Income, coal consumption, and the environmental Kuznets curve in Vietnam

Abstract

This study investigates the relationship between gross domestic product (GDP) and coal consumption in an emerging country, Vietnam. We test for the existence of an environmental Kuznets curve (EKC) relationship from 1984 to 2021 using the autoregressive distributed lag (ARDL) framework. After verifying a level relationship, we show that the GDP elasticity of coal demand rises with economic growth and is greater than unity since the 1990s. Thus, the GDP-coal consumption relationship resembles an upward-sloping curve instead of an inverted U-shaped EKC. This relationship is robust to estimation methods and when we control for two additional variables. While renewable energy consumption is negatively associated with coal consumption, oil prices have no significant impact on coal usage in the long run. The findings allow us to provide policy implications for the sustainable development of Vietnam. Specifically, the large GDP elasticity suggests that Vietnam should reduce its excessive coal use to become more ecologically sustainable by making coal more expensive than cleaner alternatives.