Does Better Environmental Performance Come at the Cost of Growth? Evidence from EU-27 SDG Indicators

While economic growth has often been linked to environmental degradation—particularly in early development stages, as suggested by the Environmental Kuznets Curve (EKC)—the reverse relationship, where environmental sustainability influences growth, remains less explored, especially in the EU context. This study examines annual panel data from EU-27 economies (2000–2023), incorporating selected European Sustainable Development Goal (SDG) indicators and employing fixed-effects panel models alongside instrumental-variable and dynamic panel estimators to address endogeneity. The findings show no evidence that improvements in environmental performance hinder economic growth; rather, for several indicators, better environmental performance is associated with higher real GDP per capita growth. These results are robust to alternative specifications and controls, supporting the policy conclusion that enhanced environmental quality does not constrain economic growth and may sustainably support economic development.