How Does the Circular Economy Applied in the European Union Support Sustainable Economic Development?

Abstract

This research paper aims to find a causal relationship between the circular economy and sustainable economic development. The implementation of the circular economy in the European Union requires, on the one hand, smart regulation and on the other hand, the long-term involvement of all actors in society at all levels—member states, regions, cities, businesses, citizens—and their ability to develop cooperation networks and suitable collaboration and exchange patterns. Moreover, the circular economy is based on business models for reusing, recycling and recovering materials in the production and consumption of goods. This research establishes correlations between circular economy performance measurement indicators and sustainable economic development using panel analysis. Statistically significant correlations were noted between GDP per capita and three independent variables, mainly due to the high R-squared coefficient. This research’s innovation contribution is related to the selection and combination of circular economy indicators. Finally, the results confirmed that an increase in the recycling rate of municipal waste and a decrease in environmental tax revenues and environmental protection expenditures led to an increase in GDP per capita and sustainable economic development.

Measurement of Progress in the Environmental Area: Poland against the Countries of the European Union

“…Therefore, innovation with a focus on the processes of managing green knowledge and its impact on green investment and green technologies plays an important role here [27][28][29]. This translates not only into the environmental area of sustainable development, but also into its socio-economical dimension [30] and the economies' striving towards CE [31].…”

A Panel Analysis Regarding the Influence of Sustainable Development Indicators on Green Taxes

“…Environmental taxes, according to the World Bank [23], create a triple win for fiscal policy: the additional tax revenues generated, the improvement of the efficiency of the tax system, and the reduction of the need to raise conventional taxes to finance public spending to address the same social costs. The European Green Deal pledged to create the context for broad fiscal reforms at the national level, remove fossil fuel subsidies, including in the maritime and aviation sectors of the ETS, and shift the tax burden from labor to pollution while taking social considerations into account [24,25]. With the implementation of environmental taxes, firms and the corporate sector are left with two options: to use non-renewable sources for commercial activities and pay taxes related to CO 2 emissions, as well as to transform technology to renewable sources to avoid taxation [13,20,21].…”