Analysis of Fertilizer Raw Materials and Environmental Degradation: Using Granger Causality

Abstract

Abstract This study aims to examine the relationship between fertilizer raw materials and environmental degradation using the Granger causality test. This study uses data from World Bank Commodity Prices for fertilizer raw materials in the form of price data for phosphate, potash, and natural gas in the U.S. Dollar/metric tons and environmental degradation in the form of CO2 Emissions from methane and process emissions data from British Petroleum (BP) from 1990-2021. The methods are stationarity test, cointegration test, and Granger causality test. The results of the analysis state that there is no bidirectional relationship between these variables, but there is a one-way relationship where environmental degradation affects the price of raw materials for potash and phosphate fertilizers, and the price of natural gas is affected by environmental degradation. The implication of this research is the need to apply incentives to producers and consumers of fertilizers in the use of fertilizers to improve environmental quality.