Can Economic Growth Drive Circularity? The Conditional Role of Energy and Resource Productivity

ABSTRACT This study examines the relationship between economic growth and circular economy performance, focusing on the role of structural productivity dynamics in shaping the income–circularity relationship. Using panel data for 27 European Union countries over 2010–2023, the analysis estimates two‐way fixed‐effects models incorporating energy productivity, resource productivity, and innovation and investment controls. The findings show that income per capita alone is not significantly associated with circular material use. Including productivity variables provides some evidence of nonlinear income associations in some specifications, although their significance is sensitive to sample composition and estimation choices. Interaction analyses suggest that productivity associations may vary across income levels, but this evidence weakens in lagged specifications. The results reveal contrasting productivity associations: energy productivity is negatively associated with circular material use, potentially reflecting rebound‐type or other structural mechanisms, whereas resource productivity exhibits a more consistent positive association. These findings highlight the potential importance of resource productivity and material recirculation in sustainable development strategies, while suggesting that energy‐efficiency policies may benefit from complementary measures addressing material‐use trade‐offs.