Impact of foreign direct investment and urbanisation on CO 2 emissions in Vietnam

Vietnam is considered one of the countries mostly affected by climate change due to CO2 emissions. Urbanisation and foreign direct investment have been argued to be main causes. This study examines the impact of foreign direct investment and urbanisation on CO2 emissions in Vietnam by applying the autoregressive distributed lag (ARDL) model, testing reliability and correcting model. The research data was collected from the World Bank's tracking database between 1985 and 2016. The causal relationship among variables shows the impacts in short run and long run are different. We find that the relation between urbanisation and CO2 emissions has changed from U-shaped in short-term with the optimal lag 2 into inverse U-shape in long-term. We realise that foreign direct investment is positively related to CO2 emission in short run while there is no such effect in the long run. Conclusions and policy implication for Vietnam are given accordingly.