Does Europe benefit from a circular economy in resource management?

The circular economy provides a transformative framework to tackle global challenges, offering sustainable solutions across industries, cities, and policy levels, with significant environmental, economic, and social benefit.

A circular economy is a systems solution framework that tackles global challenges like climate change, biodiversity loss, waste, and pollution. It is based on three principles, driven by design: eliminate waste and pollution, circulate products and materials (at their highest value), and regenerate nature. It is underpinned by a transition to renewable energy, which is derived from resources that are not depleted on timescales relevant to the economy (i.e., not geological timescales) and materials.

This resilient system benefits business, people, and the environment. Transforming every element of the take-make-waste system—how resources are managed, how products are made and used, and how materials are handled afterward—is essential. By doing so, a thriving circular economy can be created, benefiting everyone within the planet's limits. The circular economy equips us with tools to tackle climate change and biodiversity loss while addressing social needs. It offers the power to grow prosperity, jobs, and resilience while reducing greenhouse gas emissions, waste, and pollution.

Challenges Facing the Circular Economy

Several challenges hinder the adoption of a circular economy. These include the uptake of new business models, establishing adequate standards and laws, creating financial incentives, fostering innovation, and encouraging behavioral change. Improved waste management, know-how, and administrative capacity are also critical. The market for secondary materials remains underdeveloped, while the cost of virgin materials often fails to reflect environmental costs. Instruments like carbon pricing, environmental taxes, and the polluter-pay principle are not yet widely or effectively implemented.

Moreover, the potential of green public procurement remains underutilized, and cultural barriers persist. Society continues to prioritize ownership over renting or sharing. Unlocking the potential of the circular economy in regions and cities requires creating legal and financial incentives, stimulating technical, social, and institutional innovation, and generating actionable data, knowledge, and capacities.

Minimizing Waste from Resources and Products

Minimizing waste is a key priority of the European Union, as highlighted in the European Green Deal. This ambitious roadmap for a climate-neutral and circular economy provides opportunities and investment directions for various economic sectors. The Circular Economy Action Plan outlines actions to accelerate this transition in Europe.

Central to achieving the Sustainable Development Goals (SDGs) and the Paris Agreement, the circular economy involves transformational changes in consumption and production. By designing out waste and pollution, preventing waste, reintegrating resources into environmental and economic systems, and extending the lifecycle of goods and products, it contrasts sharply with a linear economic model. In recent years, the circular economy has gained popularity at national and subnational levels, with regions and cities increasingly implementing initiatives to build sustainable circular systems.

Opportunities for Circular Economy Systems in Urban Areas

Urban areas provide unique opportunities for a circular economy due to their proximity to citizens, producers, retailers, and service providers, as well as their high human capital. More than 54% of the world's population lives in metropolitan areas, with city populations projected to grow by 50% between 2015 and 2050. This growth presents challenges but also offers opportunities for more efficient resource use.

Today, cities account for 70% of consumption-based emissions and about two-thirds of global energy use. Meanwhile, around 90% of city dwellers in Europe are exposed to harmful levels of air pollution. Congestion costs in cities are estimated to represent 2–5% of global GDP annually, while waste management expenses consume 20% of municipal budgets. Urban policy levers such as urban planning, public procurement, and regulations support the circular economy in cities. Key urban transition systems include buildings, designed for resource efficiency and deconstruction; mobility, enhanced through ride-sharing and reduced transport needs; and food systems, improved through diet transitions and food waste reduction.

Managing the Transition to a Circular Economy

The circular economy is gaining momentum as a solution to combat climate change and contribute to environmental sustainability by treating waste as a resource. With demographic growth and urbanization intensifying global megatrends, regions and cities are making economic and social cases for the circular economy. New business models based on waste prevention and resource efficiency offer cost savings, increased turnover, and local job creation across various sectors.

National and supranational strategies, as well as global agendas such as the 2030 Agenda for Sustainable Development, are providing crucial impetus for the transition. The circular economy is central to achieving Sustainable Development Goal (SDG) 12 on sustainable consumption and production. It also supports progress toward goals like SDG 6 on water, SDG 7 on energy, SDG 11 on sustainable cities, SDG 13 on climate action, and SDG 15 on the sustainable use of natural resources.

A Global Perspective

The circular economy offers mitigation solutions that align with the objectives of the Paris Agreement by focusing on low-carbon materials and driving behavioral changes in society. It is a key pillar of the European Green Deal, representing an opportunity to implement the New Urban Agenda and G20 initiatives on resource efficiency. The European Investment Bank (EIB) plays a significant role by funding urban circular economy projects within the EU Urban Partnership on the Circular Economy.

Circular economy technology and expertise have the potential to become global growth markets as resources become increasingly scarce. The European Environment Agency (EEA) estimates that enhanced resource productivity and material reuse could save EUR 600 billion within the EU-27 by 2030