The impact of the circular economy on sustainable development: A European panel data approach

Abstract

The circular economy (CE) has attracted considerable attention because of its potential to help achieve sustainable development (SD). This paper presents a comprehensive analysis of the effect of the CE on the three dimensions of SD at the country level. We analysed the impact of each CE source of value (renewable energy, reuse, repair, recycling) and the influence of an overall factor-analysis-derived measure of the CE on the economic, environmental and social dimensions of SD. The aim was to compare the individual impacts and outcomes of the CE and its sources of value in a single study. Panel data analysis was performed using a sample of 25 European countries for the period 2010 to 2019. The findings show a major impact of the CE on achieving SD, which has positive effects on the economy, environment and society. However, the results show that the impact of each CE value source on the three SD dimensions varies. While renewable energies and reuse reduce the impact on the environment, recycling has no effect, and repair increases GHG emissions. However, repair is the only CE source with a positive economic impact at the country level. Finally, renewable energy, repair and recycling reduce unemployment. Decision makers should conduct impact analysis to design suitable, efficient and targeted measures depending on each country's specific objectives.