The Opportunity Cost Between the Circular Economy and Economic Growth: Clustering the Approaches of European Union Member States

Abstract

The circular economy (CE) framework is increasingly recognized as essential for achieving sustainable development by addressing the challenges of resource depletion, waste generation, and environmental degradation. This study examines the relationship between resource consumption, waste management procedures, and energy efficiency within European Union (EU) member states, leveraging data from 2004 to 2023. Using Pearson correlation analysis, Principal Component Analysis (PCA), and K-means clustering, this study identifies key sustainability performance indicators and classifies EU nations into four distinct clusters based on CE adoption. These findings reveal a strong positive correlation between resource productivity and circular material use, indicating that efficient resource management significantly enhances sustainability performance. Similarly, energy productivity exhibits a moderate correlation with resource efficiency, suggesting that economies optimizing energy consumption also enhance material use efficiency. This study also assesses the role of policy instruments, such as environmental taxation, which show a weak negative correlation with resource productivity. These insights provide actionable recommendations for policymakers to tailor interventions, harmonize sustainability strategies, and address regional disparities to accelerate the transition to a resilient and efficient circular economy model.