Abstract
Vietnam considers achieving net-zero emissions by 2050 a strategic goal, requiring a thorough understanding of the macroeconomic factors influencing greenhouse gas (GHG) emissions. This research examines the relationship between economic growth and pollution within the Environmental Kuznets Curve (EKC) framework, with a unique emphasis on the impact of real effective exchange rate (REER) volatility. Utilizing annual data from the World Bank spanning 1990 to 2024, the study employs a robust multi-step econometric methodology, primarily the ARDL bounds testing approach complemented by Granger causality analysis, to address small sample constraints and capture dynamic interactions. Additionally, a comparative Threshold Autoregression (TAR) analysis is conducted using industrialized Asian economies as benchmarks to identify Vietnam’s specific EKC turning point. The findings reveal a bidirectional causal link between REER and carbon emissions, suggesting currency valuation directly affects environmental quality through trade pathways. Contrary to the classic inverted U-shaped EKC, local data show industrial growth has a linear positive effect on emissions. By referencing development benchmarks from Japan, South Korea, and Singapore, projections indicate Vietnam’s EKC turning point could occur between 2044 and 2063, depending on annual growth rates of 5.8% to 3%. Based on these insights, it is recommended that Vietnam accelerate green technology adoption by offering tax incentives, streamlining administrative processes, and setting domestic standards aligned with international benchmarks to expedite progress toward its Net Zero goal by 2050.