carbonemissions from transport in ASEAN nations will double by 2050 At the same time, carbon emissionsfrom transport in developed world will remain almost unchanged The current emissions fromtransport account for nearly one-fourth of the total amount of artificially released CO2 IEA predictsthat the share of emissions from developing countries, which is 35 per cent today, will nearly double

to 66 per cent by 2050

Therefore, we realise the impacts of Carbon Dioxide CO2 in our lives, especially to ASEANcountries, including Vietnam Our assignment is aimed at an analysis of effects of CO2 Besides, weuse Environmental Kuznet Curve (EKC) to test and analyse the facts of ASEAN countries

AI OBJECTIVES OF THE STUDY.

2 What is the main source of CO2 emissions?

3 We analyse the effects of CO2 emissions in ASEAN countries Finally we suggest toimplement policies to government as well as measurements to corporations Thereby, wewill help corporations manage the quality of enivironment and make it better

TERMINOLOGY

I CO2 EMSSIONS

Carbon dioxide (chemical formula CO2) is a colorless gas with a density about 60% higher than that

of dry air Carbon dioxide consists of a carbon atom covalently double bonded to two oxygen atoms

It occurs naturally in Earth's atmosphere as a trace gas Under all conditions found naturally onEarth, CO2 is an invisible, odorless gas It is removed from the atmosphere mostly by plants, whichextract carbon from CO2 to build their tissues, and by the oceans, in which CO2 dissolves

Emissions means the release of greenhouse gases and/or their precursors into the atmosphereover a specified area and period of time Carbon dioxide is the most significant long-livedgreenhouse gas in Earth's atmosphere Since the Industrial Revolution anthropogenicemissions – primarily from use of fossil fuels and deforestation – have rapidly increased itsconcentration in the atmosphere, leading to global warming

AI ENVIRONMENT KUZNET CURVE

1 The environmental Kuznets Curve (EKC)

The environmental Kuznets curve is a hypothesized relationship between various indicators ofenvironmental degradation and income per capita In the early stages of economic growthdegradation and pollution increase, but beyond some level of income per capita (which will vary fordifferent indicators) the trend reverses, so that at high-income levels economic growth leads toenvironmental improvement This implies that the environmental impact indicator is an inverted U-shaped function of income per capita An example of an estimated EKC is shown in Figure 1

Figure 1: An estimated Environment Kuznet Curve (EKC)

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The EKC is named for Kuznets (1955) who hypothesized income inequality first rises and then falls

as economic development proceeds The Kuznets curve implies that as a nation undergoesindustrialization – and especially the mechanization of agriculture – the center of the nation’seconomy will shift to the cities As internal migration by farmers looking for better-paying jobs inurban hubs causes a significant rural-urban inequality gap (the owners of firms would be profiting,while laborers from those industries would see their incomes rise at a much slower rate andagricultural workers would possibly see their incomes decrease), rural populations decrease asurban populations increase Inequality is then expected to decrease when a certain level of averageincome is reached and the processes of industrialization – democratization and the rise of the

welfare state – allow for the benefits from rapid growth, and increase the per-capita income Kuznets believed that inequality would follow an inverted “U” shape as it rises and then falls again with the increase of income per-capita.

2 Explanation of EKC shape

A number of papers have developed theoretical models about how preferences and technologymight interact to result in different time paths of environmental quality The different studiesmake different simplifying assumptions about the economy Most of these studies can generate

an inverted U shape curve of pollution intensity but there is no inevitability about this

The shape of the curve can be explained as follows: when GDP per capita rises, it leads to adegraded environment; However, when it reaches a certain point, increasing per capita GDPreduces environmental degradation At low levels of income, it is difficult to mitigate pollutionbecause individuals tend to use limited income to meet their basic consumption needs Whenincome levels reach a certain level, individuals begin to consider the choice betweenenvironmental and consumer quality, resulting in increased environmental damage but at alower rate After reaching the conversion threshold, spending on waste treatment will increase,

as each individual wishes to improve the quality of the environment by using more and thequality of the environment begins to improve along with economic growth

ε

ln i

The author assumes that: In any country at a given income level, even if the level of emissionsper capita is different, the elasticity of income remains the same A restriction is applied thatregressions are only appropriate when the indicator levels fall to zero or become negative in thecase of deforestation where afforestation can occur The point where emissions or

concentrations are at a maximum, called “the turning point”, can be found using the formula:

τ=exp [-β1/(2β2)]

The writer said that when people studies the EKC, most of them try to estimate both the fixed andrandom effects models Whereas the fixed effects model can usually be estimated consistently, thedata of countries and times are conditional Therefore, an EKC estimated with fixed effects usingonly data form developed countries might not say much about the future of developing countries Onthe other hand, many studies have found that the random effects model cannot be estimatedconsistently, and so it is unclear what we can infer from the majority of EKC studies

CONTENT

I MAIN SOURCES OF CO2 EMISSIONS

There are both natural and human sources of carbon dioxide emissions Natural sources includedecomposition, ocean release and respiration Human sources come from activities like cementproduction, deforestation as well as the burning of fossil fuels like coal, oil and natural gas

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87 percent of all human-produced carbondioxide emissions come from the burning offossil fuels like coal, natural gas and oil Theremainder results from the clearing of forestsand other land use changes (9%), as well assome industrial processes such as cement

manufacturing (4%).

1.1. Fossil fuel combustion

The largest human sourceof emissions,

especially carbon dioxide is from thecombustion of fossil fuels This produces 87%

of human carbon dioxide emissions Burning

Figure 4: Human sources of Carbon Dioxide these fuels releases energy which is most

commonly turned into heat, electricity or power for transportation Some examples of where they are used are in power plants, cars, planes and industrial facilities In 2011, fossil fuel use created 33.2 billion tonnes

of carbon dioxide emissions worldwide.

The 3 types of fossil fuels that are used the most are coal, natural gas and oil Coal is responsible for 43% of carbon dioxide emissions from fuel combustion, 36% is produced by oil and 20% from natural gas.

Figure 5: Carbon Dioxide emissions from fossil fuel combustion

emissions Coal represents one- third

of fossil fuels' share of world total primary energy supply but is responsible for 43% of carbon

dioxide emissions from fossil fuel use.

During 2000–2010, total primary energy demand in Brunei Darussalam increased at 7.6% per year, reaching 1.20 Mtoe in 2010 from 0.57 Mtoe in 2000 The per capita primary energy demand of Brunei Darussalam (7.92 tons of oil equivalent [toe] per person in 2010) is the highest among the members of the Asian Development Bank.

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Singapore’s total primary energy demand grew at a rate of 5.0% (2005–2010)—slightly lower thanthe GDP rate—reaching 23.7 Mtoe in 2010 Oil was the main imported fuel with a share of 66.5%

in 2010, followed by natural gas at 32.9% Per capita primary energy demand of Singaporerepresents a relatively high level at 4.67 toe per person in 2010, compared with Southeast Asia’s

average of 0.93 toe in the same year, as it reflects the refinery crude oil input

requirements that are re-exported.

Electricity

Electricity and heat generation is the economic sector that produces the largest amount

of man-made carbon dioxide emissions This sector produced 41% of fossil fuel related carbon dioxide emissions in 2010 Around the world, this sector relies heavily on coal, the most carbon-intensive of fossil fuels, explaining this sector giant carbon footprint.

In Brunei, electricity generation reached 3.60 terawatt-hours (TWh) in 2010, up 41.6% from 2000.Per capita electricity generation was about 9,000 kilowatt-hours (kWh) per year, almost eight timesthe Southeast Asia group’s average of 1,153 kWh per person In Brunei Darussalam, electricity

production is essentially all gas-fired However, as these simple gas turbine plants have low operating ratios, the average generation efficiency was only 25.4% in 2010 There are efforts under way to upgrade plant efficiency by introducing more advanced combined-cycle generation technologies The first gas-fired combined-cycle power plant of 110 megawatts (MW) was completed in 2007, and the second to fourth phases, each with a capacity of 200 MW, are also being planned.

Transportation

The transportation sector is the second largest source of anthropogenic carbon dioxide emissions.Transporting goods and people around the world produced 22% of fossil fuel related carbon dioxideemissions in 2010 This sector is very energy intensive and it uses petroleum based fuels (gasoline,diesel, kerosene, etc.) almost exclusively to meet those needs Since the 1990s, transport relatedemissions have grown rapidly, increasing by 45% in less than 2 decades

Road transport accounts for 72% of this sector's carbon dioxide emissions Automobiles, freightand light-duty trucks are the main sources of emissions for the whole transport sector andemissions from these three have steadily grown since 1990 Apart from road vehicles, the otherimportant sources of emissions for this sector are marine shipping and global aviation

Marine shipping produces 14% of all transport carbon dioxide emissions While there are a lotless ships than road vehicles used in the transportation sector, ships burn the dirtiest fuel on themarket, a fuel that is so unrefined that it can be solid enough to be walked across at roomtemperature Because of this, marine shipping is responsible for over 1 billion tonnes of carbondioxide emissions This is more than the annual emissions of several industrialized countries(Germany, South Korea, Canada, UK, etc.) and this sector continues to grow rapidly

Global aviation accounts for 11% of all transport carbon dioxide emissions International flightscreate about 62% of these emissions with domestic flights representing the remaining 38%.Over the last 10 years, aviation has been one of the fastest growing sources of carbon dioxideemissions.Aviation is also the most carbon-intensive form of transportation, so it's growthcomes with a heavy impact on climate change

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In fact, Indonesia’s transport energy demand will grow, nearly doubling the 2010 level

to reach 68.6 Mtoe in 2035 Vehicle ownership will increase as it has not yet reached saturation level Much of the transport energy needs will be fueled by oil, which will account for 96% of the transport energy demand in 2035.

Industrial sector

The industrial sector is the third largest source of man-made carbon dioxide emissions Thissector produced 20% of fossil fuel related carbon dioxide emissions in 2010.The industrialsector consists of manufacturing, construction, mining, and agriculture Manufacturing is thelargest of the 4 and can be broken down into 5 main categories: paper, food, petroleumrefineries, chemicals, and metal/mineral products These categories account for the vastmajority of the fossil fuel use and CO2 emissions by this sector

2.2. Plant and animal respiration

An important natural source of carbon dioxide is plant and animal respiration, which accounts for 28.56% of natural emissions Carbon dioxide is a byproduct of the

chemical reaction that plants and animals use to produce the energy they need

Annually this process creates about 220 billion tonnes of carbon dioxide emissions Plants and animals use respiration to produce energy, which is used to fuel basic activities like movement and growth The process uses oxygen to break down nutrients