Keywords: CO2 emissions, carbon dioxide, economic impact, Malaysia, manufacturing sector, productivity growth, total factor productivity growth, TFP growth, air pollution
Carbon dioxide emissions, impact on Malaysia's manufacturing productivity growth
The methods used to measure productivity growth generally ignore the pollutants that are produced by the industrial processes. For example, pollutant emissions generated as undesirable output, apart from the main output of Malaysia's manufacturing sector, are excluded from the productivity accounting framework. This study aims at an extended productivity measure that takes pollutants into account by internalisation of Carbon dioxide (CO2) as a measure of air pollutant emissions into the production function, as an unpriced input. The results show that there was a slowdown in the contribution of total factor productivity (TFP) growth in general, and a negative impact of CO2 emissions produced by the sector in particular, compared to other productivity indicators of the sector when CO2 is internalised in the models.