DETERMINANTS OF CO2 EMISSIONS IN MALAYSIA: AN EKC ANALYSIS

Abstract

CO₂ emissions remain a major challenge to Malaysia’s sustainable development and transition toward a green economy. This study examines the determinants of CO₂ emissions in Malaysia from 1990–2024, focusing on GDP, energy consumption, and trade (imports and exports of goods and services). Guided by the Environmental Kuznets Curve (EKC) framework, the study investigates the long-run effects of these variables on environmental quality. Using annual data from the World Bank and econometric techniques including the Augmented Dickey-Fuller (ADF) unit root test, Akaike Information Criterion (AIC), cointegration, and regression analyses, the findings show that GDP, energy consumption, and imports significantly increase CO₂ emissions, supporting the inverted U-shaped EKC hypothesis. Exports exhibit mixed effects, with stronger impacts at higher emission levels, while energy consumption acts as a key channel through which trade influences environmental degradation. The results highlight the need for green economy strategies that promote energy efficiency and sustainable trade practices to decouple economic growth from environmental degradation. Despite being limited to data available up to 2024, the study provides valuable evidence for policymakers seeking to align Malaysia’s economic and trade objectives with international carbon reduction commitments.