Enhancing European climate resilience through circular economy practices: an analysis of economic impacts and policy effectiveness

Abstract European circular economy practices prioritize resource efficiency, waste reduction, and sustainable consumption and production, in contrast to the linear economic model of extracting, using, and disposing. This study investigates the impact of circular economy practices in enhancing European climate resilience; by examining a panel data set from 39 European countries from 2000 to 2022, employing a principle components analysis to construct an index for circular economy practices and a panel quantile regression model, to investigate the impact of circular economy practices on European climate resilience. The findings indicate a recent growth in adopting circular economy practices and European climate resilience. Moreover, it detects a threshold impact for GDP and environmental protection expenditure, indicating a diminishing return beyond a certain level. Environmental taxes exhibit a positive effect within the observed range, up to the turning point of the estimated inverted U-shaped relationship and circular economy practices enhancing their effectiveness. The study underscores the importance of prioritizing circular economy initiatives and policies to bolster European resilience, optimize environmental taxation, and customize strategies to sector-specific needs. Continuously assessing and adjusting policies to ensure alignment with evolving circumstances and overarching resilience goals is recommended. These findings offer essential insight for policymakers who aim to advance sustainable development and mitigate climate-related risk in Europe.