CO2 EMISSION AND ECONOMIC DEVELOPMENT IN ASEAN COUNTRIES

112 Figure 10: An Environment Kuznet Curve of high and upper middle income ASEAN countries .... ENVIRONMENT KUZNET C URVE The environmental Kuznets curve is a hypothesized relationship b

TABLE OF CONTENTS

ABSTRACT 1

INTRODUCTION 2

I Introduction 2

II Objectives of the study 2

TERMINOLOGY 3

I CO2 Emssions 3

II Environment Kuznet curve 3

1 The environmental Kuznets Curve (EKC) 3

2 Explanation of EKC shape 4

3 Econometrics Framework 4

CONTENT 5

I Main sources of CO emissions 52 1 Human resources 5

2 Natural Sources 8

II State of economy and CO emission in ASEAN countries 92 1 State and classification of economy in ASEAN countries 9

2 State of CO emssions in ASEAN countries 112 III.Testing the Environment Kuznet Curve (EKC) in ASEAN countries 13

1 High and upper middle income ASEAN countries 13

2 Low – middle ASEAN countries 14

IV.The effects of CO2 emission on the development in ASEAN countries 16

1 Greenhouse effect 16

2 Ocean acidification 17

3 Changes to plant nutrition & growth levels 17

4 Smog & ozone pollution 17

5 Ozone layer depletion 17

V Challenges of reducing CO emission in ASEAN countries 182 VI.Recommendations 18

VII Conclusion 19

APPENDIX 1 19

APPENDIX 2 20

REFERENCES 21

TABLE OF FIGURES

Figure 1: An estimated Environment Kuznet Curve (EKC) 3Figure 2: A description of variables in the equation 1 4Figure 3: Main sources of CO emissions 52

Figure 4: Human sources of Carbon Dioxide 6Figure 5: Carbon Dioxide emissions from fossil fuel combustion 6Figure 6: Natural sources of Carbon Dioxide 8Figure 7: Summary Statistic of GDP per capita and some emissions per capita in ASEAN countries 10Figure 8:Classification of ASEAN countries in terms of income level 11Figure 9: An analysis of CO per capita and population in ASEAN countries 112

Figure 10: An Environment Kuznet Curve of high and upper middle income ASEAN countries 13Figure 11: An Environment Kuznet Curve of low middle income ASEAN countries 15Figure 12: Temperature changes in 5 ASEAN countries 16

CO2 EMISSION AND ECONOMIC DEVELOPMENT IN ASEAN COUNTRIES

Foreign Trade University

91 Chùa Láng Street, Dong Da District, Hanoi

ABSTRACT

Development and urbanization are very important for developing countries, but rapid economic growth alone is not an indicator of development for a dynamic and sustainable economy Recently, studies on the environmental Kuznet Curve (EKC) revealed that environmental degradation occurs

in tandem with economic growth This profound result has led many economists interested to study about economic growth and environmental degradation Environmental Kuznets Curve (EKC) hypothesis describes relationship between environmental degradation and level of income follows

an upside down U path Our asignment aims to demonstrate EKC for the ASEAN case, using emissions data from variety sources

In this article, we focus on emphasizing the relationship between economic development and environmental destruction Using realistic models and data, we will explain how fossil fuel combustion, transportation and industrialization massively increase CO2 concentrations in ASEAN countries, 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 of solutions to these issues and long-term plan to minimize its volume and effects

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

INTRODUCTION

I INTRODUCTION

Firstly, carbon dioxide (CO2) is never out of concern and related to global warming It is released into Earth’s atmosphere mostly by the burning of carbon-containing fuels and the decay of wood and other plant matter Under all conditions found naturally on Earth, CO2 is an invisible, odorless gas Although other gases are also causing Earth’s climate to warm, CO2 alone is responsible for about three-fourths of global warming Emissions of CO2 predate the human race by billions of years and are essential to life on Earth, since the natural greenhouse effect keeps Earth’s average surface temperature above freezing In the deep geological past, atmospheric CO2 has sometimes been much higher than today On the other hand, until human beings began to burn large amounts

of fossil fuel in the late eighteenth century, CO2 had been stable for about 20 million years Due

to anthropogenic (human-caused) emissions, atmospheric CO2 is now significantly higher than at any time in the last 800,000 years and probably in the last 20 million This change has happened

in a mere 200 years, which is instantaneous by geological standards

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

Thirdly, to ASEAN countries, this problem has become serious recently According to the data in the IEA report, in 2005, the total emissions from transport in Vietnam were 20.3 million tons; national road 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, carbon emissions from transport sector are expected to be increase to 144 million tons while road transport will have reached 126 million tons It is estimated that there will be an annual increase in total CO2 e missions 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 was Thailand (253.58 million tons, 3.8 tons per capital) and then Vietnam (98.76 million tons in total, 1.12 tons per capital ) If the International Energy Agency (IEA) is to

be believed, the amount of carbon emissions from transport in ASEAN nations will double by

2050 At the same time, carbon emissions from transport in developed world will remain almost unchanged The current emissions from transport account for nearly one-fourth of the total amount

of artificially released CO2 IEA predicts that 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 ASEAN countries, including Vietnam Our assignment is aimed at an analysis of effects of CO2 Besides,

II OBJECTIVES OF THE STUDY

The objective of the study is to prove Environmental Kuznet Curve (EKC) with the figures of ASEAN countries We pointed out basic terms related to CO2 emissions and EKC, afterwards answering the following issues:

2 What is the main source of CO2 emissions?

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

TERMINOLOGY

I CO 2 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

on Earth, CO2 is an invisible, odorless gas It is removed from the atmosphere mostly by plants, which extract 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 atmosphere over

a specified area and period of time Carbon dioxide is the most significant long-lived greenhouse gas in Earth's atmosphere Since the Industrial Revolution anthropogenic emissions primarily –from use of fossil fuels and deforestation have rapidly increased its concentration in the –atmosphere, leading to global warming

II ENVIRONMENT KUZNET C URVE

The environmental Kuznets curve is a hypothesized relationship between various indicators of environmental degradation and income per capita In the early stages of economic growth degradation and pollution increase, but beyond some level of income per capita (which will vary for different indicators) the trend reverses, so that at high-income levels economic growth leads to environmental 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)

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

industrialization and especially the mechanization of agriculture – – the center of the nation’s economy will shift to the cities As internal migration by farmers looking for better-paying jobs in urban 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 and agricultural workers would possibly see their incomes decrease), rural populations decrease as urban populations increase Inequality is then expected to decrease when a certain level of average income 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

A number of papers have developed theoretical models about how preferences and technology might interact to result in different time paths of environmental quality The different studies make 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 a degraded environment; However, when it reaches a certain point, increasing per capita GDP reduces environmental degradation At low levels of income, it is difficult to mitigate pollution because individuals tend to use limited income to meet their basic consumption needs When income levels reach a certain level, individuals begin to consider the choice between environmental and consumer quality, resulting in increased environmental damage but at a lower 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 the quality of the environment begins to improve along with economic growth

The author assumes that: In any country at a given income level, even if the level of emissions per capita is different, the elasticity of income remains the same A restriction is applied that regressions are only appropriate when the indicator levels fall to zero or become negative in the case 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 and random effects models Whereas the fixed effects model can usually be estimated consistently, the data of countries and times are conditional Therefore, an EKC estimated with fixed effects using only data form developed countries might not say much about the future of developing countries

On the other hand, many studies have found that the random effects model cannot be estimated consistently, and so it is unclear what we can infer from the majority of EKC studies

CONTENT

I MAIN SOURCES OF CO 2 EMISSIONS

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

Figure 3: Main sources of CO emissions 2

Since the Industrial Revolution, human sources of carbon dioxide emissions have been growing Human activities such as the burning of oil, coal and gas, as well as deforestation are the primary cause of the increased carbon dioxide concentrations in the atmosphere

Sources

Human Sources

Ocean Exchange

Soil Respiration

Volcanic eruptionPlant Animal Respiration

87 percent of all human-produced carbon dioxide emissions come from the burning of fossil fuels like coal, natural gas and oil The remainder results from the clearing of forests and other land use changes (9%), as well as some industrial processes such as cement manufacturing (4%)

The largest human source of emissions, especially carbon dioxide is from the combustion of fossil fuels This produces 87%

of human carbon dioxide emissions Burning 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

Coal is the most

produces the most

Because of this and it's high rate of use, coal is the largest fossil fuel source of

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

Figure 4 Human sources of Carbon Dioxide :

Figure 5: Carbon Dioxide emissions from fossil fuel combustion

Singapore’s total primary energy demand grew at a rate of 5.0% (2005–2010)—slightly lower than the 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 Singapore represents 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 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

man-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 times the 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 dioxide emissions 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 related emissions have grown rapidly, increasing by 45% in less than 2 decades

Road transport accounts for 72% of this sector's carbon dioxide emissions Automobiles, freight and light-duty trucks are the main sources of emissions for the whole transport sector and emissions from these three have steadily grown since 1990 Apart from road vehicles, the other important 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 lot less ships than road vehicles used in the transportation sector, ships burn the dirtiest fuel on the market,

a fuel that is so unrefined that it can be solid enough to be walked across at room temperature Because of this, marine shipping is responsible for over 1 billion tonnes of carbon dioxide 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 flights create 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 dioxide emissions.Aviation is also the most carbon-intensive form of transportation, so it's growth comes with a heavy impact on climate change

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

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 like sugars, proteins and fats This releases energy that can be used by the organism but also creates water and carbon dioxide as byproducts

2.3 Soil respiration and decomposition

Another important natural source of carbon dioxide is soil respiration and decomposition, which accounts for 28.56% of natural emissions Many organisms that live in the Earth's soil use

respiration to produce energy Amongst them are decomposers who break down dead organic material Both of these processes releases carbon dioxide as a byproduct Annually these soil organisms create about 220 billion tonnes of carbon dioxide emissions

Any respiration that occurs below-ground is considered soil respiration Plant roots, bacteria, fungi and soil animals use respiration to create the energy they need to survive but this also produces carbon dioxide Decomposers that work underground breaking down organic matter (like dead trees, leaves and animals) are also included in this Carbon dioxide is regularly

released during decomposition

A minor amount carbon dioxide is created by volcanic eruptions, which accounts for 0.03% of natural emissions Volcanic eruptions release magma, ash, dust and gases from deep below the Earth's surface One of the gases released is carbon dioxide Annually this process creates about 0.15 to 0.26 billion tonnes of carbon dioxide emissions

The most common volcanic gases are water vapor, carbon dioxide, and sulfur dioxide Volcanic activity will cause magma to absorb these gases, while passing through the Earth's mantle and crust During eruptions, the gases are then released into the atmosphere

II STATE OF ECONOMY AND CO 2 EMISSION IN ASEAN COUNTRIES

Using the STATA, we report summary statistics of the variables used in estimation

Indonesia

Myanmar

Thailand

Vietnam