Environmental Productivities and Carbon Abatement Costs of Manufacturing Sectors

  • Erik ArmunditoEmail author
  • Shinji Kaneko


The manufacturing sector is one of the most important sectors in Indonesia due to its enormous potential for creating job opportunities and its contribution to development. When the roles of manufacturing sector are expected to increase continuously, some considerable obstructions should be confronted, in particular the increasing pollution and the increasing domestic price of oil commodities. This chapter provides a baseline analysis of the total factor productivity (TFP) growth over time with and without considering CO2 emissions and the estimation of carbon abatement cost of manufacturing sector from 1990 to 2000. The results show that the TFP with CO2 emissions over time has grown faster than the TFP without CO2 emissions for the most of all periods. The results suggested that when accounting for changes in pollutions as undesirable outputs, the average productivity growth is higher than the growth ignoring pollutions. The increased price of oil commodities might affect the environmental productivity and average carbon abatement cost of the manufacturing sector. Several sectors are identified to be ready for the implementation of a carbon tax in the future. The results also suggest that CO2 emissions as undesirable outputs can be considered in measuring the manufacturing sector’s productivity growth as a response to the climate change mitigation and energy-related policy. At the same time, technological improvement is expected to be a major concern for the manufacturing firms’ long-term strategic planning after the changes in prices of oil commodities. Hence, the share of manufacturing sector to Indonesia’s gross domestic product (GDP) and more job opportunities can be well maintained in the future.


Total factor productivity Directional distance function Malmquist-Luenberger productivity index Carbon abatement cost Indonesian-manufacturing sector 


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Copyright information

© Springer Japan 2016

Authors and Affiliations

  1. 1.National Development Planning Agency (BAPPENAS)JakartaIndonesia
  2. 2.Graduate School for International Development and Cooperation (IDEC)Hiroshima UniversityHigashi, HiroshimaJapan

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