The Role Of Private Investment In The Transition To A Circular And Sustainable Economy In The European Union

Based on the international pressure to achieve climate neutrality and the need to adhere to a sustainable economic framework, the EU faces dilemmas related to the efficient mobilization of capital for the circular economy. This article aims to examine the evolution of private investment at EU level in sectors related to the circular economy. By including economic aspects of sustainability-related investments, the research can provide new public policy models to accelerate the transition to a greener economy and in line with international standards. A comprehensive analysis of the interconnections between private investment on the economic performance of circular sectors and climate obligations is a key element of this article. In the first part of the research, we conducted a literature review that captures a unique combination of gross value added, international investment position, direct investment income and climate allocations by sector. In the second part of the article, we presented the investment situation at the European Union level, highlighting both the connections and discrepancies between direct, private and climate investments in relation to the performance of circular economy indicators. Last but not least, this paper contains an econometric analysis on investment dynamics in the European context, using a coherent range of economic and financial indicators, including EU direct investment income, by country and economic activity, Private investment and gross added value related to circular economy sectors, Investments in climate change mitigation, Investment by institutional sectors, Net international investment position and Environmental protection investments of total economy. Our findings indicate a modest, but growing gap between private capital engagement and circular performance, alongside a notable disparity between the potential for international financing and its actual absorption in green sectors. The findings argue for fiscal stimulus measures and a cohesive policy framework to transform investment into a genuine catalyst for a sustainable transition.