From linear to circular: the impact of economic policies and technological innovations on greenhouse gas emissions in the Netherlands

Abstract

The Netherlands, recognized as a leader in promoting circular economy principles, is actively implementing laws, incentives, and public–private collaborations to reduce raw material consumption by minimizing extraction and encouraging sharing and reuse. Emphasizing the durability and extended use of materials and goods is crucial in this transition. This study investigates the long-term and causal impacts of circular economy practices, technological innovation, environmental tax policies, economic instability, and industrialization on greenhouse gas (GHG) emissions in the Netherlands, covering the period from the first quarter of 2010 to the fourth quarter of 2022. Employing advanced econometric techniques, including the bounds test of co-integration, autoregressive distributed lag models, wavelet coherence analysis, and gradual shift causality tests, the study reveals that circular economy practices, technological advancements, and environmental taxation significantly reduce GHG emissions in both the short-run and the long-run. Conversely, economic instability and industrialization are found to contribute positively to GHG emissions. The wavelet coherence analysis further highlights the substantial interplay between GHG emissions and the independent variables studied. Based on these findings, the study underscores the need for the Netherlands to intensify efforts in reducing GHG emissions, curbing the use of virgin materials in construction, and investing in recycling technologies to advance its circular economy goals.