Abstract
In recent decades, examining the relationship between economic development, the expansion of international trade, and environmental outcomes—particularly carbon dioxide (CO₂) emissions—has become one of the key topics in environmental economics literature. The main concern of countries is how to balance economic growth with environmental preservation while simultaneously pursuing sustainable development. This study employs a Structural Vector Autoregression (SVAR) model and uses data from 30 geographic regions worldwide over the period 2000–2021 to investigate causal relationships between economic growth, trade freedom,
and CO₂ emissions. The analysis is conducted under two separate scenarios to independently assess the effect of each



variable. The results indicate that the impact of economic growth on CO₂ emissions is on average 40–60% stronger than the effect of free trade. Moreover, the response of different regions to economic and trade shocks does not follow a uniform pattern and is fully dependent on economic structure, development level, and degree of industrialization. In developed regions such as Europe and Central Asia, positive economic growth shocks lead to significant increases in CO₂ emissions, whereas in less-developed regions such as IDA member countries and Sub-Saharan Africa, this effect is very limited and in some cases statistically insignificant. These findings emphasize structural differences in the relationship between growth, trade, and the environment and suggest that environmental policy should be tailored to the development level of each region. Accordingly, implementing coordinated global policies—such as international carbon taxation, clean technology transfer, investment in renewable energy, and environmental standardization in global trade—can help control CO₂ emissions worldwide. Therefore, international cooperation and a multilateral approach to climate change mitigation are considered indispensable and should be supported by continuous political will and institutional backing.
Materials and Methods
This study aims to analyze the causal relationships among free trade, economic growth, and CO₂ emissions using reliable World Bank data for 30 geographic regions worldwide during 2000–2021. The main variables in this paper include the trade-to-GDP ratio (trade freedom index), real GDP growth rate, and CO₂ emissions. Prior to model estimation, stationarity tests of the time series and optimal lag selection based on information criteria were performed. Then, the SVAR model was estimated under two scenarios: in the first scenario, economic growth was considered the primary causal variable, and in the second scenario, free trade acted as the exogenous cause. To analyze the dynamic responses of variables to shocks, impulse-response functions were employed to better capture both short-term and long-term effects.
Results and Discussion
The results from the impulse-response functions indicate that in developed regions, economic growth shocks lead to significant increases in CO₂ emissions, reflecting a strong dependence of these countries on energy-intensive industries. In contrast, in low-income countries, due to the high share of agriculture, low energy consumption, and weak industrial infrastructure, this relationship is weak, less significant, and sometimes even neutral. Moreover, it was found that overall, economic growth has a greater impact on environmental pollution than free trade. Therefore, it is recommended that global policies focus on instruments such as carbon taxation, promotion of clean technologies, green investment, and harmonization of environmental regulations in international trade to accelerate the reduction of pollutants.