Impact Of Circular Economy And Environmental Sustainability On Economic Growth In Ethiopia: An Empirical Analysis

Abstract

The circular economy is part of global efforts to achieve the Sustainable Development Goals of the United Nations. The problem of Ethiopia's low economic growth and significant environmental issues is currently preventing our nation's economy from rapidly increasing. Our country faces significant environmental challenges such as resource waste, unsustainable usage, climate change, famine, poverty, and population expansion, obstructing its development. Through empirical analysis, the objective of this study is to examine how Ethiopia's economic growth is impacted by the circular economy and environmental sustainability. The study uses time series and auto-regressive distributive lag model analyses of 1990-2021 data from the World Bank. The long-term relationship between dependent and independent variables is negative and statistically significant at a 99% confidence level. In the short run, natural resource income rents can boost economic growth, but in the long-run impacts include resource waste, climate change, famine, poverty, and disease. Environmental sustainability aims to protect the planet and natural resources for future generations. Environmental conservation efforts could attract environmentally conscious tourists, generating sustainable revenues for the country while promoting conservation . The circular economy can boost economic growth by creating job opportunities, reducing unemployment, and generating foreign exchange. Renewable energy's negative impact on the economy includes land use requirements, reducing agricultural land, reducing crop yields, and increasing food prices. In addition, the production of renewable energy equipment can have negative environmental impacts and require the use of rare earth metals that can be difficult to source sustainably. Accordingly, policymakers and governments, especially the Environmental Protection Authority, the Agricultural Ministry, the Ministry of Economy, and the Culture and Tourism Ministry, must carefully consider the potential negative impacts of investing in natural resources, renewable energy, and manufacturing projects and work to mitigate them wherever possible.