The Journal of Environmental Management just published the empirical paper on the interplay between public environmental expenditure and private investment in advancing the circular economy in the European Union (EU), written by Dr Joshua Afolabi and Md Rohidul Islam.
The paper highlights how markets often fail to account for environmental costs, which results in market failures and negative externalities (such as pollution and resource depletion) that hinder sustainable development and the advancement of the circular economy (CE). Its key finding is that both public and private investment are critical drivers of CE progress in the EU, and are complementary rather than substitutive. More importantly, the interaction between the two demonstrates a “crowding-in” effect, where public spending helps catalyze and amplify private investment by reducing risks and uncertainty, and creating enabling market conditions.
These results provide strong empirical support for the EU’s integrated policy strategy under the European Green Deal and the Circular Economy Action Plan. The key takeaway is that maintaining robust public environmental expenditure is essential for mobilizing the private capital needed to accelerate the transition to a circular, climate-neutral economy.