Does the Circular Economy Reduce CO₂ Emissions? Evidence from European Countries

This study examines whether circular economy practices (CE) reduce CO₂ emissions in European countries, addressing the lack of long-term, cross-country empirical evidence. Using panel data from 2000 to 2022, it evaluates the effects of CE alongside green energy (GE), financial development index (FDI), and gross domestic product (GDP) on environmental sustainability. The findings supported practices significantly reduce CO2E; however, their impact is smaller than that of GE, which emerges as the most effective driver of emission mitigation. FDI supports environmental sustainability by facilitating green investments, whereas GDP increases emissions, indicating incomplete decoupling between growth and environmental quality. This study provides macro-level, long-term evidence on the environmental role of CE and highlights its complementary function within a broader sustainability framework. These results suggest that integrating circular economy strategies with renewable energy expansion and sustainable finance is essential for achieving sustained emission reductions.