This paper examines the environmental Kuznets curve (EKC) in Vietnam between 1977 and 2019. Using the autoregressive distributed lag (ARDL) approach, we find an inverted N-shaped relation between economic growth and carbon dioxide emissions in both the long- and short-run. The econometric results also reveal that energy consumption and urbanization statistically positively impact pollution. The long-run Granger causality test shows a unidirectional causality from energy consumption and economic growth to pollution while there is no causal relationship between energy consumption and economic growth. These suggest some crucial policies for curtailing emissions without harming economic development. In the second step, we also employed the back-propagation neural networks (BPN) to compare the work of econometrics in carbon dioxide emissions forecasting. A 5-4-1 multi-layer perceptron with BPN and learning rate was set at 0.1, which outperforms the ARDL’s outputs. Our findings suggest the potential application of machine learning to notably improve the econometric method’s forecasting results in the literature.

Type of the article: Research ArticleAbstractThis study delves into the combined impact of foreign direct investment (FDI) and renewable energy consumption (REC) on carbon emissions (CO2) in developing countries. The primary objective is to assess the moderating role of renewable energy consumption in the impact of FDI on CO2 emissions in 50 developing countries from 2013 to 2021. To ensure rigorous accuracy in addressing potential endogenous issues in the proposed model, this study employs a two-step systematic generalization estimation (S-GMM) method. The results show that the individual impact of FDI on CO2 emissions is positive and statistically significant, further verifying the Pollution Haven Hypothesis. Meanwhile, the combined impact of FDI and REC is inversely related to CO2 emissions. This is considered a significant finding because renewable energy consumption can mitigate the negative impact of FDI on CO2 emissions, supporting the Pollution Halo Hypothesis. Furthermore, REC and innovation are important supporting factors in emission reduction, implying that if developing countries prioritize clean energy use and clean technology transfer, it will significantly reduce environmental pressure. On the other hand, trade openness, natural resource rents, and economic growth have statistically significant positive effects on CO2 emissions; increases in these variables lead to higher CO2 emissions. Overall, the importance of REC shows that policies promoting clean energy transition are necessary for FDI to play a positive role in reducing carbon emissions instead of becoming an increasing source of environmental pollution.AcknowledgmentWe are grateful for the valuable contributions made by the peer reviewers in shaping this paper into its final form. Their commitment to scholarly excellence and their dedication to advancing the field have been instrumental in improving the quality and impact of this research.

This paper examines the dynamic relationship between electricity consumption (ELE), foreign direct investment (FDI), and carbon dioxide (CO2) emissions in 88 developing countries from 1985 to 2024. While electricity demand is widely recognized as a primary driver of CO2 emissions, the moderating role of FDI remains contested, oscillating between the “Pollution Haven” and “Pollution Halo” hypotheses. Employing the Difference Generalized Method of Moments estimation and Granger causality tests, this study provides empirical evidence of three critical patterns. First, electricity consumption exerts a significantly positive effect on CO2 emissions, reflecting the persistent reliance on fossil fuels in the energy mix. Second, FDI mitigates CO2 emissions, consistent with the “Pollution Halo” hypothesis. Third, the positive moderating effect of FDI in the ELE-CO2 nexus shows an interesting inference. The FDI targets energy-intensive sectors, creates scale effects to offset efficiency gains (mitigating CO2 emissions), and leads to expanding CO2 emissions. These results highlight integrated policy design. Decarbonizing electricity systems and strategically regulating FDI toward low-carbon sectors offer developing countries a coherent pathway to establish economic sustainability.