Impact of trade liberalisation, economic development and energy consumption on the environment in Vietnam

Abstract

This study provides a quantitative assessment of the impact of trade openness on Vietnam's environment and the amount of CO2 emission over a period of 29 years from 1985 to 2013. An Auto-regression Distributed Lag (ARDL) model is applied to estimate the impact of trade openness on CO2 emission. The study found a significant negative long-run equilibrium between economic development, openness and energy use on CO2 emission in Vietnam. Trade liberalisation exhibits negative impact on CO2 emission. More specifically, a 1% increase in trade openness leads to 0.19% increase in CO2 emission in the long-run elasticity; and a 1% increase in trade openness leads to 0.15% increase in CO2 emission in the short-run elasticity. The empirical results show that the long-run relationship between economic development and CO2 emission in Vietnam can be expressed in an inverted U-curved function. In term of energy consumption, the results show that energy usage negatively affect CO2 emission. A 1% increase in energy usage leads to 1.39% in CO2 emission in the long-run which strongly indicates the inefficiency of CO2 treatment of energy use in Vietnam. Thus the environment quality in Vietnam can be improved with cleaner technology and stricter regulations on environmental protection incorporated into international economic at the policy level in Vietnam.