Industrial Production, FDI, Trade Openness and CO₂ Emissions: Evidence from Vietnam

Abstract

This study examines how industrial production, foreign direct investment (FDI), trade openness, and human capital affect CO₂ emissions in Vietnam over the period 1986–2023, a time marked by rapid industrialization and deeper economic integration. Using annual time-series data from the World Development Indicators and the Penn World Table, the ARDL–ECM approach is employed to estimate both short-run and long-run relationships. The results show a stable long-run relationship among the variables. The error correction term is negative and significant, indicating that short-run deviations are corrected fairly quickly. In the long run, industrial production, FDI, trade openness, and human capital are all associated with higher CO₂ emissions. This suggests that Vietnam’s current growth and integration process still relies heavily on energy use. Diagnostic tests confirm that the model is statistically sound. Overall, the findings imply that policy efforts should focus more clearly on cleaner industrial restructuring, better screening of FDI projects, stronger environmental requirements in trade, and improvements in education and training that support low-carbon development.