Do circular innovations and carrying capacity of natural environment enhance circular economy in the European Union? Evidence from simulation and machine learning methods

The longevity of the natural environment is fundamental for sustainable production and consumption. The circular economy conserves natural resources, ensures sustainable production and consumption, and protects the natural environment. The role of circular innovations, particularly the carrying capacity of nature, is ignored in literature. This study analyses the impact of circular innovations and the carrying capacity of the natural environment on the circular economy for 27 European Union countries. Panel data from 2010 to 2022 were analyzed using simulation and machine learning methods. Empirical estimates revealed that circular innovations and resource productivity have been instrumental in propelling circular practices, while the carrying capacity of nature and per capita output have a detrimental impact. More specifically, the carrying capacity of the natural environment signifies potential threats to the adoption of circular practices. This study suggests that innovation in recycling technologies and reuse processes is mandatory for enhancing the adoption of circular practices. Furthermore, the European Union must limit the use of naturally occurring endowments and increase the use of recycled resources. Concludingly, this study provides unique insight into the sustainable and circular landscape in the European Union.