By Igor Taranic

The concept of a circular economy aims to address the ecological challenge of the resource depletion and bring along both economic and environmental benefits.

The concept of a circular economy aims to address the ecological challenge of the resource depletion and bring along both economic and environmental benefits.

In December 2015, the European Commission (EC) adopted the Circular Economy Action Plan, which is probably the most ambitious regional programme to address resource depletion (Refer to Part-1 and Part-2 of Circular Economy series for more information).

Although the theoretical foundations of the concept date back to the 1970s, ‘Circular Economy’ as a policy is still in its “work in progress” phase. Similar to policies aiming to amend the way our economies function, this too requires a coherent and supportive regulatory framework. This article highlight some crucial points from the CEPS special report on the Circular Economy that can support the Circular Economy in Europe.

Policy Mix to Support Circular Economy

A circular economy rests on three pillars:

  • Reducing environmental impacts and increasing environmental benefits;
  • Cost savings from reduced resource use, and
  • Creating new market opportunities for Circular Economy business models
Energy efficiency policies play an important part in of the transition towards a low carbon economy.

Circular economy aims to address the ecological challenge of the resource depletion and bring along both economic and environmental benefits. | Photo Courtesy: Pexels

A policy mix to support the transition towards the circular economy needs to address each one of the pillars separately. At the same time, it needs to align the cross-pillar policies that address the three pillars altogether.   

We address this by introducing three main types (in this context) of regulatory instruments:

  • General recommendations to align the cross-pillar policies
  • Recommendations addressing the financing of the Circular Economy
  • Specific recommendations that address each pillar

General Recommendations to Align the Cross-pillar Policies

Given the scale and scope of the transition towards the circular economy, numerous policies of the European Union contain certain aspects of this type of economy, alongside with the mentioned EU’s Circular Economy Action Plan. Although their primary aim is other than addressing resource depletion, these policies include the Digital Single Market, Collaborative Economy and a number of environment, energy and climate initiatives. The CEPS framework presented in our report offers a bottom-up, stakeholder-centered and inclusive approach to conceptualising the circular economy and helping to align the different policies through the prism of the Circular Economy.

Given the specifics of the European Union structure, many policy tools to support the transition to the circular economy remain in the hands of the member states (e.g. taxation). Still, the European Union can play an important role in investing in R&D, provide support to SMEs and stimulate private financing by providing public leverage.

Addressing the Pillars – Specific Recommendations

Energy efficiency policies play an important part in of the transition towards a low carbon economy. Mandatory energy efficiency (and other) targets proved to be an effective tool in Europe.

Energy efficiency policies play an important part in of the transition towards a low carbon economy. Mandatory energy efficiency (and other) targets proved to be an effective tool in Europe.

Mandatory resource use targets still sound somewhat controversial, but there are at least two alternatives that might reach similar effect: voluntary agreements with the industry on voluntary targets for resource use; or other sorts of mechanisms, such as standards, to reduce the resource use.

Another important aspect is making the consumers a part of the transition via product labeling. Circular economy labeling initiatives need to go beyond existing packaging recycling schemes; re-usability, re-manufacturability, and recyclability of products could encourage sustainable production and consumption.

Optimizing the usage of natural resources through tax reform is known as the “double-dividend” approach. The first dividend is environmental in nature i.e. reduction in resource use. The second dividend is an economic one – stimulate employment by reducing the pressure on labor costs.

Last but not least, circular economy transition can only happen in cooperation between public sector, private sector, civil society and other stakeholders.

Creation of public-private partnerships and other types of multi-stakeholder platforms and networks to foster eco-innovation, is a crucial part in the policy mix to support the ‘Circular Economy’.

Finally, a combination of the policies alignment, financing, creation of multi-stakeholder networks and specific policies to address the Circular Economy pillars can take it from a concept and a “work in progress” policy to our reality of tomorrow.  


Igor Taranic works at the Centre for European Policy Studies (CEPS), a Brussels based leading European think tank. He is also a Member of the Executive Board of the College of Europe Alumni Association.

Featured Image Credits: Karsten Wurth via Unsplash

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Posted by The Indian Economist