From linear to circular: Evaluating the effects of circular economy on sustainable development progress in the EU economies

The circular economy (CE) represents a transformative approach to global sustainability, fundamentally reimagining how societies can maximize resource efficiency while minimizing waste. Despite its promise, significant questions remain about its practical implementation. This study investigates how CE practices have influenced progress toward Sustainable Development Goals (SDGs) 12 and 13 across the European Union between 2005 and 2020. Through rigorous econometric analysis, combining two-way fixed effects, system GMM, panel causality tests and quantile via moments regression (MMQR), we examine the relationship between key circular economy indicators and sustainable development outcomes. Our findings reveal bidirectional causality between CE variables and SDGs, suggesting complex feedback mechanisms in the sustainability transition process. The findings also show that urbanization has a strong positive impact on SDG achievement in developed regions, while GDP growth demonstrates a predominantly negative relationship with SDG progress. We also identify a marked North-South divide in CE implementation and SDG achievement across EU member states, reflected in their varying positions on the Environmental Kuznets Curve. Drawing on Post-Keynesian economic theory, we demonstrate how green innovation systems and strategic government intervention can help separate economic prosperity from environmental degradation. Our findings emphasize the importance of context-specific solutions in advancing circular economy initiatives.