Governance moderates circular economy’s link to European energy diversification

A panel study covering European countries from 2000 to 2023 finds that circular economy practices are positively associated with energy diversification in both the short and long run, while government governance moderates that relationship. The analysis also finds positive associations for energy use, environmental taxation and urbanization, alongside a negative association with dependence on energy imports. The study examines energy-system diversification in the context of growing European energy demand and reliance on imported fuels.

It describes the circular economy as a framework for resource efficiency, waste reduction and greater integration of renewable and alternative energy sources. These practices are linked in the study to Sustainable Development Goal 7 on affordable and clean energy, Goal 9 on industry, innovation and infrastructure, Goal 12 on responsible consumption and production, and Goal 13 on climate action. For the statistical analysis, the researchers used a Cross-Sectionally Augmented Autoregressive Distributed Lag model, or CS-ARDL.

The reported estimates show that circular economy practices positively influence energy diversification over both horizons. Four additional variables are associated with energy diversification in the reported results. Energy use, environmental taxation and urbanization each have positive relationships with the diversity of the energy system, whereas dependence on energy imports has a negative relationship.

The findings therefore identify import dependence as a factor associated with less diversification, while taxation, urban development and energy use coincide with broader energy mixes. Because the evidence comes from an observational panel model of country-level data, these relationships should not be interpreted as proof that a particular policy instrument or development trend directly produced the reported outcomes. Within this model, the results position government governance as part of the conditions under which circular economy practices are associated with a more diversified energy system.

The authors identify the advancement of circular economy policies and the reduction of import dependency as complementary strategies for fostering a diversified, resilient and sustainable European energy system. The scope of the evidence is the European panel from 2000 through 2023, with short-run and long-run model estimates accounting for energy use, energy imports, environmental taxation and urbanization.

Subject of Research: How governance and circular economy practices relate to energy diversification in European countries

Article Title: Government governance as a strategic enabler of resilient energy systems: insights from the circular economy transition in European countries

Article References: Abbas, Q., & Ramzan, M. (2026). Government governance as a strategic enabler of resilient energy systems: insights from the circular economy transition in European countries. Humanities and Social Sciences Communications. https://doi.org/10.1057/s41599-026-09491-z

Image Credits: AI Generated

DOI: 10.1057/s41599-026-09491-z

Keywords: circular economy, energy diversification, government governance, energy imports, European energy systems, resource efficiency, environmental taxation, urbanization, CS-ARDL model, energy resilience, Government, governance