CARBON TAX AND CARBON EMISSIONS IN ASEAN: EXPLORING THE MODERATING ROLE OF RENEWABLE ENERGY PENETRATION

Abstract

This study examines the impact of carbon tax implementation on per capita carbon emissions in ASEAN countries, highlighting the moderating role of renewable energy within the national energy mix. Motivated by the urgent need to balance economic growth with emission reduction in developing regions, the research applies a quantitative approach using Dynamic Panel Generalized Method of Moments (GMM) with secondary data from the World Bank, OECD, IMF, and IEA covering 2010–2023. The findings reveal that adopting a carbon tax significantly reduces carbon emissions, confirming its effectiveness as a fiscal environmental policy instrument. Moreover, the share of renewable energy not only directly reduces emissions but also enhances the effectiveness of the carbon tax, indicating a strong synergistic effect when both policies are implemented simultaneously. The interaction between carbon tax and renewable energy proves to be significantly negative, suggesting that countries with higher renewable energy penetration benefit more from carbon tax policies. Among control variables, economic growth and urbanization are associated with higher emissions, while trade openness shows no significant effect. These results provide critical implications for ASEAN policymakers to integrate carbon taxation with renewable energy expansion strategies and reinvest tax revenues in green technology development. The study contributes novel evidence to environmental economics by validating Pigouvian Tax theory and policy mix frameworks in the context of Southeast Asian economies.