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The Economics of Innovation, Renewable Energy, and Energy Efficiency for Sustainability: A Circular Economy Approach to Decoupling Growth from Environmental Degradation

Author

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  • Manal Elhaj

    (Department of Economics, College of Business Administration, Princess Nourah Bint Abdulrahman University, Riyadh 11671, Saudi Arabia)

  • Masahina Sarabdeen

    (Department of Economics, College of Business Administration, Princess Nourah Bint Abdulrahman University, Riyadh 11671, Saudi Arabia)

  • Hawazen Zam Almugren

    (Department of Economics, College of Business Administration, Princess Nourah Bint Abdulrahman University, Riyadh 11671, Saudi Arabia)

  • A. C. Muhammadu Kijas

    (Department of Social Foundations and Educational Leadership, Faculty of Education, International Islamic University Malaysia, Kuala Lumpur 53100, Malaysia)

  • Noreha Halid

    (Department of Economics, College of Business Administration, Princess Nourah Bint Abdulrahman University, Riyadh 11671, Saudi Arabia)

Abstract

The circular economy (CE) aims to reduce environmental degradation by ensuring the continuous use of materials and energy resources, aligning with the decarbonization agenda. However, despite the rising acceptance of CE concepts, the economic and managerial aspects remain underexplored in policy and practice. Therefore, this study seeks to bridge the knowledge–practice gap by studying how technology-driven innovation, renewable energy, and energy efficiency interact with CE principles to advance sustainable environmental connections in a detailed manner. The economic analysis of this study was conducted using two base and moderation models, utilizing global data from 78 developing and developed countries, and applying Fixed Effect, Random Effect, and Generalized Method of Moments estimates. The samples were selected based on data availability from internationally recognized databases from 2010 to 2021. The key findings suggest that technology-driven innovation and renewable energy reduce carbon emissions, whereas gross domestic product (GDP) growth and energy efficiency show no standalone positive effects. Notably, moderation effects reveal that the integration of technology with GDP promotes sustainability outcomes, but energy efficiency and renewable energy interact negatively with emissions, a contradictory result warranting further policy investigation. CE-driven innovation promotes decarbonization by striking a balance between environmental preservation, economic expansion, and technology uptake. This study emphasizes region-specific techniques and offers policy insights for combining the CE with natural capital and green GDP. It increases the knowledge of how circular business models powered by technology support sustainable growth and the shift to a circular economy.

Suggested Citation

  • Manal Elhaj & Masahina Sarabdeen & Hawazen Zam Almugren & A. C. Muhammadu Kijas & Noreha Halid, 2025. "The Economics of Innovation, Renewable Energy, and Energy Efficiency for Sustainability: A Circular Economy Approach to Decoupling Growth from Environmental Degradation," Energies, MDPI, vol. 18(17), pages 1-28, September.
    • Handle: RePEc:gam:jeners:v:18:y:2025:i:17:p:4643-:d:1739619
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    References listed on IDEAS

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