The Nexus between Energy Consumption and Carbon Emissions in Developing Countries and Policy Implications for Vietnam

Abstract

Climate change has emerged as a major constraint on sustainable development in developing economies, increasing the need to identify the princpal drivers of carbon emission within the Sustainable Development Goals (SDGs) framework. This study investigates the effects of energy consumption on CO₂ emissions in 104 developing countries over 2000–2022 within the STIRPAT framework, incorporating digital technological adoption and key macroeconomic covariates. The empirical analysis employs panel data estimators, including pooled OLS, Fixed Effects model (FEM), and Random Effects model (REM), with model selection based on the Hausman test, and addresses endogeneity using an Instrumental Variables (IV) approach via Two-Stage Least Squares (2SLS). The results indicate that non-renewable energy consumption intensifies carbon emission, while renewable energy consumption has a statistically significant emissions reducing effect. Notably, digital technological adoption exhibits a nonlinear U-shaped relationship with emissions, suggesting stage-dependent effects. Economic growth, trade openness, and energy intensity are found to exacerbate emissions, while foreign direct investment (FDI) is statistically insignificant. These findings underscore the importance of accelerating the energy transition, enhancing energy efficiency, and steering digitalization toward sustainable outcomes, particularly in the context of Vietnam.