Circular economy innovations: Balancing fossil fuel impact on green economic development

The transition to a green economy is essential for sustainable development, yet the reliance on fossil fuels poses a significant challenge. This study investigates the impact of fossil fuel consumption on green economic development and examines circular economy innovations as a potential solution. Focusing on the period from 2000 to 2022, we employ the CS-ARDL model to analyze data from twelve developing countries in Latin America. Our analysis reveals that fossil fuel consumption continues to impede green development, while circular economy innovations substantially mitigate this negative impact. The findings show that countries with higher adoption rates of circular economy practices exhibit better performance in green economic indicators, improved resource efficiency, and reduced environmental degradation. The policy implication is that developing countries should prioritize circular economy innovations to balance the adverse effects of fossil fuels and promote sustainable economic growth.