Circular Economy and Energy Transition as Drivers of Carbon Emission Reduction: Evidence from Central and Eastern European Countries

Abstract

Reducing carbon emissions has become a central objective of sustainable development policies as countries seek to address the environmental challenges associated with climate change and resource depletion. In this context, circular economy practices and energy transition policies have emerged as key mechanisms for achieving environmental sustainability. This study examines the determinants of carbon emissions within the framework of the circular economy and energy transition for selected Central and Eastern European countries (Romania, Poland, Hungary, Bulgaria, Slovakia, and Slovenia) over the period 2010–2024. Using panel data analysis, the study incorporates key variables including circular economy, economic growth, recycling, renewable energy consumption, and urbanization. To enhance the reliability of the empirical estimates, panel unit root tests, the Hausman specification test, fixed-effects estimation, and Driscoll–Kraay robust standard errors are employed to address heteroskedasticity, serial correlation, and cross-sectional dependence. The results indicate that improvements in circular economy practices together with greater renewable energy use are associated with lower carbon emissions, providing empirical support for the proposed hypotheses. Recycling activities are found to increase emissions in the short run, indicating energy-intensive processes. In contrast, the effects of economic growth and urbanization are found to be context-dependent, providing only partial support for the related hypotheses. Overall, the results highlight that carbon emission dynamics are shaped by a complex interaction of economic, structural, and environmental factors, and that policy effectiveness depends on country-specific conditions. By focusing on transition economies in Central and Eastern Europe, this study extends the existing literature through an integrated panel data analysis of circular economy and energy transition policies and offers policy-relevant evidence for the region.