Economics of sustainable development and its environmental impact in the European Union: Case study

Abstract

The natural environment and the human economy are tightly interrelated systems. The paper investigates long-term input-output relations between economics and the environment regarding draws (raw materials) from the system and loads (pollution) to the system. More recent evidence about consumption and use patterns was provided regarding raw extraction and waste production. New insights about the contribution of the EU member states toward the sustainable use and reuse of materials and waste have been highlighted. The results support the EKC hypothesis regarding the firm and negative relationship between income and GHG emissions in CO2 eq., strengthening the evidence about a further drop in emissions responding to income growth. However, the inconclusive results suggest a cyclical waste production and raw materials consumption pattern. Thus economic growth instead encourages consumption. Moreover, there is a lack of cooperation between the EU member states on a national level to fill common environmental goals. EU member states are pursuing their goals rather than individually, thereby "locking" themselves against each other. Their effort results in substantial differences, and their overall progress is vague. The cluster analysis shows relatively significant heterogeneity between the subclusters and high inter-class variance within; regarding renewable energy share, water use, waste recycling and circular material use. More inclusive coordination of policies and broader decentralization of power-decision bodies on the regional level might shape economic-environmental relations more sustainably.