An Econometric Assessment of Growth–Pollution Interactions in Vietnam within the Environmental Kuznets Framework

Abstract

The pursuit of Net Zero emissions has become a strategic priority for many economies, including Vietnam. Understanding the determinants of greenhouse gas (GHG) emissions is essential for developing effective environmental management and sustainable growth policies. This study examines the relationship between economic growth and environmental pollution in Vietnam within the Environmental Kuznets Curve (EKC) framework, emphasizing the role of exchange rate volatility. Annual data covering the period 1990–2024 were obtained from the World Bank and analyzed using a multi-step econometric approach, including the ARDL bounds testing method and Granger causality analysis. The empirical results indicate that the real exchange rate not only serves as a predictor of carbon emissions but also responds to environmental changes, revealing a bidirectional causal relationship. A traditional U-shaped relationship characterizes the short- and long-term effects of industrial development, foreign direct investment (FDI), and economic growth on emissions. The EKC turning point has not yet emerged, suggesting that Vietnam’s current growth trajectory remains environmentally intensive. These findings contribute new empirical evidence to the literature on the growth–pollution nexus and underscore the importance of integrating exchange rate management and sustainable investment policies into Vietnam’s environmental strategy toward Net Zero 2050.