Economic, technological and environmental drivers of the circular economy in the European Union: a panel data analysis

Abstract

The circular economy has become a strategic priority in the European Union, aiming to reduce dependence on finite natural resources and promote a sustainable economic model. This study investigates the key factors influencing the use of circular materials in the European Union between 2010 and 2022, considering the impact of global challenges such as the coronavirus pandemic, the energy crisis, and geopolitical tensions. Unlike previous research, this study integrates economic, technological, and environmental dimensions, with a particular focus on the role of digital transformation as a catalyst for circularity. The research applies an econometric model based on the analysis of panel data to explore the interconnections between resource productivity, recycling rates, private sector investment, digitalization, and expenditures on research and development. The findings reveal a strong positive relationship between resource efficiency, recycling efforts, and the use of circular materials, emphasizing the importance of infrastructure and technological advancements in supporting circularity. However, significant regional differences among European Union member states are also identified, highlighting the need for targeted policies to address these disparities. In the context of European policies such as the Green Deal and the Circular Economy Action Plan, this study provides valuable insights for decision makers. The results suggest that increasing investment, expanding digital infrastructure, and fostering innovation are essential for accelerating the transition to a circular economy. This research contributes to the existing literature by offering a comprehensive perspective on circularity and demonstrating how digital transformation can enhance sustainability.