Environmental and economic dimensions of material recycling and energy efficiency in the European Union

Abstract

The current use rate of recycled material in the European Union (EU), at 11.5 percent in 2022, arguably undermines the bloc’s 2030 target of reaching twice the recycled material use rate between 2020 and 2030. Given the current scenario, this investigation attempts to corroborate whether material circularity improve environmental quality without compromising economic performance. Due to its ability to provide robust inferences, a two-step dynamic system generalized method of moments (GMM) was employed for the dataset spanning 2010 to 2022. Other indicators were also incorporated into the analysis through two distinct models. Foremost, the finding shows that material circularity and primary energy consumption mitigate per capita carbon emission while income level and energy efficiency show detrimental effect on environmental quality. For economic dimension, both material circularity and energy efficiency hamper income level but income level improves with increase in total primary energy consumption and urbanization. Importantly, although the use rate of recycled material improves environmental quality and hampers income level, the elasticities are small in magnitude. However, this observation provides important insight on the need to drive the economic dividend of material circularity as much as its environmental benefits.