Circular economy aims to keep materials in use for as long as possible, while reducing the generation of waste. This approach can help limit the volume of primary materials consumed by society: a particularly pressing concern when global consumption of goods is projected to double by 2050 due to growth in future income and population.

The EU was one of the first movers, globally, to promote circular economy principles, with the European Commission adopting the first Circular Economy Action Plan in 2015, which was further updated in 2020 and became a central part of the EU Green Deal. Under the action plan, Member States are responsible for their own transition towards a circular economy (CE). Circularity rates and the level of progress substantially varies across countries – and in recent years rates of circular material use have stagnated or declined in some economies (for instance in Ireland and Türkiye, according to EEA reports).

This new study aims to provide insights for policymakers by evaluating CE policies not only by the impact on material use but also on their economic and social impacts, including possible trade-offs from transitioning away from traditional production to circular approaches. The study modelled the impacts of a range of CE and climate change policies on the extraction and consumption of primary materials as well as assessing broader economic, social and environmental impacts. Its results suggest current climate change policies are not enough to significantly reduce material use and it will require a combination of supply and demand CE policies that target a range of commodities (fossil fuels, metals and non-metallic minerals) across all stages of the value chain (from mining and processing to intermediate use and final consumption). This is in line with the recommendations developed at the global level in UNEP (2024).

The researchers used a global economy-wide modelling framework that included both forward-looking approaches such as fiscal measures to stimulate recycling, and demand-side measures to shift societies towards less materialistic consumption patterns. To evaluate the efficacy of different policy options the study modelled a set of scenarios for the transition to a CE. The first set of (demand-side) scenarios focussed on policies that tax primary production of goods and subsidise the use of recycled materials – for example extraction levies for non-metallic minerals. The second set of (supply-side) scenarios focussed on CE policies that impact upstream design and consumption of products such as extending product lifetime and reducing consumer demand. The study also examined a combined scenario of both supply and demand policies, compared to a business-as-usual scenario, where there were continuing upward trends in production and use of materials.

The study also considered a set of ambitious climate change mitigation policies within the EU Green Deal, to see how these may complement the circularity agenda, and vice versa; that is, to see how pursuing decarbonisation (policies targeting fossil fuel extraction and CO2 emissions) may impact on material consumption, and if there could be any perverse effects. Under this scenario, they assumed declining cost of renewable electricity and increases in energy efficiency, in addition to considering the effects of carbon pricing, removal of fossil fuel subsidies and increased taxes on petroleum products – but no explicit actions targeting the reduction of material use.

The assessment showed that demand-side CE policies, such as those that support shifts in consumption, changes in product design and its lifetime, lead to a reduction in overall material use. For instance, the consumption shift scenario leads to a 2.3 % reduction in extraction of all materials in Europe and a 2.6% decline in material consumption (all materials embodied in final demand within country – material footprint). Policies to mitigate climate change were shown to have a large impact on extraction of domestic fossil fuels but a smaller impact on material consumption.

Fiscal policies target production by penalising the activities that rely on virgin materials such as ore extraction and production of primary metals and plastic. This approach has a narrower focus on selected materials (e.g. metals or plastic) and the reduction in domestic production could increase production in other countries (material leakage) to meet the demand. For example, the study showed that a tax on the extraction of non-metallic minerals reduced their extraction by 4% but at the same time material consumption declined by only 1.1%, indicating that countries are sourcing materials from outside their borders. In this context, border tax adjustments within the fiscal-type policies could reduce material leakage.

Results suggest that a package of CE policies can deliver a 15% reduction in Europe-wide extraction of materials relative to business-as-usual in 2030 compared to 2021. The magnitude of the effects differs across countries. For example, reductions in extraction of materials vary from over 14% in Romania to 9% in Croatia, Bulgaria and other Eastern European countries. This indicates that the policy mix may need to be tailored for different countries.

Researchers also examined the broader social and economic impacts of a move to CE policies. They showed that at a Europe-wide level, the overall cost of implementing the combined CE scenario is around 1% of GDP in 2030, and for most individual policy scenarios, the cost does not exceed 0.3%-0.4%. According to researchers this cost is modest, especially since the study does not consider co-benefits such as improved health and productivity resulting from lower pollution, increased biodiversity etc.

However, the analysis suggests that CE policies could potentially result in unequal distribution of wages with unskilled workers’ wages declining relative to skilled workers’ wages. In the combined scenario, unskilled wages decline by around 2% relative to skilled wages Europe-wide. This decline results mainly from policies focussed on changing design of products, which shift economic activities away from material-intensive sectors, such as metals production and mineral mining, to knowledge-intensive sectors, such as design and engineering. Additional policy interventions may be required to limit this wage inequality such as alternative revenue recycling options for the CE-related taxes.

Reference: 

Maksym Chepeliev, M. Angel Aguiar, A.  Farole, T. Andrea Liverani, A. & van der Mensbrugghe, D. (2026) Circular economy transition in Europe requires ambitious policies beyond climate mitigation, Resources, Conservation and Recycling (2026)

Volume 225, 108591, https://doi.org/10.1016/j.resconrec.2025.108591.

To cite this article/service:

“Science for Environment Policy”: European Commission DG Environment News Alert Service, edited by the Science Communication Unit, The University of the West of England, Bristol.

Notes on content:

The contents and views included in Science for Environment Policy are based on independent, peer reviewed research and do not necessarily reflect the position of the European Commission. Please note that this article is a summary of only one study. Other studies may come to other conclusions.