Research Implications

6.3.1

Academic Implications

Our study provided evidence of the applicability of EKC theory in Vietnam. This indicates that the long-term relationship between economic development and the concentration of CO2 emissions in

Vietnam can be expressed in an inverted U-shaped function. Alternatively, this can be stipulated that in order to maintain and develop the economy and promote GDP per capita, Vietnam has to exploit and consume natural resources and discharge wastes into the environment. This will subsequently lead to the deterioration of the environment. However, our study revealed a possibility that Vietnam’s environment (measured by CO2 emissions) will be rehabilitated in conjunction with its

economic development.

With regard to the empirical estimation method, the selection of lag order is very important for studies which apply time series data and capture the dynamic effect of independent variables on the dependent variable. This is because increasing the number of lag orders leads to the increase in the number of parameters. Consequently, this leads to an increase in the sum of sample square errors and biased estimation results. Therefore, the model selection criterion plays a key role to minimise the loss of degrees of freedom in ARDL models. The empirical results of our study supported the Schwarz criterion which has more advantages in selecting the minimum lag order in ARDL models. The Schwarz criterion performs better in ARDL estimations compared to the Akaike information criterion and the R-squared value. This is because the BIC selects the smallest possible lag length and minimises the loss of degrees of freedom.

The use of an advanced estimation technique in our study, which is an auto-regression distributed lag model, contributes significantly to the field of econometrics. The ARDL estimation technique has advantages in estimating the short-run and long-run relationships among time series data variables. The ARDL estimation technique helps the current study to overcome the problems related to small sample size, and the auto-correlation of time series data variables. To this end, we recommend that the ARDL estimation technique is appropriate for future studies, particularly for the studies

employing time series data of economic development and environment variables.

Another contribution of our study is providing a framework relating to the environmental impact assessment on trade policy in Vietnam. The environmental impact assessment method on trade policy has been widely conducted in developed countries such as the US, EU countries, Japan, and Canada. Particularly, the ex-ante and ex-post environmental impact reports are conducted for each free trade negotiation in these countries. Vietnam can learn from developed countries in terms of legalising the environmental impact assessment requirements on a proposed trade policy. The

environment will be better protected if the potential environmental impacts are foreseen and can be assessed before, during and after the negotiation of each free trade policy. To this end, our study supports the benefit of applying the EIA method on trade policy and this method is appropriate in examining the regulatory effect of trade policy on the environment.

6.3.2

Practical Implications

The main policy implications emerging from the current study (see Section 6.2.4 and 6.2.5) are summarised as follows.

First, we found that energy consumption has a negative impact on CO2 emissions, which implies that

Vietnam needs to embrace more energy saving policies and apply energy efficient technology in its productions to reduce CO2 emissions. In addition, the empirical results revealed that the real per

capita GDP has negative impact on CO2 emissions, indicating that as the per capita income grows, in

the absence of energy saving and environmental protection policies, Vietnam will exacerbate the environment further.

However, the empirical results provided an applicability of EKC theory in Vietnam. This indicates that there is a possibility for Vietnam to improve the environmental quality in conjunction with its economic development process. In addition, the results showed that trade openness has a negative impact on CO2 emission, however the magnitude of the impact is quite small (0.191%); and after two

years the impact will be reversed from negative to positive. These findings indicate a possibility for Vietnam to better protect the environment. Therefore, Vietnam needs to adjust the domestic production pattern to ensure that the changes in production processes are environmentally

sustainable. Besides, Vietnam needs to take full advantage of trade liberalisation to equip and adopt the advanced production technology to mitigate the negativity in the environment.

Second, on the part of Vietnamese production firms, the results showed that the Vietnamese government should educate these firms on the environmental regulations required by the CPTPP. This will help Vietnamese production firms to fulfil the environmental protection requirements regulated by the CPTPP and have a better chance to boost their businesses internationally. Furthermore, Vietnam needs to more strictly monitor the implementation of its environmental protection law as unresolved environmental concerns arising during the production activities are eligible for the CPTPP’s dispute settlement mechanisms and trade sanctions.

Third, Vietnam should actively participate in the negotiation of FTAs that incorporate enforceable environmental provisions. Further, Vietnam should learn from her trading partners such as Canada, Japan and the US to legalise the requirements on environmental impact assessment before, during and after the negotiation of free trade agreements.