Panel data analysis of energy transition, circular economy and green innovation as drivers of environmental sustainability in the European Union

BACKGROUND AND OBJECTIVES: This study examines the determinants of environmental sustainability within ۲۷ European Union countries from ۲۰۱۴ to ۲۰۲۴, capturing the impact of critical structural and policy changes. This study systematically examines five dimensions of sustainability. It first determines the influence of energy transition variables on per capita carbon emissions, subsequently examines the effect of circular economy strategies on resource productivity and finally evaluates the the non-linear link between economic growth and carbon dioxide emissions is identified using the Environmental Kuznets Curve framework. The study objectives were to explore five empirical models concerning the European Unions-۲۷ countries and the impacts of the energy transition on per capita carbon emissions and role of circular economy in enhancing resource efficiency. Additionally, it tests the validity of the Environmental Kuznets Curve theory and income turning point.METHODS: A complete panel data set that comprises ۲۹۷ country year observations is used. The empirical methodology is based on robust fixed effects regression models. Principal component analysis is used on six standardized variables. Principal component analysis serves as a robust statistical framework for constructing environmental sustainability index. The socio-economic factors affecting environmental sustainability index are further analyzed. Validation of the model through diagnostic tests is performed. FINDING: Renewable energy consumption mitigates carbon dioxide emissions, while energy intensity and environmental tax revenues emerge as critical determinants of sustainability. The presence of strong empirical evidence in support of the inverted-U shape of the Environmental Kuznets Curve theory is confirmed. These findings indicate that most European Unions’ member have progressed to the declining phase of the curve. According to the composite index, Sweden, Finland, and Austria belong to the best performers. Simultaneously, the lowest performance ratings are observed in Malta, Romania, and Cyprus.CONCLUSION: Offering critical empirical insights for European policymakers, this evidence underscores the need to prioritize reductions in energy intensity while supporting the strategic utilization of fiscal environmental mechanisms. Implementation of targeted green transition frameworks is highly recommended.

کلیدواژه ها:

Circular economy (CE) ، Environmental sustainability ، Energy transition ، Environmental Kuznets Curve (EKC) ، European Union ، Green innovation.