Circular economy for climate neutrality: Setting the priorities for the EU. CEPS Policy Brief No 2019/04, 22 November 2019

Rizos, Vasileios and Elkerbout, Milan and Egenhofer, Christian. (2019) Circular economy for climate neutrality: Setting the priorities for the EU. CEPS Policy Brief No 2019/04, 22 November 2019. [Policy Paper]

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Abstract

The previous Commission policy on resources management was part of the priority for jobs and growth and economic competitiveness. The circular economy will be no less important for the new political priority of climate neutrality; it will become one of the indispensable elements for meeting the EU’s ambitions. EU climate policy and the circular economy are by and large complementary and mutually reinforcing. The circular economy is more than just another ‘product standards’ policy. In order for this to happen, • there is a need for a framework that is able to systematically address trade-offs, such as between the circular and the bioeconomy, but also between material efficiency and energy use, as well as • a mechanism to steer and monitor progress, touching upon the question of whether and if so, how to increase ambition and develop tools to monitor progress, for example via targets, and • the new Commission will need to develop and then scale up successful products and processes to create opportunities for new value chains while addressing risks, such as dependency on raw materials. Circular economy products for the foreseeable future will require both technology push and market pull policies. Both the circular economy and low-carbon economy will require new and often yet unknown business models. This will also require new methods of regulation. The principal challenge will be to create ‘lead markets’ for the circular economy in combination with lowcarbon products. Many ideas for this exist. They include, for example, ‘carbon contracts for difference’, carbon budgets for projects, consumption charges, taxes and tax exemptions, sustainable finance, product standards and public procurement. Ideas now need to be tested to see whether they could work in practice. Finally, the EU circular economy will need to be underpinned by a robust and transparent carbon accounting system. If effective, such as system can at the same time act as a catalyst for investment in the circular economy and low-carbon products and processes.

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