FinTech Alone Does Not Drive the EU’s Circular Agrifood Transition, Study Finds

Digital financial development, widely promoted as an engine of Europe’s twin green and digital transition, does not automatically make agriculture more circular, according to a new study of 29 European countries. The research, published in Environmental Sciences Europe, finds that FinTech produces a mixed and sometimes counterproductive set of environmental effects across the agrifood economy, with gains in some areas offset by trade-offs in others.

The study addresses a gap in the empirical literature. While the European Union’s twin transition has intensified interest in whether digital finance can support more sustainable and resource-efficient economic systems, evidence on how FinTech specifically influences the circular agrifood economy has remained limited. To test the relationship, the authors assembled panel data covering 2000 to 2024.

A central methodological contribution is an entropy-weighted FinTech Development Index, constructed from four components: information and communication technology capital, financial-market scale, digital financial adoption, and rural connectivity.

To estimate effects, the team used a dynamic panel ARDL-PMG-Fourier approach, which captures both long-run relationships and short-run dynamics. The outcomes examined were resource productivity, packaging-based circular waste, livestock emissions, and soil emissions, giving the analysis coverage of several distinct dimensions of circularity and agricultural environmental impact.

The headline result is heterogeneous rather than uniformly positive. FinTech was associated with lower resource productivity in both the long run and the short run. The authors interpret this as a rebound effect: digital financial expansion appears to stimulate production and material use faster than it delivers efficiency gains, so more accessible finance translates into greater throughput rather than conservation.

Waste outcomes show a similar ambivalence. FinTech increased packaging-based circular waste in the long run, a finding the researchers read as evidence that digital financial expansion generates both environmental benefits and trade-offs simultaneously. In other words, the same financial deepening that may fund cleaner technologies can also underwrite expanded material flows.

Emissions results diverge by source. FinTech significantly increased livestock emissions, which the authors link to improved access to credit that allows farms to expand herd sizes. By contrast, FinTech decreased soil emissions, apparently because digital finance promotes precision agriculture and environmentally efficient production technologies in that domain. The direction of effect therefore depends on which part of the agrifood system is measured.

Robustness and heterogeneity analyses revealed that these effects differ between the 14 older members of the European Union and the 13 accession economies, indicating that the stage of economic and institutional development conditions how digital finance interacts with circularity.

The authors conclude that digital financial innovation does not automatically promote a circular economy. Instead, they argue, FinTech contributes to the twin transition only through governance mechanisms, green finance, and technology-based regulatory frameworks that deliberately align digital financial development with circular-economy goals. Without such alignment, the study suggests, easier credit and faster digital adoption may accelerate material use and emissions in parts of the agrifood system even as they enable efficiency gains elsewhere.

For policymakers, the findings caution against assuming that digitalization of finance is inherently green. The study’s contribution lies in showing, across a quarter-century of panel data and multiple environmental indicators, that the environmental consequences of FinTech in agriculture are conditional, sector-specific, and shaped by institutional context rather than uniformly beneficial.

Subject of Research: The environmental effects of digital financial development on the circular agrifood economy across 29 European countries from 2000 to 2024.

Article Title: Does FinTech drive the circular agrifood transition? Empirical evidence from the European Union’s twin transition

Article References: Koondhar, M. A., Lin, L., Li, L., Jamali, R., & Hu, K. (2026). Does FinTech drive the circular agrifood transition? Empirical evidence from the European Union’s twin transition. Environmental Sciences Europe. https://doi.org/10.1186/s12302-026-01539-w

Image Credits: AI Generated

DOI: 10.1186/s12302-026-01539-w

Keywords: FinTech, circular economy, agrifood, European Union, twin transition, resource productivity, livestock emissions, soil emissions, digital finance, green transition, panel data, rebound effect