Advancing Circular Economy for Climate Change Mitigation and Sustainable Development in the Nordic Region

Abstract

This study examines how circular economy (CE) strategies contribute to climate change mitigation and sustainable development in the Nordic region. Analyzing resource productivity, environmental taxation, and corporate recycling practices from 1995 to 2021, it examines the impact of economic growth, trade openness, urbanization, and regulatory incentives on CE adoption. Using the STIRPAT model and quantile regression, findings highlight that resource productivity and environmental taxation are key drivers of circularity, while trade and urbanization present both opportunities and challenges. A bidirectional relationship between environmental taxation and recycling rates underscores the dynamic role of green fiscal policies. The study also contributes to institutional theory by demonstrating how fiscal mechanisms—such as environmental taxes—not only shape but also are shaped by recycling outcomes, reflecting adaptive and co-evolving institutional arrangements. The study offers insights for businesses and policymakers, emphasizing the need for integrated governance and sustainable trade to support CE transitions. Implications extend beyond the Nordic context, offering a robust empirical foundation for CE integration in other high-income and industrializing economies aiming to build low-carbon, resource-efficient systems.