Does democratic transition reduce carbon intensity? Evidence from Indonesia using the synthetic control method.

Despite growing concern about the low-carbon economic development, little is known about the role of political institutions, democracy, or the absence thereof, in controlling carbon intensity (carbon dioxide emissions per unit of GDP). This paper estimates the causal effects of democratic transition in Indonesia on its national carbon emission intensity. The synthetic control method is adopted to handle both time-invariant and time-variant confounding heterogeneity. Results show that Indonesia's democratic transition increases on average 0.24 kg carbon dioxide emissions per constant 2005 US dollar in the post-transition period (1999-2010), a rise of approximately 25.34%. The placebo tests indicate this causal effect is significant and the leave-one-out sensitivity check also demonstrates its robustness. The evidence of Indonesia suggests that democratic transition may serve to intensify, rather than mitigate, the emissions of carbon dioxide. Therefore, policymakers should pay more attentions to the contextual fit of democratic transition.