The influence of economic growth, urbanization, renewable energy consumption and industrialization on carbon emissions in multiple nations around the world in 2021

FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS ENVIRONMENTAL ECONOMICS ESSAY TOPIC: THE INFLUENCE OF ECONOMIC GROWTH, URBANIZATION, RENEWABLE ENERGY CONSUMPTION AND INDUST

FOREIGN TRADE UNIVERSITY

FACULTY OF INTERNATIONAL ECONOMICS

ENVIRONMENTAL ECONOMICS ESSAY

TOPIC: THE INFLUENCE OF ECONOMIC GROWTH, URBANIZATION, RENEWABLE ENERGY CONSUMPTION AND INDUSTRIALIZATION

ON CARBON EMISSIONS IN MULTIPLE NATIONS AROUND THE

WORLD IN 2021

Student group : No 09

Lecturer : Nguyen Thi Thanh Huyén, Ph.D

Hanoi, March 2025

GROUPˆS MEMBERS

Therefore, during the period of completing our assignment, we have been working hard to complete this research paper with the best of our abilities - as a token of our sincere appreciation to you

To be honest, we do acknowledge that our paper still has many shortcomings and limitations because of our limited knowledge and experiences; hence, we really hope to receive your feedback and comments to improve further Once again, we sincerely thank you and wish you the best health, success, and happiness

With heartfelt appreciation,

Group 09

2.2.2 Variable explanafions, measurernenís and dqÍd SOHFC@S e«ee- 26 2.2.3 Expected effects of Independent Variables on Dependent Variable 26 2.3 Statistical Description of the Data: 27 2.3.1 Statistical Description of the Data: 27 2.3.2 Correlation Matrix of Variables: 28 CHAPTER 3 : RESULT AND DISCUSSION 30 3.1 Estimation of econometrics model: 30

3.1.2 Sample regression function obtained: 30 3.1.3 Diagnosing and correcting the problems of the tmodlel- « 30

4

3.2.1 Coefficient of determination (R?): 33

3.2.3 Explanation of the Results: 35 CHAPTER 4 : RECOMMENDATIONS AND SOLUTIONS FOR CARBON EMISSIONS 38 4.1 Solutions for Economic Growth: 38 4.2 Solutions for Urban Population: 38 4.3 Solutions for Renewable Energy Consumption: 39 4.4 Solutions for Industrial sectors: 39

Carbon emissions are one of the most pressing environmental challenges of the modern world As economies grow and industrial activities expand, the demand for energy increases, leading to higher emissions of greenhouse gases, particularly carbon dioxide (CO2) These emissions are a major contributor to global climate change, affecting ecosystems, weather patterns, and overall human well-being Addressing carbon emission

is not just an environmental concern but also an economic and social imperative, as it influences sustainable development, energy security, and public health

The importance of managing carbon emissions cannot be understated Rapid industrialization and urbanization have led to rising emissions, causing environmental degradation and global warming Countries worldwide are striving to balance economic growth with environmental sustainability by adopting cleaner technologies, renewable energy sources, and carbon reduction policies Reducing emissions is not only a responsibility toward future generations but also a strategic necessity to ensure long-term economic stability, resource conservation, and resilience against climate change impacts

To address and assess carbon emissions effectively, various economic and environmental factors must be taken into consideration Carbon emissions are closely

linked to key variables such as GDP growth, urbanization, industrial activities, and

renewable energy adoption Understanding these relationships helps policymakers and researchers develop strategies to mitigate emissions while supporting economic progress

By examining the factors influencing carbon emissions, nations can implement targeted policies that promote sustainability without hindering development

Recognizing the significance of carbon emissions in shaping environmental and economic policies, our group has chosen the topic “The influence of economic growth, urbanization, renewable energy consumption and industrialization on carbon emissions

in multiple nations around the world in 2021”

Research objective: Analyze and assess the impact of various economic and environmental factors on carbon emissions worldwide, thereby providing insights into effective mitigation strategies

Research subjects: The influence of economic growth, urbanization, industrialization

and renewable energy on carbon emissions of countries worldwide in 2021

Research scope: The spatial scope includes 183 countries globally, and the temporal scope is from January 2021 to December 2021 Our data collection methods include gathering data from World Bank and the estimation method uses OLS, with the model run

in STATA for regression analysis and hypothesis testing

Conclusion, References and Appendix In which the content includes:

Chapter 1: Literature Review and Theoretical Framework

Chapter 2: Research Methodology and Model Specification

Chapter 3: Result and Discussion

Chapter 4: Recommendations and Solutions for Carbon emissions

CHAPTER 1 : LITERATURE REVIEW AND THEORETICAL FRAMEWORK 1.1 Literature Review:

1.1.1 Background:

The year 2021 represents an imperative period for investigating CO2 emissions and its determinants The International Energy Agency (IEA) reported that global COz emissions rose by 6% in 2021, reaching 36.3 billion tons, the highest level in history at the time This unprecedented surge in emissions significantly worsened global warming, leading to more extreme weather events, rising sea levels, and widespread environmental destruction Additionally, the emissions spike pushed the world further off track from climate targets, increasing the risk of irreversible climate tipping points

2021 is also a year marked by rapid economic recovery, increased urbanization, and industrial growth Following the severe economic stagnation caused by the pandemic, 2021 businesses quickly sought to recover from the prolonged downturn This resurgence led to a substantial increase in productivity, as industries and enterprises endeavored to restore pre- pandemic levels of economic activity As reported by The World Bank, global GDP grew by approximately 6% in 2021, representing one of the strongest annual growth rates in decades A similar trend can be witnessed in urban population and industrial production, both accelerating greatly to compensate for the lengthy period of stagnation Furthermore, the consumption of renewable energy also underwent substantial advancements According to the International Energy Agency (IEA), global renewable energy capacity increased by approximately 290 GW, the highest annual addition on record, driven primarily by solar and wind power installations This development is also marked by the COP26 Climate Summit, emphasizing the global transition to renewable energy, with over 190 countries agreeing to phase down coal and increase investments

in clean energy, signalling a more ubiquitous utilization of renewable energy

A thorough understanding of the underlying factors contributing to the crisis of elevated COz emissions is essential, as it enables policymakers to formulate well-informed and effective policies aimed at mitigating the risk of severe climate consequences that endanger global ecosystems, economic stability, and human well-being Interestingly, all of the aforementioned aspects are key variables that can have an impact on CO:z emissions Therefore, it 1s crucial to conduct

comprehensive studies that investigate the relationship between these variables and COz emissions

to identify the primary drivers behind the unprecedented increase in carbon dioxide levels in 2021 From that, our previously mentioned aim of designing effective policies can be realized

1.1.2 Research into the impact of Economic Growth, Urbanization, Renewable Energy Consumption, Industrialization on Carbon Emissions:

a Researches in other countries:

The study titled “Effect of economic growth on CO2 emissions in developing countries: Evidence from a dynamic panel threshold model” by C Aye and Edoja (2017), after using a dynamic panel threshold model that utilized panel data from 31 developing

impact on CO2 emissions in low-growth regimes but a positive impact in high-growth regimes The effect in the high growth regime is however stronger Thus, the validity of the Environmental Kuznets Curve (inverted-U) hypothesis could not be established for these panels of countries for the period under study However, this study is held back by its utilization of CO2 emissions per capita as the sole proxy for environmental degradation, neglecting other important environmental indicators Despite its limitations, this study can still inform policymakers in developing countries about the environmental consequences

of economic growth and the need for targeted policies to mitigate CO2 emissions In addition, the study results could be used in the construction of global greenhouse gas emission models

Arouri et al (2012) suggested the presence of an EKC at the regional level after conducting the study “Energy consumption, economic growth and CO2 emissions in Middle East and North African countries” that investigated the relationship between carbon dioxide (CO2) emissions, energy consumption, and real GDP in 12 Middle East and North African (MENA) countries from 1981 to 2005 This study employed bootstrap panel unit root tests and cointegration techniques to analyze the long-run dynamics between these variables before achieving results that revealed evidence of a quadratic relationship between real GDP and CO2 emissions However, country-specific analysis shows that while the estimated long-run coefficients of income and its square often satisfy the EKC hypothesis, the turning points (income levels at which emissions start to decline) vary considerably and are often outside the range of observed GDP levels for many countries, casting doubt on the applicability of the EKC hypothesis at the individual country level Meanwhile, concerning the energy consumption variable, it is found that at the regional level, this variable has a positive and significant impact on CO2 emissions in the MENA region These findings help MENA countries’ policymakers realize that they can pursue energy conservation policies to reduce CO2 emissions without necessarily sacrificing economic growth Howbeit, despite being significantly valuable and insightful, this study should be interpreted with discretion since the data only covers the period of 1981-2005 This may not reflect current dynamics, as economic structures and environmental policies have evolved since then

In the study named “The relationship between CO2 emissions, economic growth, available energy, and employment in SEE countries” Mitic et al (2022) investigated eight

South-Eastern European (SEE) countries (Albania, Bulgaria, Croatia, Greece, North

Macedonia, Romania, Serbia, and Slovenia) from 1995 to 2019 by utilizing a wide range

of research methodology, for instance, Panel Cointegration Tests, Panel Vector Error Correction Model (VECM) , which accompanied by research theory consisting of

long-run Granger causality relationships exist between CO2 emissions, GDP, and employment Howbeit, variance decomposition revealed that CO2 emissions are primarily explained by their own past shocks, with limited contributions from GDP, available energy, and employment This study still possesses some clear limitations, for instance, the absence

of other imperative indicators of economic growth such as urbanization and industrialization

In the study titled “Impact of Urbanization and Economic Growth on CO2 emissions:

A Case of Far East Asian Countries”, Anwar et al (2020), the researchers adopted a panel data-fixed effect model that accounts for time-invariant country-specific characteristics, and concluded that urbanization was significantly correlated with CO2 emission in the panel of Far East Asian countries from 1980 to 2017 Their findings also espoused aforementioned studies that came to the conclusion that economic growth (GDP) and trade openness are positively associated with CO2 emissions Adding to this, Shahbaz et al (2015) investigates the impact of urbanization on CO2 emissions in Malaysia using the STIRPAT (Stochastic Impacts by Regression on Population, Affluence, and Technology) model, covering the period of 1970 to 2011 The results indicated that besides the significant impact of economic growth on CO2 emissions due to the intense consumption

of energy and trade openness in the period of accelerating economic development, the relationship between urbanization and CO2 emissions is also a notable finding The results revealed the existence of an U-shaped relationship between urbanization and CO2 emissions, implying that initially, urbanization reduces emissions, but after a certain threshold, it increases emissions This provides insights for policymakers in designing comprehensive environmental urbanization, energy and trade openness policies to mitigate CO2 emissions However, the study still possessed clear limitations: the study only relies

on aggregate national-level data, which might mask regional variations and specific sectoral impacts Moreover, despite controlling for several key factors, the possibility of omitted variable bias is still present within these studies There might be other variables, such as, renewable energy adoption rates and industrialization, that influence CO2 emissions but are not included in the model due to data limitations

Interestingly, the previously mentioned studies are opposed by Wang et al (2021) who organized the study “Impacts of urbanization on carbon emissions: An empirical analysis from OECD countries” This research paper investigated the complex relationship between urbanization and carbon emissions, focusing on OECD (Organisation for Economic Co-operation and Development) high-income countries In this study, a dynamic panel Autoregressive Distributed Lag (ARDL) model to analyze long-run equilibrium, short-run dynamics, impact mechanisms, and lag effects between urbanization and various

that developed countries tend to witness negative impacts of urbanization on carbon emissions, albeit an extremely weak one In addition, the findings also revealed that urbanization's impact on carbon emissions operates through effects on economic growth, energy efficiency, and the final energy consumption structure This suggests that the urbanization variable presents quite a complex challenge, as existing studies have reached diverse and sometimes contradictory conclusions regarding its impact on CO2 emissions The study “Non-Renewable and Renewable Energy Consumption and CO: emissions

in OECD Countries: A Comparative Analysis” orchestrated by Shafie1 and A.Salim (2014) investigated the determinants of carbon dioxide (COz) emissions in OECD countries from

1980 to 2011 by employing the STIRPAT (Stochastic Impacts by Regression on Population, Affluence, and Technology) model to analyze the relationship between CO2 emissions and various factors, including renewable and non-renewable energy consumption and urbanization The findings suggested that while non-renewable energy consumption significantly increases CO2 emissions, renewable energy consumption significantly decreases CO2 emissions Furthermore, the study found that total population, GDP per capita, industrialization, and urbanization all positively and significantly impact CO2 emissions These findings can help convince policymakers to promote renewable energy

as well as adopt guiding urban planning to reduce the environmental impact of cities However, limitations still exist, as the study uses data up to 2011, ignoring imperative recently-updated insights, reducing the applicability of this research in recent context Contributing to these bodies of work, Chen et al (2022), in the study “Renewable energy and COz emissions: New evidence with the panel threshold model’, investigated the nonlinear impact of renewable energy consumption (REC) on carbon dioxide (COz) emissions per capita since they recognized that most prior studies used linear panel estimation techniques that overlooked potential nonlinear relationships This study employed a dynamic panel threshold model on data from 97 countries between 1995 and

2015 According to the result, the effect of growth in REC per capita on the growth of COz emissions per capita is negative and significant only when countries surpass a certain threshold of REC This finding predominantly holds for developed countries and countries with stronger institutional frameworks, remaining robust even with alternative measures of REC The study highlights that increasing REC only translates into reduced CO2 emissions

if a certain level of REC is achieved

The country of Saudi Arabia is the scope of the study “Industrialization, urbanization and CO2 emissions in Saudi Arabia: Asymmetry analysis” by Mahmood et al (2020) This research paper investigated the impact of industrialization and urbanization on CÔ; emissions per capita in this Middle East country from 1968 to 2014 by employing time-

Distributed Lag (ARDL) models, to analyze the relationship between these variables, which led to the conclusion that both urbanization and industrialization have positive and statistically significant effects on CO2 emissions per capita in Saudi Arabia, though urbanization has a more elastic effect on emissions compared to industrialization This result can inform strategies to balance industrialization and urbanization with environmental sustainability, as well as highlight the need for promoting energy-efficient public transportation and discouraging fossil fuel consumption However, limiting the scope to Saudi Arabia indicates that the results produced by this study would be notoriously difficult to apply in other countries

The study “The asymmetry effect of industrialization, financial development and globalization on CO2 emissions in India” by Patel and Mehta (2023) investigated the impact of economic growth, industrial development, fossil fuel energy output, financial development, and globalization on CO2 emissions in India, utilizing annual time series data from 1971 to 2019 The study applied the Non-Linear Autoregressive Distributed Lag (NARDL) model to analyze the relationships The findings indicated a long-term association between CO2 emissions and the examined factors Industrialization and economic expansion were found to have significant, long-term positive effects on CO2 emissions, implying that as these sectors grow, so does pollution Conversely, globalization was shown to considerably reduce CO2 emissions, suggesting that increased global interconnectedness can lead to environmentally beneficial outcomes, such as technology transfer and adoption of cleaner practices The study underscored the importance of policymakers focusing on sustainable economic development strategies that minimize environmental damage It advocates for India to implement policies that support cleaner production practices, promote the growth of non-polluting sectors, and concurrently discourage industries that heavily emit CO2 Nevertheless, limitations remain One of which is the reliance on aggregate-level data, which may not capture the nuances of regional variations or sector-specific impacts In addition, the NARDL model, while powerful, may not fully capture the complex interplay of all relevant factors influencing CO2 emissions

b Researches in Vietnam:

Minh et al (2023) orchestrated the study titled “Relationship between carbon emissions, economic growth, renewable energy consumption, foreign direct investment, and urban population in Vietnam” This study investigated the period of 1990 - 2018 and employed an autoregressive distributed lag (ARDL) bounds testing technique to assess long-run relationships and Granger causality tests to determine causal links among the variables The study found evidence supporting the EKC hypothesis in Vietnam, indicating that CO2 emissions initially increase with economic growth but eventually decrease after

Direct Investment (FDI, Urban Population (UR), and Renewable Energy Consumption (REC) in influencing CO2 emissions The study found that FDI and UR are positively correlated with CO2 emissions, while REC has a negative correlation The results also

demonstrated a bidirectional causal relationship between GDP, REC, FDI and UR to CO2

emissions in the short and long runs The study suggests that Vietnam should promote clean energy use, carefully manage FDI to balance economic benefits with environmental costs, and improve public transportation and environmental quality in urban areas The findings contributed to the development of sound policy frameworks and effective energy planning strategies for Vietnam's transition to a low-carbon development path Limitations still present, however, namely the fact that data on urban population and FDI inflow are generally aggregate data, so the study does not specify which province or city is the source

of increased environmental pollution

By using the Autoregressive Distributed Lag (ARDL) cointegration approach, the study “Economic Growth, Energy Consumption and Environmental Quality: Evidence from Vietnam” of Ho and Ho (2021) investigated the relationship between economic growth, energy consumption, and environmental quality in Vietnam between 1995 and

2018 The results indicated a long-term equilibrium relationship between these variables Notably, income (GDP) was found to have a positive effect on CO2 emissions, but the long-run income elasticity was smaller than the short-run elasticity This suggested that as Vietnam's income increases over time, CO2 emissions will rise at a slower pace than in the short run, indicating a possible move towards cleaner technologies The study also found statistical evidence supporting the impact of energy consumption and trade openness on environmental pollution However, FDI was found to have a negative impact on CO2 emissions Based on these findings, the authors proposed several policy recommendations aimed at protecting the environment while promoting economic growth in Vietnam These recommendations include the selection of clean technologies, environmental regulatory enforcement and responsible social responsibility for businesses, and policies that place importance on environmental FDI projects The research concluded by emphasizing the need for government policies to control imported goods and set environmental standards for products to limit negative environmental impacts as the economy develops Contributing to the previous work, Vo et al (2024), in the study “Do Urbanization and Industrialization Deteriorate Environmental Quality? Empirical Evidence from Vietnam”, investigates the impact of urbanization and industrialization on environmental quality in Vietnam from 1985 to 2021, a period marked by rapid economic growth since the Doi Moi reforms of 1986, by utilizing the Autoregressive Distributed Lag (ARDL) estimation technique to analyze the relationships between urbanization, industrialization, economic growth, and CO2 emissions as a proxy for environmental degradation The findings suggested that, in Vietnam, urbanization leads to short-term environmental

degradation, but this effect diminishes in the long run Industrialization, however,

negatively affects environmental quality in both the short and long term The study also provided evidence supporting the Environmental Kuznets Curve (EKC) hypothesis in the Vietnamese context, implying that environmental quality may improve as the country

Vietnamese government reassess its industrialization strategy to ensure that long-term sustainable economic growth does not come at the expense of environmental quality The research advocates for integrating environmental considerations into economic policies, investing in clean energy, and promoting green production solutions This study is limited due to its reliance on aggregate data at the national level, which may mask regional variations and specific industry effects within Vietnam

The study “Population, carbon dioxide emissions and renewable energy consumption nexus: New insights from Vietnam” conducted by Mai et al (2024) explored the complex relationship between population dynamics, carbon dioxide (CO2) emissions, and renewable energy consumption (REC) in Vietnam from 2000 to 2023 by employing the Autoregressive Distributed Lag (ARDL) approach and fixed panel data methods to analyze the nexus The findings indicated that while population growth, especially in urban areas,

is correlated with increased CO2 emissions, highlighting the impact of demographic changes on the environment, renewable energy consumption helps to decrease CO2 emissions or ecological pollution in Vietnam, noting that if renewable energy consumption

is up by 1%, CO2 emissions or environmental pollution is down by 1.042% This research contributes to evidence-based policymaking for sustainable development in Vietnam It aims to guide future research efforts by unravelling the intricacies of the relationships between population, CO2 emissions, and renewable energy consumption However, this study still has room for improvement, especially the complexity of socio-cultural factors influencing renewable energy adoption that may warrant more qualitative research

Table 1: Findings and limitations of prior studies

Name and author of Scope, Theoretical

foundation and Findings Limitations of the research the research

Methodology International Studies:

"Effect of economic - Scope: 31 developing |- Economic growth has a dual | Sole reliance on CO2 growth on CO2 countries (1970-2013) effect on COz emissions: In low- | emissions per capita as a emissions in developing |- Theoretical foundation: | growth regimes, the impact is| proxy, neglecting other countries" by C Aye Environmental Kuznets | negative, but in high-growth | environmental indicators and Edoja (2017) Curve (EKC) regimes, it turns positive and

- Methodology: Dynamic | stronger

Panel Threshold model - No evidence supporting the

EKC _ hypothesis relationship)

- Findings are relevant for building global greenhouse gas emission models and informing

at regional level; country-specific turning points often outside observed GDP levels

- Energy consumption positively impacts CO: emissions potentially not reflecting

current economic and environmental policies

"The relationship

between CO2 emissions,

- Scope: 8 South-Eastern European countries (1995-

- Long-run Granger causality relationships exist between CO2

Lacks key economic indicators like urbanization

economic growth, 2019) emissions, GDP, and employment | and industrialization

available energy, and - Theoretical foundation: | - Variance decomposition shows

employment in SEE EKC and Cointegraion |CO2 emissions are mainly

countries" by Mitic et al | Theory explained by past shocks

(2022) - Methodology: Panel

Cointegration Tests, VECM

"Impact of Urbanization |- Scope: Far East Asian | Urbanization, GDP, trade openness | May lack detailed sectoral and Economic Growth countries (1980-2017) positively associated with COz2 | and regional variations due to

on CO2 emissions: A - Theoretical —_ foundation: | emissions reliance on aggregate data Case of Far East Asian

Countries" by Anwar et

al (2020)

Not explicitly mentioned

- Methodology: Panel data- fixed effect model

- Theoretical foundation:

Urban environmental transition theory, Ecological Modernization theory, Compact City theory

- Methodology: STIRPAT model

GDP, energy consumption, trade openness increases COz emissions;

urbanization shows U-shaped relationship

Aggregate data masks

regional, sectoral variations;

omitted variable bias

"Impacts of urbanization | - Scope: OECD high-income | Urbanization has weak negative | Specific to OECD,

on carbon emissions: An | countries impact on CO: — emissions; | generalizability limited; empirical analysis from |- Theoretical foundation: | operates through — economic | complex, contradictory OECD countries" by Not explicitly mentioned growth, energy efficiency conclusions

Wang et al (2021) - Methodology: ARDL

model, dynamic panel Non-Renewable and - Scope: OECD countries, | Non-renewable energy increases | Data up to 2011, may not Renewable Energy (1980-2011) CO: emissions; renewable reflect recent insights

16

GDP, industrialization,

urbanization positively impact

Renewable energy and

CO: emissions: New

evidence with the panel

threshold model by

Chen et al (2022)

- Scope: 97 countries (1995 — 2015)

- Theoretical foundation:

EKC hypothesis

- Methodology: Dynamic panel threshold regression model

Renewable energy reduces CO:

emissions above certain threshold, mainly in developed countries with strong institutions

- The study relies on agegregate-level data, which may mask variations within countries

- The time period (1995- 2015) might not capture the most recent advancements

and trends in renewable energy technologies and policies

Industrialization, - Scope: Saudi Arabia (1968 — | - Industrialization has an inelastic, | Limited to Saudi Arabia, urbanization and COz 2014) positive, and asymmetric effect | hard to apply elsewhere emissions in Saudi - Theoretical foundation: | on CO2 emissions (increases >

Arabia: Asymmetry EKC hypothesis decreases)

analysis by Mahmood et | - Methodology: Linear, non-|- Urbanization has an elastic,

al (2020) linear ARDL models positive effect (1% increase =

2.6659% rise in emissions) The asymmetry effect of | - Scope: India (1971 —2019) |- Industrialization & economic | Aggregate data misses industrialization, - Theoretical foundation: | growth: Significant, positive, | regional, sector-specific financial development EKC hypothesis asymmetric long-term impact impacts; NARDL may not and globalization on - Methodology: nonlinear |- Globalization: Significantly | capture all factors CO2 emissions in India autoregressive distributed | reduces emissions, asymmetric

by Patel and Mehta lag (NARDL) model effect

(2023)

Researches in Vietnam

17

Relationship between

- Theoretical foundation:

EKC hypothesis

- Methodology: ARDL bounds testing, Granger causality tests

- Supports EKC: CO: emissions rise with economic growth initially, then decline after a threshold

- FDL urban population, and REC significantly impact emissions

- Granger causality shows FDI,

- Excludes factors like industrialization or trade

openness

- Data ends in 2018, missing recent trends (e.g., Vietnam’s net-zero pledge)

- Vietnam-specific

Quality: Evidence from EKC hypothesis run - Focuses on energy Vietnam by Ho and Ho_| - Methodology: - No evidence of EKC in Vietnam | consumption, omitting (2021) Autoregressive distributed | over 1980-2018 renewables or FDI

lag (ADRL) model - Vietnam-specific

Do Urbanization and - Scope: Vietnam (1985- | - Urbanization and | - Data Cutoff: Ends in 2020, Industrialization 2021) Industrialization: Both | missing recent sustainability Deteriorate - Theoretical foundation: | significantly increase CO, | efforts (e.g., Vietnam’s net- Environmental Quality? | EKC hypothesis emissions, confirming their | zero goals)

Empirical Evidence from | - Methodology: ARDL | detrimental effect on | - Variable Scope: Excludes Vietnam by Vo et al

(2024) model, structural break unit

root tests and Bayer-Hanck cointegration environmental quality

- Economic Growth and Energy:

Positive effects on emissions, with

energy consumption showing a strong contribution to degradation

- EKC Rejection: No inverted U- shape found; emissions rise linearly with growth, contradicting EKC expectations factors like renewable energy

or FDI, limiting breadth

- Context Specificity: Vietnam-specific findings may not generalize

- Data Frequency: Annual data over 31 years may lack short-term precision

18

consumption nexus: New

insights from Vietnam

by Mai et al (2024)

- Scope: Vietnam (2000- 2023)

- Theoretical foundation:

EKC hypothesis

- Methodology: ARDL bounds testing, Bayer-Hanck cointegration, Granger causality tests

- Population and Energy:

Population growth and energy consumption increase CO2 emissions significantly

- REC Impact: Renewable energy consumption reduces emissions in the long run, offering a sustainable

- Socio-cultural factors influencing renewable adoption need qualitative research

- Focuses narrowly on population, REC, and

emissions, omitting FDI, urbanization, or

industrialization

Source: Authors compiled (2025)

19

In spite of being elaborate and valuable assets, it is essential to note that the majority

of existing studies still possess clear limitations First of all, the scope of most existing research is greatly limited as they are often confined to observation within a solitary country or region, meaning the results of those studies cannot be generalized to nations beyond the specific location under examination, especially taking into account the fact that ptevious-mentioned studies have proved that the impact of economic growth on CO2 emissions is affected by the characteristics of the observed country or continent Furthermore, these researches lack the necessary sample size (<100 observations), which may undermine the robustness of its findings Additionally, the variables employed are not adequately aligned with the research objectives and lack statistical significance, which is exacerbated by the prevalent focus on a limited set of one or two variables in empirical studies This can be detrimental since excluding other imperative factors can lead to misleading or biased estimates of the true relationship between economic growth and emissions In addition, this can lead to the oversimplification of complex relationships, as ignoring key variables can cause the study to fail to capture the full complexity of the interaction between economic growth and CO2 emissions Such predicament can thereby limit the comprehensiveness and applicability of these studies It is also noteworthy that there has been a notable dearth of publications that examine the effect of economic growth

on COz emissions in recent years The majority of these studies focus on the previous decades, resulting in the risk of relying on outdated data This limitation is particularly problematic, as the impact of economic growth on CQ: emissions 1s influenced greatly by the advancement of industrialization and technology, urbanization rate and the introduction

of renewable energy, which has experienced unprecedented acceleration in just a few recent years, making older findings less applicable to current contexts

Acknowledging the existing research gaps and the hazardous impact of uncontrolled COs emissions, this study, titled “The influence of economic growth, urbanization, renewable energy consumption and industrialization on carbon emissions in multiple nations around the world in 2021”, seeks to contribute to this domain The analysis is based on a comprehensive dataset observed in 183 nations globally, a larger scope in comparison to prior studies, ensuring the statistical robustness of the findings To enhance the relevance and applicability of the results, this research employs data from 2021 obtained from highly reliable sources Furthermore, to mitigate the risk of omitting key variables, as seen in previous studies, this research incorporates a comprehensive set of prominent and relevant variables, namely Gross Domestic Product (GDP), Urban Population (UP), Renewable Energy Consumption (REC), Industrialization (INDUS) The

understanding of the impact of economic growth on CO2 emissions

1.2 Theoretical Framework:

1.2.1 Carbon Emissions:

Carbon Emissions refer to the release of greenhouse gases (GHGs) such as carbon dioxide (CO2), methane (CH,), and nitrous oxide (N2O) into the atmosphere These gases trap heat in the atmosphere, leading to global warming, which causes rising sea levels, extreme weather events, and ecosystem disruptions Managing carbon emissions is crucial for achieving sustainable development and mitigating the impacts of climate change (IPCC, 2021) These gases released mostly from human activities such as burning fossil fuels, deforestation, and industrial processes In 2021, data showed that global carbon emissions increased by 4.8%, reaching 34.9 GtCO2, reflecting economic recovery after the pandemic but also highlighting the urgent need for emission reductions (Liu ef al., 2022) Rising carbon emissions have significant environmental and economic consequences, exacerbating climate change and leading to severe weather events, biodiversity loss, and widespread ecosystem disruptions (IPCC, 2021) These environmental changes can, in turn, pose long-term threats to economic stability and human well-being From an economic perspective, climate change can undermine growth by damaging critical infrastructure, reducing agricultural productivity, and increasing healthcare costs due to the rising prevalence of climate-related diseases and extreme weather disasters (Stern, 2007) However, transitioning to a low-carbon economy presents an opportunity to mitigate these risks while fostering sustainable development By investing in renewable energy, implementing carbon pricing mechanisms, and promoting sustainable consumption patterns, governments and businesses can reduce carbon footprints while simultaneously creating new industries and jobs, enhancing economic resilience, and ensuring long-term prosperity (OECD, 2020)

1.2.2 Economic Growth:

Economic growth refers to the increase in the production of goods and services in an economy over a period of time, typically measured by the rise in Gross Domestic Product (GDP) (Mankiw, 2019) It is an essential indicator of a country's economic health and is driven by factors such as capital accumulation, labor force expansion, technological advancements, and institutional improvements

There are several theories that explain economic growth The first one is Classical Theory This theory suggests that economic growth is influenced by population growth and resource constraints It posits that economies tend towards a steady state, with deviations being temporary The second one is Neo-Classical Theory, which emphasizes the role of labor, capital, and technology in driving economic growth It suggests that investments in these factors can lead to sustained growth The third theory is Modern Growth Theory

economic growth It emphasizes that growth is not just about accumulating physical capital but also about improving productivity and innovation

According to the World Economic Outlook, the global economy is projected to grow

at a steady rate of 3.2% in 2024 and 2025, similar to 2023 levels Advanced economies are expected to experience a slight acceleration in growth, while emerging markets will see a modest slowdown (IMF,2025)

Economic growth is often linked to rising carbon dioxide (COz2) emissions due to increased energy consumption, industrial activities, and transportation demand (Stern, 2004) Countless studies with results that support this school of thought have been conducted One instance of which is the study orchestrated by Onofrei et al (2022) that confirmed the existence of a statistically significant long run cointegration relationship between economic growth and CO2 emissions within the dataset of 27 EU member states for the period 2000 - 2017 Similarly, Anwar et al (2020) arrived at the same conclusion, reinforcing the notion that higher GDP levels are correlated with higher emissions However, the nature of this relationship varies across different stages of development:

- Early-stage growth (industrialization): Heavy reliance on fossil fuels leads to rising emissions

- Middle-income stage: Shift towards manufacturing and energy-intensive industries further accelerates carbon output

- High-income stage: Transition to a service-based economy and technological innovation can lead to emission reductions (Environmental Kuznets Curve - EKC) (Grossman & Krueger, 1995)

1.2.3 Urbanization:

Urbanization is the process by which rural areas transform into urban areas, characterized by an increasing proportion of the population residing in cities and towns This phenomenon encompasses demographic shifts, changes in land use, economic

activities, and social structures

Prior studies have shown that urbanization can lead to increased energy consumption and carbon emissions For example, a study by York (2012) found that urbanization is associated with higher energy use and emissions due to increased industrial and transportation activities Another study by Seto et al (2011) highlighted the role of urbanization in land-use changes, which can contribute to deforestation and habitat destruction

Globally, more than half of the world's population now resides in urban areas, a proportion that has been steadily increasing over the past century Projections indicate that

by 2050, approximately 68% of the global population will live in urban areas This trend

is particularly pronounced in developing regions, where urban growth rates are accelerating due to factors such as rural-to-urban migration and natural population growth (UN, 2022) Urban population is considered as one of the factors that lead to the exacerbation of CO2 emissions as it heightened energy demand for transportation, electricity, heating, and industrial operations, in addition to the significant waste generation One of the researches that support this is the study “CO2 emissions and urbanization correlation in China based