Economic Growth, Renewable Energy, Trade Openness and CO₂ Emissions: A Causality Analysis

Abstract

The paper analyses the causal relationship between economic growth, renewable energy consumption, trade openness, and CO₂ emissions using a sample of 13 countries from 2006 to 2021. The JKS Granger non-causality test is applied. The results of the analysis show a bidirectional relationship between economic growth and CO₂ emissions. Additionally, there is a two-way causal relationship between CO₂ emissions and renewable energy consumption. Trade openness causes an increase in CO₂ emissions, but emissions do not, in turn, cause trade openness. This may be explained by the increasing role of renewable energy sources in offsetting fossil fuel dependence, while trade openness, particularly in developing economies, often leads to greater industrial activity and energy consumption, which in turn raises emission levels. The study highlights the interrelated nature of CO₂ emissions, economic growth, renewable energy use, and trade openness, emphasising the importance of coordinated policies for achieving carbon reduction and sustainable development. These findings offer valuable insights for policymakers aiming to design balanced strategies for energy transition and environmental protection.