Relationship between carbon emissions, economic growth, renewable energy consumption, foreign direct investment, and urban population in Vietnam

Abstract

At the 26th UN Climate Change Conference in late 2021, Vietnam set a target of achieving net-zero carbon (CO2) emissions by 2050. However, the country’s rapid economic growth, urbanization, and industrialization have historically relied on coal-based energy, a source of significant greenhouse gas (GHG) emissions. Although contributing only 0.8% of the world’s emissions over the last two decades, Vietnam currently has one of the fastest increasing GHG emissions rates per capita. Over the 2000–2015 period, Vietnam’s per capita gross domestic product increased from $390 to $2,000, and CO2 emissions nearly quadrupled. Hence, this research explores the causal relationships among CO2 emissions, economic growth, foreign direct investment, renewable energy usage, and urban population in Vietnam over the period from 1990 to 2018 using the Environment Kuznets Curve. An autoregressive distributed lag bounds testing technique for measuring integration is utilized to investigate the long-run relationship. Results indicate that economic growth increases with CO2 emissions until a certain threshold level and then CO2 emissions decrease, thereby supporting the environmental Kuznets curve theory for Vietnam. Furthermore, this study examines the causal relationship among variables using a Granger causality model and determines that FDI, urban population, and renewable energy consumption play an important role and have substantial impact on carbon emission in Vietnam.