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IMPACT OF CO2 EMISSIONS ON NON-PERFORMING LOANS IN

VIET NAM

Du Thi Lan Quynh
46

Abstract: High CO2 emissions and non-performing loans (NPLs) have become a significant
challenge for commercial banks, impeding innovation and economic growth in recent years. This article
explores the relationship between CO2 emissions and NPLs in Vietnam from 2014 to 2023. By drawing
from data collected from 20 Vietnamese commercial banks, the study examines the impact of CO2
emissions on NPLs in Vietnam. The research findings suggest that CO2 emissions negatively influence
the non-performing loans of commercial banks in Vietnam. This result shows that the Vietnamese
government should be cautious in making policies to protect the environment by cutting CO2 emissions
because there is a trade-off between two goals: reducing CO2 and reducing NPLs. Therefore, the
Vietnamese government is considering implementing appropriate policies that enhance the environment
and supervise NPLs to ensure sustainable development goals.
Keyword: non-performing loans, CO2 emissions

1. Introduction
Climate change disproportionately affects regions of the world, and most
developing countries show a high vulnerability profile (Bachegour & Qafas, 2023). The
environment is gradually becoming a concern not only for developed countries but also
for developing countries - including Vietnam because environmental quality is
increasingly deteriorating with global warming and climate change (Kasman & Duman,
2015). Environmental pollution can have a long-term impact on the economy, especially

now and in the future. In the history of human development, there have been two
challenges that people need to address: economic development and environmental
protection (Chu & Karr, 2017).
The global environmental issue that demands our attention is CO2 emissions.
These emissions, a result of human activities such as burning fossil fuels, raising
livestock, decomposing waste, and logging forests, are affecting us all. They trap and

reflect heat radiation from the Sun, leading to a greenhouse effect and a rise in Earth’s
temperature. This is a concern not just for developed countries, but also for developing
nations like Vietnam, where the environmental quality is deteriorating due to global
warming and climate change (Kasman & Duman, 2015). Therefore, to be more precise,
there is a relationship between economic growth and environmental pollution, and this
research field has attracted a considerable number of studies so far (Cetin & Ecevit,
2017; Istaiteyeh, 2016; Kalayci & Köksal, 2015). The Paris Agreement, signed in 2015,

and the United Nations 2030 Agenda for Sustainable Development have focused on the
rapid rise in global temperatures and the move towards a fully decarbonized economy.
The transition to a low-carbon economy entails structural changes affecting all sectors
and economic activities, including banking operations (Ha & Nguyen, 2023). This
significant research posits that climate change could lead to an

46 Ho Chi Minh University of Banking, Email: quynhdtl@hub.edu.vn
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