Income, Coal Consumption, And The Environmental Kuznets Curve In Vietnam

Abstract

While coal leads energy structure in a rapid growth economy like Vietnam, there exist efforts to increase the use of renewable energy and at the same time to reduce greenhouse gas emissions. This paper aims to investigate whether there is an inverted U environmental Kuznets curve (EKC) relation between income and coal consumption from 1984 to 2019 using the nonlinear autoregressive distributed lag (NARDL) framework. We find that the income elasticities of coal consumption are larger than unity and increase monotonically with income. It thus reveals that the income-coal consumption relationship resembles an upward-sloping curve instead of an inverted U-shaped curve. We also find that coal consumption reduces with the one percent increase in the share of renewable energy consumption by less than it increases with the one percent decrease in the share of renewable energy consumption. Despite this, it indicates that the substitution of renewable energy for coal seems more substantial with policy improvements. Moreover, we find that the quantity of coal consumed grows with positive oil price shocks. It suggests that rising oil prices play an undesirable role in reducing coal consumption and associated emissions. Finally, the study provides policy implications for interventions to achieve committed emission targets.