Response of Indonesian mineral supply to global renewable energy generation: Analysis based on gravity model approach

Abstract

The captivating surge of energy transitions in the major industrialized nations has elevated the global demand for critical minerals. The demand pattern has enabled mineral-abundant emerging economies like Indonesia to enter the international market by exporting mineral goods. Accordingly, we investigate the Indonesian mineral export supply's response to the renewable energy production of the 18 clean energy-generating countries, considering crude oil and mineral prices, exchange rates, and economic growth of the resource and importer countries from 1990 to 2020. In doing so, we apply the Poisson Pseudo-maximum Likelihood (PPML) approach to measuring the panel gravity model for mineral exports in Indonesia. As a result, we observe a significant response of Indonesia's mineral export supply to the renewable energy generation of the 18 mineral importing countries. Besides, mineral and crude oil prices are insignificant, whereas the importer countries' exchange rates and income growth positively influence Indonesia's mineral export growth. However, Indonesia's income factor negatively affects its mineral export supply. Finally, we validate our results using an alternative estimator, the Driscoll-Kraay robust standard error estimation technique. Therefore, our findings suggest implementing Indonesia's existing mineral policy to produce finished mineral goods to materialize the worldwide vision of energy transitions toward a crossroad of net-zero emissions by the middle of the current century.

Keywords

Mineral export supply / Energy transformation / Gravity model / PPML approach / Indonesia / Renewable energy-producing countries

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