Environmental Policies as a Path to the Development of Circular Economy - the EU Perspective

Circular economy is a dynamic and integrative framework within modern environmental economics, designed to reduce resource dependency, mitigate climate issues, and foster regenerative systems. The transition to a circular economy is a key pillar of the European sustainable development concept. However, under current volatility in the global context, the efficiency and effectiveness of this shift remain under concern. Underpinned by limited quantitative research on the efficacy of circular economy policies, it is important for authorities to consider and mitigate external factors influencing the transition. This paper empirically assesses the degree of impact the new circular economy action plan has on circular economy among the European countries during the period of 2010-2023. As one of the main pillars of circular economy is waste management, the recycling rate of municipal waste is used as an indicator of circular economy. The objective of this research is to identify whether the circular economy action plan significantly increased the circular economy (measured by recycling rate). Furthermore, other variables, which are expected to impact the adoption of the circular economy model, are included in the model. The study uses an econometric approach based on a multiple linear regression model with fixed effects. Also, tests for cross-sectional dependence, stationarity, and cointegration are performed. The results indicate that the adoption of the action plan substantially improved the circular economy and structured the process of transition. In addition, R&D expenditure and all types of government ideology are found to have significant positive effects, whereas no strong relationship is identified between wealth and urbanization level. Overall, policies are found to have a positive impact, however, as a circular economy is a broad concept, there are many factors influencing the process.