Government governance as a strategic enabler of resilient energy systems: insights from the circular economy transition in European countries

The circular economy (CE) supports energy diversification in Europe by promoting resource efficiency, waste reduction, and greater integration of renewable and alternative energy sources. By expanding access to cleaner and more sustainable energy systems, CE contributes to Sustainable Development Goals (SDGs), SDG-7 (Affordable and Clean Energy). Through innovation and resource-efficient production, it also advances SDG-9 (Industry, Innovation and Infrastructure). Furthermore, CE encourages SDG-12 (Responsible Consumption and Production), while reducing environmental pressures and supporting climate mitigation efforts under SDG-13 (Climate Action). As Europe faces growing energy demand and reliance on imported fuels, effective government governance is essential for implementing CE policies and fostering a resilient, diversified energy system. Against this background, this study investigates the impact of CE practices on energy diversification in European countries moderated by government governance while accounting for the influences of energy use, energy imports, environmental taxation, and urbanization for the period 2000–2023. To capture both short-run and long-run dynamics, the Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) model is employed. The results revealed that CE positively influences energy diversification in both the short and long run. Additionally, government governance plays a moderating role in the relationship between CE and energy diversification. Moreover, energy use, environmental taxation, and urbanization positively contribute to diversification efforts, while dependence on energy imports negatively affects it. These findings point to advancing CE policies and reducing import dependency as key strategies to foster a more diversified, resilient, and sustainable energy system in Europe.