The shift towards the circular economy in EU cities and regions is driven by several interconnected factors that reflect the urgent need for systemic change: environmental imperatives, economic growth and resilience of supply chains, technological progress and R&D, regulatory and policy frameworks and jobs and societal engagement. This chapter provides the narrative, data, costs of inaction and co-benefits for each driver.
The Circular Economy in Cities and Regions of the European Union
Abstract
The circular economy is a production and consumption model that aims to maintain the value of products, materials, and resources in the economy for as long as possible while minimising waste generation (European Parliament, 2023[1]; European Union, 2021[2]) (OECD, 2019[3]). By doing so, it contributes to key European Union (EU) priorities, including a green recovery, climate mitigation and energy savings, biodiversity protection, sustainable development and competitiveness (European Commission, 2015[4]).
Source: Author’s elaboration based on Potting et al. (2017[5]) Circular Economy: Measuring innovation in the product chain.
Contrary to the linear economy, which follows a take-make-consume-dispose pattern and relies on large quantities of cheap and readily available materials and energy, the circular economy applies R-strategies (Box 1.1) to the upstream, midstream and downstream phases of production and consumption. These strategies aim to narrow economic flows by minimising the inputs of raw materials and energy; slow material flows by extending the life span of products and services; and close loops by reintegrating treated resources back into the economy (Figure 1.1).
In the upstream phase, where products are designed and produced, strategies based on refusing, rethinking, and reducing aim to dematerialise the economy. They show high circularity potential as they can narrow material flows. Several business models can be applied. For instance, user-oriented product-service systems, such as leasing, pay-per-use, or subscription services provide access without ownership, reducing material footprint consumption. Similarly, result-oriented models focus on delivering outcomes, such as lighting or printing as a service, with providers retaining responsibility for efficiency and maintenance of the goods used to provide the service. Sharing models optimise the utilisation of underused assets, including goods libraries, shared mobility platforms, and co-working spaces. Digital business models leverage technology to minimise resource use, including subscription-based software, e-commerce platforms, and digital twins for efficient system management. Finally, circular supply models facilitate eco-design, circular sourcing, take-back schemes, and reverse logistics to promote reuse, repair, and recycling.
In the midstream phase, which is related to consumption, reuse, repair, refurbish, remanufacture and repurpose have a medium level of circularity potential as they slow material flows, extending the life span of products and services. According to the European Commission (EC’s classification of materials, material flows include categories such as biomass, metal ores, non-metallic minerals, and fossil energy materials/carriers (Eurostat, 2024[6]). In this phase, product-oriented or product-service systems combine product sales with extended services, such as warranties, maintenance contracts and repair services, to extend product lifetimes and mitigate resource extraction and waste generation (OECD, 2019[7]) (OECD, 2024[8]).
The downstream phase includes recycle and recover strategies. They show a low level of circularity as they are applied when resources become waste and require treatment. Therefore, reintegrating transformed resources into the economy (closing loops) requires the use of additional material and energy. In this case, business models include downcycling, where materials are repurposed for less demanding applications; upcycling, which creates secondary materials for higher-value applications; and industrial symbiosis, where by-products from one industry are used as inputs for another.
The EU Taxonomy Compass1 identifies 16 economic sectors2, five of which are directly connected to circularity (European Commission, 2020[9]): water supply, sewerage, waste management and remediation; construction and real estate; services; manufacturing and information and communication technology (ICT). Within each sector, the EU Taxonomy highlights a series of activities across the upstream, midstream and downstream phases (Table 1.1).
Refuse refers to eliminating the use or demand for materials or products that are harmful or unnecessary. For instance, cities and regions can prohibit single-use plastics in public services and events, digitalise services to replace physical products such as files with e-files, or introduce water refill stations in public buildings and urban areas to reduce single-use bottles.
Rethink relates to reformulating consumption and use models enabling cities and regions to intensify resource utilisation. Cities and regions can rethink their infrastructure and urban settings by promoting compact city designs, such as in the 15-minute city concept, alongside the provision of multi-use community spaces, co-working and co-living hubs, bike-friendly pathways, and using smart technologies to optimise resource use.
Reducing the economy's material footprint requires increasing material efficiency during the manufacturing or use phases of products and services. Cities and regions can achieve this by employing resource-saving technologies, such as energy-efficient lighting and water-saving and recycling devices (e.g. decentralised water recycling systems, stormwater harvesting) in public buildings and urban areas, and by integrating renewable energy systems, such as solar panels and wind energy infrastructure.
Reuse encourages the use of products and materials for their original purpose or by a new user. Examples of spaces fostering reuse in cities and regions include community exchange centres and second-hand markets.
Repair strategies can prevent the disposal of products. Cities and regions can promote repair and maintenance by offering repair workshops, hubs, and cafés as well as ensuring that public services, such as schools or municipal offices, prioritise the repair of goods such as electronic devices.
Refurbishing involves restoring products and infrastructure to an updated or improved condition. Cities and regions can refurbish public infrastructure instead of demolishing and rebuilding it.
Remanufacturing enables discarded products or their components to be transformed into new items with the same quality and functionality as the original. This requires reverse logistics systems that allow products, such as appliances, to re-enter the industrial cycle. Cities and regions can incentivise local industries to adopt remanufacturing practices and integrate remanufactured products into public procurement.
Repurposing involves adapting discarded items for new uses. In urban contexts, this can include transforming old railways into bike paths, community gardens or vertical farming infrastructure. Cities and regions can repurpose underused public buildings for new functions, such as co-working offices or community centres, and provide workshops to teach citizens how to repurpose and upcycle household items.
Recycling refers to the processing of discarded materials to produce new resources of either the same or lower quality. Cities and regions can support this by prioritising the use of recycled materials in construction, promoting urban mining and building city-wide recycling systems (e.g. separate collection bins for organic waste, plastics and textiles) that include facilities for e-waste and textiles.
Recovery focuses on extracting value from non-recyclable materials, often through waste-to-energy technologies. Cities and regions can establish waste-to-energy facilities to process non-recyclable waste and divert it from landfills. These facilities can produce energy, materials, and other valuable by-products, thereby reducing reliance on virgin natural resources, and wastewater-to-energy systems.
Source: Blomsma and Brennan (2017[10]), The Emergence of Circular Economy: A New Framing Around Prolonging Resource Productivity, 10.1111/jiec.12603; Reike, Vermeulen and Witjes (2018[11]), The circular economy: New or Refurbished as CE 3.0? — Exploring Controversies in the Conceptualization of the Circular Economy through a Focus on History and Resource Value Retention Options, 10.1016/j.resconrec.2017.08.027; Potting et al. (2017[5]), Circular Economy: Measuring innovation in the product chain - Policy report.
The circular economy operates at the micro (relating to products, companies, consumers), meso (e.g. eco-industrial parks) and macro (city, region, country and beyond) scales. In cities and regions, the circular economy implies a systemic shift whereby economic activities are planned and carried out in a way that minimises waste and uses resources efficiently across value chains; services (e.g. water, waste and energy) are provided by making efficient use of natural resources as primary materials and optimising their reuse; and infrastructure is designed and built to avoid linear lock-in (e.g. district heating, smart grids, etc.) (OECD, 2020[12]).
Cities are the places where most of the global population lives and consumes. Globally, by 2050, about 7 billion people will reside in cities (70% of the total population) (UN-Habitat, 2022[13]). In Europe, 84% of the population will be urban by 2050, representing around 600 million people, with implications for production and consumption patterns (UN-Habitat, 2022[13]). Currently, cities consume 70% of the world's food production, account for approximately 75% of global energy consumption, and generate 70% of greenhouse gas emissions – shares that are set to rise (FAO, 2025[14]; IEA, 2024[15]). Economically, cities and regions are powerful engines of growth. With more than 80% of the global gross domestic product (GDP) generated in cities, they can contribute to sustainable growth through increased productivity and innovation (World Bank Group, 2025[16]). In 2021, more than 50% of the EU’s GDP and around 45% of its employment was concentrated in predominantly urban regions (Eurostat, 2024[17]). Urban areas also represent 83% of total household spending, amounting to USD 51 trillion globally (World Economic Forum, 2024[18]). Moreover, local and regional governments hold competencies in areas relevant to the circular economy such as water supply and sanitation services, solid waste management, land use, and climate change. These governments can enforce regulations, manage infrastructure, and develop policies that promote sustainable practices and resource efficiency (OECD, 2020[12]). Both the OECD Principles on Urban Policy (OECD, 2019[19]) and the OECD Principles on Rural Policy (OECD, 2019[20]) consider the circular economy as a means to encourage more efficient resource use.
Note: ✓ = Relevant value chain for the sector ✗ = Not relevant value chain
Source: Author’s elaboration based on European Commission (2020[21]) A new Circular Economy Action Plan and European Commission (2020[9]) EU Taxonomy Compass.
The shift towards a circular economy in EU cities and regions is driven by several interconnected factors that reflect the urgent need for systemic change. According to the results of the OECD Survey: The Circular Economy in Cities and Regions in the European Union (EU), across 48 cities, 15 regions and 1 province from 21 countries of the EU-27 Member States, the United Kingdom and Norway (Box 1.2), major drivers for transitioning to a circular economy include climate change (67% of respondents), economic growth (55%), and private sector initiatives and job creation (48%) (Figure 1.3). Based on survey responses and major macrotrends, five key factors driving the circular economy in cities and regions emerge: environmental imperatives, economic growth and resilience of supply chains, market and jobs opportunities, technological development and Research & Development (R&D), regulatory frameworks and societal engagement (Figure 1.2). These drivers are not mutually exclusive and may align or conflict, requiring implicit or explicit prioritisation. For instance, reducing resource depletion or negative environmental impacts do not always support economic activity and employment, nor does economic growth necessarily minimise resource use or environmental harm (Ekins, 2024[22]). Figure 1.5 illustrates examples of the costs of inaction and co-benefits of the circular transition.
Source: Author’s elaboration.
Note: Results based on a sample of 64 respondents that indicated the drivers being “Very relevant” and “Relevant”.
Source: OECD (2024[23]), OECD Survey: The Circular Economy in Cities and Regions in the European Union (EU).
Undertaken between February 2024 and October 2024, the OECD Survey: The Circular Economy in Cities and Regions in the European Union (EU) aimed at gathering data and information on:
The status of circular economy in EU cities and regions, including common understanding, definitions and applications.
The main tools (including plans, legal and regulatory frameworks, economic instruments) to implement circular economy in EU cities and regions.
The main obstacles for circular economy to happen in EU cities and regions.
The good practices available to date.
The target respondents of the survey were policymakers from subnational governments in EU-27 Member States, the United Kingdom and Norway (as participating countries in the Horizon Europe programme for 2021-2027). The survey was developed by the OECD in collaboration with the CCRI-CSO and disseminated in co-operation with ICLEI, European Committee of the Regions – CoR, ASSET Interreg project, Ellen MacArthur Foundation, UK Circular Cities Network and the OECD Champion Mayors for Inclusive Growth. A total of 64 responses were provided on a voluntary basis by 48 cities, 15 regions and 1 province from 21 countries (Figure 1.4). The countries represented in the survey are Finland (10 responses); Spain (9); the Netherlands (6); Portugal (5); Germany and Italy (4); Belgium, Luxembourg and Sweden (3); Estonia, France, Greece, Norway, Slovenia and the United Kingdom (2); and Bulgaria, Czechia, Hungary, Ireland and the Slovak Republic (1). It should be noted that while the survey highlights trends across various cities and regions in EU countries, the sample is not representative of the entire population of European cities and regions. Additionally, some results are influenced by respondents' perceptions.
Note: Based on the 64 cities and regions that completed the OECD Survey: The Circular Economy in Cities and Regions in the European Union (EU).
Source (figure and box): OECD (2024[23]), OECD Survey: The Circular Economy in Cities and Regions in the European Union (EU).
Source: Author’s elaboration
Environmental imperatives
Circular economy practices in cities and regions are on the rise as they contribute to lower carbon emissions in material and energy-intensive processes. They can favour decoupling of economic growth from environmental depletion, and contribute to reducing waste production, by extending the life cycle of products and goods, while decreasing the need for landfill and incineration which cause environmental harm (Table 1.2).
Climate change mitigation
A circular economy aims to minimise the extraction and processing of raw materials, which is a major source of emissions in cities and regions. In 2024, around 60% of global greenhouse gas (GHG) emissions were generated by materials such as iron and steel, cement and plastic, and the construction sector was responsible for 50% of emissions (UNFCCC, 2023[24]; UNEP, 2024[25]). The extraction and processing of non-energy and non-agricultural raw materials are estimated to contribute to 18% of EU consumption-based GHG emissions (EEA, 2024[26]). In the EU, GHG emissions from production activities decreased by 18% between 2008 and 2022 (Eurostat, 2024[27]), although the environmental costs of mining and processing remain high. Globally, these costs for 38 materials can reach EUR 5 trillion per year, equivalent to 6.4% of GDP (Arendt, Bach and Finkbeiner, 2022[28]).
The circular economy contributes to achieving climate mitigation targets. First, resource demand reduction strategies and new models of service provision could reduce global GHG emissions from buildings, transport, food, industry and energy supply systems by 40-70% by 2050 (IRP, 2022[29]). Second, material efficiency measures can cut hard-to-abate process emissions in the EU’s production of raw materials such as steel, cement, aluminium, and plastic by over 50% by 2050 (Material Economics, 2018[30]). Third, solutions such as waste segregation, composting, and recycling could reduce the waste sector’s total emissions by 84% (WEF, 2022[31]). The EU set a 55% reduction target in net GHG emissions by 2030 and 90% by 2040 compared to 1990 levels. The European Green Deal, aiming for Europe to become the first climate-neutral continent by 2050, identifies the circular economy as one of its pillars. Yet only 28% of current Nationally Determined Contributions (NDCs)3 include the circular economy (UNDP, 2024[32]). The cost of inaction on climate change is expected to reach 10-12% of the EU’s GDP by the end of the century (CoR, 2024[33]).
Importantly, there is a potential trade-off between decarbonisation and dematerialisation. It is crucial to recognise that not all decarbonisation policies will lead to reduced material use, but rather, some could increase demand for resources. For example, fully electrifying the current passenger car fleet would require over 227 million tonnes of key materials, equivalent to 3.5% of the EU’s total raw material consumption (Blot and Stainforth, 2022[34]). However, this does not account for the significant reduction in fossil fuel consumption that electrification brings, which can contribute to offsetting a share of the overall material demand. This substantial increase in demand for critical raw materials highlights the need for careful consideration of the impact of climate change mitigation policies on circular economy objectives. Policy coherence between dematerialisation and decarbonisation measures is critical to maximise synergy between these objectives while mitigating potential trade-offs.
Resource efficiency
The EU shows a circular material use rate (CMUR)4 of 11.8% (in 2023), indicating a 1.1 percentage point increase since 2010 (10.7%) and slow progress towards the EU's 2030 target for circularity (which is set at 23.4%) (Figure 1.6) (European Commission, 2022[35]). Between 2014 and 2023, the circularity rate increased for biomass (+1.8 percentage points) and fossil-based materials (0.9 percentage point) but decreased for metal ores (-0.3 percentage point) and non-metallic minerals (-1.2 percentage point) (Eurostat, 2024[36]). Rates vary across countries, from 30.6% in the Netherlands to less than 3% in Finland, Ireland, and Portugal (European Commission, 2022[35]).
Source: Author’s elaboration based on (Eurostat, 2025[37]), Circular material use rate, https://ec.europa.eu/eurostat/web/circular-economy/monitoring-framework
Resource efficiency directly impacts the material footprint when overall material consumption is reduced. Housing and food, which are key sectors in cities and regions, are major drivers of resource consumption, accounting for a total of 72% of the EU's material footprint (i.e. the economic value generated per unit of material used) and requiring the highest material input per EUR spent (EEA, 2024[26]). At EU level, the average material footprint was estimated at 14 tonnes per capita in 2023, exceeding the 6-8 tonnes per capita sustainability threshold used across different studies (IEEP, 2022[38]). There are national and regional differences. For instance, Finland has the highest material footprint in the EU (46 tonnes per capita), six times higher than the lowest in the Netherlands and Malta (6.6 tonnes per capita). At the local level, the material footprint is, on average, 2.4 and 1.9 times larger than the domestic material consumption in Gothenburg, Sweden, and Nantes-Saint-Nazaire, France, respectively (Bahers and Rosado, 2023[39]). Despite relative reductions in the average EU material footprint, GDP growth in the EU between 2010 and 2018 increased resource extraction 4 times more than the material savings achieved by circular economy initiatives. On average, a 1% increase in GDP can increase resource extraction between 0.3 and 0.6% (Bianchi and Cordella, 2023[40]). Most material extraction in the EU takes place in rural regions. In 2022, urban regions (NUTS 3 level5) extracted 6.4 tonnes of materials per capita on average, while rural areas extracted over three times as much at 21 tonnes per capita (ESPON, 2025[41]).
2010 = 100
Note: Eurasia includes countries in Caspian regions, Russian and non-OECD European countries; Other America includes American countries excluding OECD American countries (Canada, Chile, Colombia, Costa Rica, Mexico, United States); Other Asia Oceania includes China, India and other non-OECD Asian and countries.
Source: OECD (2025[42]), OECD Data Explorer: Material Productivity, https://data-explorer.oecd.org/
Material productivity – the economic output or value added generated per unit of material consumed excluding energy production – increased by 19% in the EU over 2010-2022 (Figure 1.7). It more than doubled in Ireland and grew by over 50% in Cyprus, Malta, and Spain between 2010 and 2022 (OECD, 2025[43]). These increases reflect efficiency gains in production processes and changes in the materials mix. By 2024, 93% of EU SMEs implemented at least one resource-efficiency measure, primarily focusing on energy saving (66%), waste minimisation (66%), material saving (57%), and water conservation (49%) (European Commission, 2024[86]). Across NUTS 3 level regions, urban areas demonstrate greater material productivity in 2022, producing EUR 3.77 of economic output per kilogramme of material used, compared to EUR 1.50 in rural areas (ESPON, 2025[41]). Moreover, between 2010 and 2022, European OECD countries decreased their domestic material consumption (DMC) (i.e. the weight of the materials used in the domestic economic system) (OECD, 2019[3]) by 3% (OECD, 2025[42]). This implies a decoupling6 of material consumption from economic growth. While all OECD countries decreased their DMC per unit of GDP between 2010 and 2022, the DMC per unit of some countries such as Australia, Canada, Chile and Finland was double the OECD average in 2022 (Figure 1.9). At the NUTS 3 level, around 30% of small regions achieved absolute decoupling between 2014 and 2022, reducing material dependency while sustaining economic growth (ESPON, 2025[41]). This trend is particularly evident in regions of Germany, Greece, and Norway, along with several regions of France, Italy, the Netherlands, Spain, and the United Kingdom. The strategies and innovations in these regions—such as circular investments, technological advancements, and shifts to low-impact, high-value economic activities—offer valuable insights that could be adapted and applied to other contexts.
2010 = 100
Note: Eurasia includes countries in Caspian regions, Russian and non-OECD European countries; Other America includes American countries excluding OECD American countries (Canada, Chile, Colombia, Costa Rica, Mexico and United States); Other Asia Oceania includes China, India and other non-OECD Asian and countries.
Source: OECD (2025[42]), OECD Data Explorer: Domestic Material Consumption, https://data-explorer.oecd.org/
Non-energy materials, kilogram per USD current prices using 2010 base year and Purchasing Power Parities
Source: OECD (2024), "Material productivity" (indicator), https://doi.org/10.1787/dae52b45-en (accessed on 25 January 2025).
Waste management
In 2023, municipal waste constituted approximately 10% of total waste generated in the EU. Its diverse composition (e.g. organic materials, paper, plastic, various metals, textiles, glass, wood) poses challenges for environmentally sound management. In 2022, EU countries generated 513 kg of municipal waste on average, the same amount as in 2000, with relevant variations across EU Member States, from 803 kg per capita in Austria to 303 kg per capita in Romania (Eurostat, 2022[44]). At the NUTS 3 level, rural regions generated the least waste in 2022, averaging 422 kg per capita, compared to 608 kg per capita in urban regions (ESPON, 2025[41]). In the EU, municipal waste generation is projected to increase by 5.3%, from 220 Mt in 2018 to 231.5 Mt in 2035 (European Commission, 2022[45]). Globally, municipal waste generation is forecast to grow from 2.1 billion tonnes in 2023 to 3.8 billion tonnes in 2050 (UNEP, 2024[46]). Among OECD TL2 regions, Upper Austria, Austria, and Brussels, Belgium, show significant increases in municipal waste per capita generation between 2016 and 2020 and disparities in relation to municipal waste management (Figure 1.10).
Note: This includes the change in municipal waste per capita in large OECD regions (TL2 territorial level classification) for the period 2016-2020.
Source: OECD (2024[47]), OECD Regions and Cities at a Glance 2024, https://doi.org/10.1787/f42db3bf-en.
Correlation analyses across 239 OECD large regions suggest a possible inverted U-relationship (known as the Environmental Kuznets Curve7) between GDP per capita and municipal waste generation, whereby municipal waste generation initially increases with GDP per capita but eventually tends to decline after reaching a certain point (Figure 1.11). Other studies have confirmed a similar inverted U-relationship between GDP per capita and e-waste generation (Boubellouta and Kusch-Brandt, 2021[48]), GDP per capita and construction waste generation (Bao and Lu, 2023[49]), and GDP per capita and mismanaged8 plastic waste generation (Rom and Guillotreau, 2024[50]). In this case, data seem to show that OECD large regions generate more waste as they get wealthier, until a certain point when measures are taken to reduce waste production. Once GDP per capita surpasses approximately EUR 45 000, waste generation per capita seems to decrease. The low value of the R2 indicates that a substantial share of the variation remains unexplained, warranting caution in interpreting these trends. Based on the estimated curve equation, a 20% increase in GDP per capita in the wealthiest OECD large regions (beyond the turning point) could lead to a 3.6% reduction in municipal waste per capita. This may reflect a greater willingness to invest in environmental quality, driven by improved waste management infrastructure, enhanced circular economy policies, and increased public awareness, ultimately leading to decoupling economic growth from waste production.
Municipal waste generation (kg) per capita
GDP per capita (EUR)
Note: This figure includes data for 239 OECD large regions (TL2) for the latest year available between 2018 and 2020. The visualisation suggests a positive correlation between municipal waste generation and GDP per capita until the threshold of approximately EUR 45 000 is reached. Beyond this point, additional municipal waste per capita shows little to no discernible relationship with GDP per capita. The curve suggests a threshold above EUR 45 000; however, this discrepancy may be due to data dispersion, scaling effects, or other factors affecting the graphical representation. The polynomial curve was selected as it provided a relatively better fit (R² = 0.59) compared to the linear curve (R² = 0.51). The low value of the R2 (0.59) indicates that waste generation is only partially explained by GDP per capita, so data should be interpreted with caution.
Source: OECD (2025[51]), Municipal waste rate and GDP per capita, https://www.oecd.org/en/data/tools/oecd-regions-and-cities-atlas.html.
Between 2004 and 2023, total municipal waste landfilled in the EU fell by 3.2% per year on average, reaching a rate of 22% in 2023 (Eurostat, 2025[52]). Some EU countries such as the Netherlands have banned waste categories that could be recycled or recovered for energy from landfilling, while Czechia has banned the landfilling of unsorted mixed municipal waste and recoverable waste. Research shows that landfill capacity is limited in countries with high population densities (OECD, 2019[53]) (European Commission, 2024[54]). By 2022, nine Member States (Austria, Belgium, Denmark, Finland, Germany, Luxembourg, the Netherlands, Slovenia, and Sweden) had already met the EU target of reducing landfilling to less than 10% by 2035 (EEA, 2024[55]).
In the EU, 25% of total municipal waste was incinerated (with and without energy recovery) in 2023, a slightly higher share than landfilling (Eurostat, 2025[52]). Regional disparities exist in municipal waste recovery rates, with countries such as Belgium, the Netherlands and Norway having the highest recovery rates, while countries such as Czechia, Latvia and Portugal have average recovery rates below 50% (Figure 1.12). Capital-city regions (e.g., the Brussels Region, Limburg, and Trøndelag) are also at the forefront of municipal waste recovery, with average rates in capital-city regions 12 percentage points higher than the national level across OECD countries. Higher recovery rates could partially be explained by higher levels of GDP per capita, which could lead to investment in waste management (Figure 1.13). However, high incineration capacity often underlies high recovery rates, which does not necessarily indicate greater circularity.
Source: OECD (2024[47]), OECD Regions and Cities at a Glance 2024, https://doi.org/10.1787/f42db3bf-en.
Share of municipal waste recovered (%)
Note: This figure includes data for 144 OECD regions (TL2) for the latest year available between 2018 and 2020. Municipal waste recovery includes waste that undergoes material recycling or other forms of recovery (including energy recovery and composting). Landfilling is excluded.
Source: OECD (2025[51]), Municipal waste rate and GDP per capita, https://www.oecd.org/en/data/tools/oecd-regions-and-cities-atlas.html.
In 2023, 48% of total EU municipal waste was recycled (material recycling and composting), an increase of 21 and 3 percentage points respectively compared to 2000 (27%) and 2015 (45%) levels (Eurostat, 2025[52]). The share of recycling among waste treatment methods ranged from 69.2% in Germany to 12.3% in Romania (Eurostat, 2025[56]). Nine EU countries reached recycling rates of 50%. However, an increase in recycling is not necessarily positive per se, as in a fully circular economy, repair and reuse should limit raw material consumption as much as possible and recycling should be seen as a second-best option. Despite recent progress in increasing EU recycling rates, in 2023, the EC identified that eighteen Member States were at risk of failing to meet the 2025 municipal and packaging waste recycling targets9, while nine were on track to meet those targets (European Commission, 2023[57]).
Implementing circular economy principles could help reduce total waste generation in the EU by 24% by 2030 (Waste Managed, 2025[58]). However, only 13% of 306 OECD large regions have achieved the end values10 of Sustainable Development Goal (SDG) 12 on responsible consumption and production, i.e. achieve a municipal waste generation rate lower than 366 kilogrammes per capita and a number of motor road vehicles lower than 34 per 100 people. EU regions with the largest distance from the end value include Burgenland, Austria; Corsica, France; Rhineland-Palatinate, Germany; and Emilia-Romagna, Italy, which share an average distance of 95 points out of 100. The largest in-country disparities in this indicator are shown in France (Figure 1.14). The global direct cost of waste management, together with the hidden costs of pollution, deficient health and climate change from poor waste disposal practices, is expected to reach approximately USD 600 billion by 2050, twice the estimated value for 2020 (UNEP, 2024[46]).
Note: The distance to travel for regions to achieve SDG 12 is based on a composite index estimated through three indicators: (i) Municipal waste rate (kilogrammes per capita), (ii) Percentage of municipal waste that is recycled, (iii) Number of motor road vehicles per 100 people. Given the substantial data gaps, the indicator on the percentage of municipal waste that is recycled was not considered. Lagging regions are those that have not achieved the end values for 2030, i.e. a score of 100. Data is available for 306 regions, corresponding to the latest available value in 2022. Numbers between brackets correspond to the number of lagging regions compared to the number of regions with available data.
Source: OECD (2024[59]), Measuring the distance to the SDGs in regions and cities, https://www.oecd-local-sdgs.org/.
Source: Author’s elaboration.
Economic growth and resilience of supply chains
A circular economy generates cost savings and earnings for cities and regions compared to linear consumption models. Circular practices in construction, mobility and energy efficiency reduce dependence on imported raw materials and energy, enhancing the resilience of supply chains in cities and regions. New circular economy business models can reduce the cost of services and boost access to shared resources for local residents in an affordable way. Moreover, the adoption of different end-of-life treatment practices can be beneficial for cities and regions, as the valorisation of the materials contained in waste streams generates secondary raw materials at little or no cost, reducing the demand for virgin raw materials and lowering the costs associated with waste disposal (Table 1.3). Nevertheless, in 2021, the EU circular economy11 represented 2.1% of total EU GDP (1.6% in 2008, the latest year available), 2.2% of total employment (1.8% in 2009, latest year available), and attracted investment in tangible goods corresponding to 0.8% of GDP (0.9% in 2012, latest available data) (Eurostat, 2025[83]). In principle, circularity can increase GDP if greater resource efficiency enables goods and services to be produced more cheaply; remanufactured, renovated or refurbished products, or recycled materials, can be produced more cheaply than new products or virgin materials; and circular economy strategies stimulate innovation or investment and result in new jobs and technology that improve productivity (Ekins, 2024[22]) (Box 1.3).
The microeconomics
It has been argued that the economic principles underpinning the circular economy remain surprisingly underdeveloped. A common assertion in circular economy discourse is that "waste is a resource". However, in economic terms, waste is by definition a material with a zero or negative value that its current owner seeks to discard. While the same material may acquire value under different ownership, in a different location, or following some degree of processing, these transformations typically incur costs. These include information costs, as potential new owners must become aware of the material’s availability, condition, and location; transaction costs associated with negotiating its transfer; logistical costs for relocation; and processing costs to modify the material. By incurring these costs, value is added, enabling waste to become a resource. Identifying viable pathways to enhance the value of waste materials so they can compete with virgin resources in the marketplace is a complex challenge. Where such opportunities do not exist, waste remains waste, requiring further spending on its management and disposal.
The macroeconomics
The microeconomic impacts of moves towards a circular economy may, if significant, also have macroeconomic impacts. Macroeconomic impacts can relate to the formal economy and the welfare impacts of informal economic activity, which may contribute to welfare while not increasing employment nor economic growth. The beneficial macroeconomic impacts of circular economy strategies are not intuitively obvious. For example, extending product lifespans may appear economically detrimental as it may reduce the sale of new products. However, the overall macroeconomic impact depends on how consumers allocate financial resources saved from delaying new purchases. They may spend them on other goods and services, stimulating different sectors of the economy, or invest them, contributing to long-term economic growth. Additionally, if durable products are primarily imported, extending their lifespan could reduce imports, further benefiting the domestic economy. These interactions make the macroeconomic impacts of the circular economy complex and multifaceted.
One way to assess the economic implications of circular economy strategies is to estimate the potential savings from resource efficiency investments. According to estimates, implementing available resource efficiency technologies globally could save private investors USD 2.9 trillion annually by 2030, with 70% of these investments yielding returns exceeding 10% per year. Economic growth linked to resource efficiency could also drive job creation, with estimates suggesting an increase of 9 to 25 million jobs worldwide (Dobbs et al., 2011[84]). However, these modelling results depend heavily on underlying assumptions, such as the type of economic model used (e.g., computable general equilibrium, macro-econometric, or system dynamics), the treatment of investment (including potential crowding-out effects), the availability of underused resources (especially labour), the skills required for circular activities, and the policy mechanisms driving resource efficiency.
Source: Ekins (2024[22]), Circular Priorities for Europe, unpublished paper prepared for the OECD Task Force for Circular Strategic Thinking.
Competitiveness
By increasing resource efficiency and the use of secondary materials in a way that reduces costs for its businesses, the EU could benefit economically through increased innovation, more resilient supply chains and reduced imports (Ekins, 2024[22]). According to the “Draghi Report”, The future of European competitiveness – A competitiveness strategy for Europe (European Commission, 2024[85]) “Europe must bring down high energy prices while continuing to decarbonise and shift to a circular economy”. Overall, the EU economy heavily relies on virgin raw materials for approximately 87% of its material consumption (World Bank, 2022[86]). Raw material consumption within the EU reached 14.1 tonnes per capita in 2023, down from 16.3 tonnes per capita in 2000. Of this, 54% consisted of non-metallic minerals, 23% of biomass material use, 18% of fossil energy materials and 5% of metal ores (Figure 1.15).
Tonnes per capita
Sources: Eurostat (2025[87]), Material footprints - main indicators, https://ec.europa.eu/eurostat/databrowser/view/ENV_AC_RME/default/table?lang=en; Eurostat (2024[88]), Material flow accounts, https://ec.europa.eu/eurostat/databrowser/view/env_ac_mfa/default/table?lang=en.
The level of raw material consumption varies considerably across the EU, ranging from around 9-10 tonnes per capita in countries such as Italy, the Netherlands and Spain to around 30-40 tonnes per capita in Estonia, Finland and Romania (World Bank, 2022[86]). Non-metallic minerals are the largest material category, mostly used in the construction industry in cities and regions. Globally, the secondary raw materials market has grown, but the primary material market still dominates. In 2022, the global volume of trade in primary materials was 3.7 times higher than that of secondary materials. This represents a decrease compared to the fivefold difference observed in 2002. The economic value generated by the trade of secondary materials including scrap plastics, metals, used paper, and second-hand clothing increased by 417% over the same period, reaching USD 462 billion in 2022 (CircularEconomy.Earth, 2024[89]).
As recognised in the “Letta Report” Much more than a market – Speed, Security, Solidarity (2024[90]), the transition to a circular economy could significantly strengthen the EU's resilience and security of supply. In 2023, the EU imported 47.2% of its metal and 73.3% of its fossil energy materials (Eurostat, 2024[91]). The 2023 EU Critical Raw Materials Act, which aims to secure the EU's supply of selected critical raw materials, set targets for increasing recycling (25%) (European Commission, 2023[92]), ensuring that by 2030, the EU does not rely on a single third country for more than 65% of its supply of any critical raw material (European Commission, 2023[92]). Currently, 98% of the EU’s supply of rare earth elements comes from China, 98% of its boron from Türkiye, and 71% of its platinum from South Africa. Such concentration strengthens the urgency of shifting towards a circular economy, which can ensure resource efficiency and increase security of supply (European Council, 2024[93]). By promoting local resource loops that emphasise the reuse, recycling and repurposing of materials, the circular economy can reduce import dependency and insulate EU industries from external shocks in critical raw material markets such as price volatility and geopolitical tensions.
EC projections suggest that demand for critical materials is expected to increase significantly by 2050. This increase is likely to be mainly driven by the projected growth of the EU e-mobility sector, a key sector for EU cities, many of which have climate neutrality objectives by 2030 evidenced by growing investments (European Commission, 2025[94]). The EU sources 100% and 82% of its demand for lithium and cobalt respectively from a limited number of non-EU countries, making it highly exposed to supply risks (European Commission, 2023[95]). By 2030, EU demand for lithium is projected to increase 12-fold and 21-fold by 2050 compared to 2020 levels; demand for platinum to increase 30-fold by 2030 and 200-fold by 2050; and demand for lithium-ion batteries, which are essential for electric vehicles and energy storage, is projected to multiply by a factor of 21 by 2050 (European Commission, 2024[96]).
Demand for rare earth metals in EU wind turbines is also estimated to increase by 5.5 times by 2050 (Joint Research Centre, 2023[97]). Some EU cities are investing in e-mobility, resulting in a growing number of privately owned electric vehicles (EV) in 2022, including 76 000 in Vienna (Austria), 35 000 in Copenhagen, Denmark, 24 000 in Berlin, Germany, 20 000 in Paris, France, and 9 000 in Amsterdam, Netherlands. By the end of 2025, Copenhagen aims to have publicly accessible charging points within 250 metres of all multi-storey buildings. Similarly, Vienna has installed more than 950 EV charging points, with an average of one every 400 metres. Vienna also offers subsidies for businesses to invest in electric vehicles and buses, promoting e-mobility as a viable and inclusive solution (Continental, 2023[98]).
Recent disruptions in supply chains, highlighted during the COVID-19 pandemic and exacerbated by Russia's war of aggression against Ukraine, have highlighted the EU's structural dependencies and their potentially damaging effects on its economy. Disruptions in the supply of energy and essential commodities such as steel, aluminium, copper, and industrial minerals can strain key industries, including construction and transport. For example, in 2020, 57.5% of the energy available in the EU was produced outside its Member States (European Council, 2024[99]). The EU energy import dependency rate, which measures the extent to which a country or a region is dependent on imports for its energy consumption, stood at 62.5% in 2022 (Eurostat, 2024[100]). The energy landscape has also been affected by Russia's war of aggression against Ukraine and the subsequent loss of pipeline natural gas. While energy prices have fallen from their peaks, EU companies still face electricity prices that are 2-3 times those in the US and natural gas prices that are 4-5 times higher. There are also strategic dependencies in the area of critical technologies for the digitalisation of the EU economy. The EU currently relies on foreign countries for over 80% of digital products, services, infrastructure and intellectual property (European Commission, 2024[101]). In 2023, cities accounted for 75-80% of energy consumption and around 70% of GHG emissions (Harris et al., 2020[102]). Urban energy demand is expected to rise as global urbanisation rates are projected to climb from 56% in 2024 to around 70% in 2050 (IEA, 2024[103]).
Faced with these multisided challenges, the EC launched its Clean Industrial Deal (CID) in February 2025, which outlined concrete actions for European industries’ growth with decarbonisation as a key driver. These includes lowering energy prices, creating high quality jobs and the right conditions for companies to thrive with a focus on energy-intensive industries and the clean tech sector. Circularity is another major aspect of the CID, which highlights that maximising the EU’s limited resources and reducing overdependencies on third-country suppliers for raw materials is crucial for a competitive and resilient market. Under the CID, the EC will (i) set up a mechanism enabling European companies to come together and aggregate their demand for critical raw materials, (ii) create an EU Critical Raw Material Centre to jointly purchase raw materials on behalf of interested companies, creating economies of scale and offering leverage to negotiate better prices and conditions, and (iii) adopt a Circular Economy Act in 2026 to accelerate the circular transition and ensure that scarce materials are used and reused efficiently, reducing global dependencies and creating high quality jobs. The aim is to increase the circular material use rate from 11.8% in 2023 to 24% by 2030 (European Commission, 2025[104]).
Economic recovery
The circular economy can help households tackle the cost-of-living crisis by promoting energy efficiency, reducing reliance on new materials, and encouraging practices like repair and reuse, which lower household expenses. Between 2021 and 2022, households across the EU faced price increases of 18% on average for housing, water and energy; 12.1% for transport; and 11.9% for food and non-alcoholic beverages (Eurostat, 2023[105]). According to the European Parliament's (2023[106]) Eurobarometer, the rising cost of living was the most pressing concern for 93% of EU citizens. Almost half (46%) of the EU population reported a decline in their standard of living due to the combined impacts of the COVID-19 pandemic and Russia's war of aggression against Ukraine. In 2022, households made up almost 26% of the EU’s final energy consumption, four-fifths of which was used for heating, cooling, and water heating (Eurostat, 2024[107]). Through energy-saving initiatives, such as improved insulation and efficient appliances, households can reduce heating, cooling, and water heating costs, which are key drivers of living expenses. Additionally, by supporting second-hand markets and repair activities, the circular economy enables households to extend the life of products, reducing the need for new purchases and further mitigating the financial burden caused by rising prices in housing, food, and energy. However, smaller household sizes imply reduced material efficiency as common household services, including appliances and installations, are shared across a smaller number of individuals (Ivanova et al., 2021[108]). In 2023, 36.7% of the 200 million households residing in the EU were single adult households (Eurostat, 2024[109]).
Source: Author’s elaboration.
Technological progress and research and development (R&D)
Digitalisation
The rapid growth of the global smart city market has the potential to enhance urban efficiency and sustainability with relevance to the circular economy. This market is estimated to reach over USD 1 024 billion by 2027 (Table 1.4) (OECD, 2024[132]). Digital technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), and blockchain can enable better resource tracking, waste management, and sharing economies in cities and regions. In the United States alone, cities are expected to invest USD 41 trillion over the next two decades to upgrade and benefit from digital technologies (OECD, 2023[133]).
Through AI, IoT, big data analytics, cloud computing, blockchain, online platforms, and 3D printing, digitalisation is a key enabler of the digital, green, and circular transitions by reducing emissions and increasing material efficiency. The introduction of new digital solutions to optimise industrial production is expected to improve energy and resource efficiency by over 20% at all stages of production (Wuppertal Institut, 2022[134]). Several digital technologies have potential applications for the circular economy.
Radio Frequency Identification (RFID) systems, which integrate sensors, identification technology, and internet connectivity, can be attached to waste and recycling containers. These tags support the implementation of pay-as-you-throw waste systems and optimise municipal waste collection.
Real-time data, stored and processed in the cloud, can facilitate seamless communication between trucks, containers, recycling facilities, and secondary material retailers. This data enables the monitoring of container status, including material content, fill levels, and maintenance needs. It also supports route management, fleet productivity, and safety assurance, while improving the sorting, reuse, and recycling of materials in a more cost-effective and efficient manner (Barteková and Börkey, 2022[135]).
3D printing can facilitate the recovery of up to 80% of raw materials from end-of-life vehicles for reuse in manufacturing (Barteková and Börkey, 2022[135]).
Blockchain technology can improve material circularity by enabling the tracking and monitoring of materials and components throughout the supply chain, ensuring that they can be reused, remanufactured or, when no longer viable, recycled or composted. It also offers opportunities in water and waste management, such as improving the traceability of processes used to transform waste materials for productive use, including applications in agriculture (EMF, 2022[136]).
Digital passports supported by databases can serve as digital records that accompany physical products throughout their lifecycle, from design to end-of-life (Walden, Steinbrecher and Marinkovic, 2021[137]). These passports provide detailed, auditable information on product composition, including material types and grades. By offering insights into product composition, they enhance disassembly processes at scrapyards, improve material recovery while maintaining quality and properties, and increase the potential for reuse. When implemented through blockchain technology, digital passports ensure data immutability, foster trust, and eliminate information asymmetries along value chains. From a producer’s perspective, they provide greater control over materials throughout a product’s lifecycle (Barteková and Börkey, 2022[135]).
Digital twins (i.e. a 3D virtual reality version of a production process or a product) can be used in textiles, food, and consumer goods to support sustainable product development by minimising material waste and improving recyclability (OECD, 2019[138]). Digital twins facilitate real-time monitoring of product conditions, allowing businesses and consumers to optimise maintenance schedules and prevent premature disposal. In the construction sector, Berlin's Urban Mining Hub uses digital twins to map material compositions in buildings, ensuring that resources can be effectively recovered and reused at the end of their lifecycle rather than lost to demolition.
While digital technologies offer new opportunities for enhancing environmental management and protection, they also pose challenges to sustainability by increasing resource consumption and electronic waste. In 2022, OECD countries generated around 18 kg per capita of e-waste (i.e. electric and electronic equipment discarded as waste without intent of reuse), with less than half being properly collected and recycled. Some countries such as Canada, Japan and the UK collect and recycle less than 30% of their e-waste (OECD, 2025[139]). Beyond its environmental impact, unrecovered e-waste also represents a significant economic loss, with an estimated USD 91 billion global worth of valuable tech materials discarded annually (UNITAR, 2024[140]).
Material innovation
The development of biodegradable, recyclable, and renewable materials can accelerate the transition to a circular economy. In particular, the availability of biodegradable material for different uses in cities and regions is increasingly reducing plastic use. The global market for biocomposites12 is expected to reach USD 56 billion by 2032, with the EU27 representing around 12% of the total market (Bisresearch, 2024[141]). Biocomposites, emerging as sustainable materials, have been employed for applications in aerospace, automobiles, packaging, or electronics. In the cement industry, alternatives to clinker can reduce CO2 emissions by up to 70% compared to traditional concrete (Vinci SA, 2023[142]). In the city of Amsterdam, the Netherlands, 20% of housing projects must be constructed from bio-based materials from 2025 (Dezeen, 2021[143]). However, such alternatives are forecast to replace a marginal share – 1% and 5% of total cement in 2030 and 2050 respectively – due to the low availability of raw materials at the scale required, reducing overall CO2 emissions by just 0.5% in 2050 (GCCA, 2024[144]). While the market for circular materials is expanding, the EU’s contribution to innovation in the circular economy remains limited. Between 2000 and 2020, the number of patents related to recycling and secondary raw materials in the EU stagnated, lagging behind China, Japan and Korea, while only marginally surpassing the United States (Figure 1.16).
Number of patents
Note: This chart excludes China, which had around 6 000 patents in 2020, a 5 823% increase since 2000.
Source: Eurostat (2025[145]), Patents related to recycling and secondary raw materials, https://ec.europa.eu/eurostat/web/circular-economy/monitoring-framework.
Source: Author’s elaboration
Regulatory and policy frameworks
EU regulatory and policy landscape
The evolution of EU circular economy policy reflects a shift from a focus on waste management to a comprehensive life-cycle approach that integrates eco-design, citizen awareness, and urban action. The EU’s circular economy journey started with the 2011 Roadmap for a Resource-Efficient Europe, which set targets to ensure the efficient use of water, land and marine resources and ecosystem services and to support the transition to a green economy (European Commission, 2011[162]). Building on this Roadmap, the European Commission (EC) adopted its first Circular Economy Action Plan (CEAP) in 2015. It contained 54 actions covering the entire life cycle of products (e.g. production, consumption, waste management and secondary raw materials) and five priority areas (plastics; food waste; critical raw materials; construction and demolition; biomass and bio-based products), and review of fertiliser legislation. The EC allocated EUR 10 billion in public funding to the transition between 2016 and 2020 and concluded that all 54 actions of the plan had been delivered or implemented by March 2019 (European Commission, 2019[163]).
The 2015 CEAP included four legislative proposals to amend the Waste Framework Directive13, the Packaging Waste Directive14, the Landfill Directive15, and Directives16 on end-of-life vehicles, waste batteries and accumulators, and waste electrical and electronic equipment, which had all been adopted by 2018. Under this new regulatory framework, EU Member States were required to move from a 50% recycling target for all municipal waste to 60% by 2025 and 65% by 2030; from a 60% target for recycling or energy recovery to 65% by 2025 and 75% by 2030; and to reduce landfilling to a maximum of 10% of municipal waste by 2035. As part of the 2015 CEAP, the EC adopted the 2018 European Strategy for Plastics, which established new mandatory requirements for recycled content and waste reduction measures for key products (e.g. packaging, construction materials and vehicles) and aimed to ensure that all plastic packaging placed on the EU market would be reusable or easily recyclable by 2030 (European Commission, 2018[164]). A new Circular Economy Action Plan was adopted by the EC in 2020, aligned with the 2019 EU Green Deal, which aims to achieve climate neutrality in the EU by 2050. The 2020 CEAP included 35 actions to improve product design, focusing on seven key value chains: (i) electronics and information and communication technology (ICT); (ii) batteries and vehicles; (iii) packaging; (iv) plastics; (v) textiles; (vi) construction and buildings; and (vii) food, water and nutrients. It also set an aspirational target of doubling the EU's circular material use rate (i.e. the proportion of material recycled and fed back into the economy) from 11.7% in 2020 to 23.4% by 2030 (European Commission, 2020[165]). However, according to EU statistics, the circular material use rate reached 11.2% in 2020, below the 11.7% target, which was achieved in 2023 (11.8%) (Eurostat, 2025[37]).
The 2020 CEAP proposed to extend the scope of the Eco-design Directive from requirements on energy consumption to a wider range of products; a new legislative initiative to replace single-use packaging, tableware and cutlery with reusable products in food services; and launched the EU Strategy for Sustainable and Circular Textiles to strengthen competitiveness and innovation in the sector while boosting the EU market for textile reuse (European Commission, 2023[166]). This led to an amendment of the Waste Framework Directive and the introduction of mandatory and harmonised Extended Producer Responsibility (EPR) schemes for textiles in EU Member States (European Commission, 2023[167]). Following the adoption of the 2020 CEAP, the EC proposed minimum mandatory GPP criteria and targets in sectoral legislation and introduced the EU Ecolabel to identify products and services with a reduced environmental life cycle impact, as well as the Energy Label, which helps consumers to choose products that save energy and money (European Commission, 2020[168]).
The 2020 CEAP dedicated a section to cities, highlighting its commitment to harnessing the potential of EU financing and funding instruments to support investments at subnational level and ensure that all regions benefit from the transition. Circular economy solutions would be tailored to the EU’s outermost regions and islands, characterised by their dependence on imports of resources and products, high waste generation fuelled by tourism, and waste exports. The 2020 CEAP mentioned the role of the Just Transition Mechanism as part of the European Green Deal Investment Plan and InvestEU to support projects focusing on the circular economy. It also highlighted the role of the European Urban Initiative, the Intelligent Cities Challenge Initiative, and the Circular Cities and Regions Initiative in supporting cities and designated the European Circular Economy Stakeholder Platform as the place for stakeholders to exchange information. Between 2021 and 2028, the EC pledged to mobilise at least EUR 1 trillion in sustainable investments to achieve the goals set by the European Green Deal, including the circular economy (Table 1.5) (EC, 2020[169]).
The shift towards a more systemic approach has also been reflected in the EU’s monitoring framework for the circular economy. In fact, the framework developed in 2018 did not include indicators on repair, reuse, sharing, product durability, and design standardisation, which can help substitute parts of products rather than the whole product (Joint Research Centre, 2023[97]). In May 2023, the revised EU Circular Economy Monitoring Framework was launched to track progress in the transition to a circular economy. It includes new indicators, such as material footprint, resource productivity, and GHG emissions from production activities, aligning with the European Green Deal and other sustainability objectives. Cities and citizens play a crucial role in this expanded approach. The EU has sought to empower citizens through measures such as the “right to repair” and the Digital Product Passport, which enhances transparency by providing information on materials, environmental impact, and disposal options. Public awareness campaigns and platforms connecting consumers with repair services and refurbished goods further illustrate the EU’s efforts to engage individuals in the transition.
The circular economy has also been embedded in broader policy objectives. The European Green Deal and the Fit for 55 package link circularity with climate neutrality goals, recognising the role of sustainable production and consumption in reducing GHG emissions. Sectoral strategies such as the Plastics Strategy recommend the integration of circular principles in high-impact industries such as textiles, electronics, and construction. The Chemicals Strategy for Sustainability (2020[170]) underlines the importance of a clean circular economy to promote secondary raw materials while ensuring the safety of both primary and secondary materials and products. The 2020 New Industrial Strategy for Europe emphasises the importance of integrating circular economy principles in the industrial sector to reduce Europe's dependence on raw materials, increase secondary material use and promote innovation in sustainable production. The EC also included the circular economy in the Competitiveness Compass (2025[171]), a strategy to lead the development, manufacturing and marketing of future technologies, services and clean products in the EU. It projects a substantial increase in the EU remanufacturing market's circular potential, with a forecast 223% rise from EUR 31 billion in 2021 to EUR 100 billion in 2030. This growth is expected to generate 500 000 new jobs (World Bank, 2022[172]).
The circular economy is expected to become increasingly important in the EC's current work programme. Within the EC's 2024-2029 mandate, the circular economy was explicitly included in the portfolios of two executive vice-presidents (for a clean and competitive transition, and for prosperity and industrial strategy) and a commissioner for climate, net zero and clean growth, as well as a new commissioner for environment, water resilience and a competitive circular economy. A new Circular Economy Act expected by the end of 2026 is expected to help create stronger market demand for secondary materials and a single market for waste, particularly in relation to critical raw materials. In addition, the updated bioeconomy strategy and the forthcoming EU Water Resilience Strategy will incorporate circular economy principles, while the New European Bauhaus will focus on innovation, bio-based materials and circularity, housing and the built environment, financing and community building across the EU (EC, 2024[173]).
Source: Author’s elaboration
Jobs and societal engagement
Cities and regions are setting up circular economy business models that generate jobs in recycling, remanufacturing, and green tech sectors. Changes in consumer demand and grassroots movements in recent years advocate for waste reduction, repair culture, and sustainable practices. In addition, societal engagement is pushing for more transparency and justice in waste management practices (Table 1.6).
Job opportunities
The circular economy has the potential to create 18 million net green jobs worldwide in recycling, repair and reuse activities and 2.5 million new jobs in the EU by 2030 (OECD, 2021[189]) (IISD, 2020[190]). In the EU, over 4 million people worked in circular economy sectors in 2023, 60% of which were based in France, Germany, Italy, Poland and Spain (Eurostat, 2023[2]). However, when measured as a share of total employment, the increase is minimal (1.9% of total employment in 2009 and 2.1% in 2021) (Eurostat, 2022[191]). In 2018, 11% (140 000 jobs) of total employment in the Amsterdam Metropolitan Area (the Netherlands) were categorised as circular – with the workforce excelling in areas of circular design, repair service and the use of digital technology (Amsterdam Economic Board, 2018[192]) – and there were more than 17 000 jobs in the circular economy in the Basque Country, Spain (Ihobe, 2022[193]). However, in the majority of EU cities, circular economy jobs do not yet represent more than 20% of total employment, such as in Milan, Italy (9.6% of total employment and 84 267 jobs), Vienna, Austria (9.6% of total employment and 72 753 jobs), Copenhagen, Denmark (20% of total employment and 101 355 jobs) (Circle Economy, 2025[194]).
Projections indicate that the circular economy is poised to create 700 000 jobs between 2015 and 2030, with more than half of this target (368 115 jobs) already achieved by 2023 (European Commission, 2018[3]; Eurostat, 2023[2]). Estimates suggest that resource efficiency and circular economy policies in the EU could lead to employment gains of up to 2% by 2030 and 7% by 2050. By 2030, these policies are expected to generate the greatest employment gains in sectors such as secondary steel reprocessing, retail, and repair services, while the largest reductions in employment are projected in manufacturing and mining (Laubinger, Lanzi and Chateau, 2020[195]). As such, it will be crucial to address significant regional disparities in employment in circular business models, for example, through re- and up-skilling activities (ESPON, 2020[196]). Specifically, people in low-skill occupations will face requirements to acquire new skills for green occupations, in particular process skills – critical thinking, monitoring and active learning – and complex problem-solving skills (OECD, 2024[197]). The average cost of re- and up-skilling new workers in the green economy could represent up to 1.7% of the GDP of EU countries (European Commission, 2022[35]). As such, behind the positive net effects, the radical transformation of the EU's circular economy will require significant changes in the labour market, with possible income losses for certain categories of workers (Wilts, 2024[198]) (Box 1.4).
The OECD Employment Outlook shows that workers who are forced to quit high-emission jobs and shift to green, low-emission occupations suffer an income loss of 29% on average over the next six years of their employment (Figure 1.17). Similar systematic assessments are still lacking for the circular economy but available studies anticipate increases in sectors such as waste management, where average incomes are significantly lower compared to industry jobs. As a result, similar or even higher income losses could be expected.
Source: OECD (2024[197]), OECD Employment Outlook 2024: The Net-Zero Transition and the Labour Market, https://doi.org/10.1787/ac8b3538-en.
The concrete impacts of the shift from high-emission to low-emission occupations will significantly differ between cities and regions. In a study for ESPON, the Wuppertal Institute and others have shown how, for example, the share of employment in circular business models varies not only between the EU Member States but also across regions. The OCED Employment Outlook highlights that the gap between current and future qualification requirements is much higher for low-skill occupations compared to high-skill qualifications. However, the development of circular skills in the EU currently focuses on creating new courses and services at university and technical college levels.
Source: OECD (2024[197]), OECD Employment Outlook 2024: The Net-Zero Transition and the Labour Market, https://doi.org/10.1787/ac8b3538-en; Wilts (2024[198]), Options for the European Commission to support circularity in cities and regions, unpublished paper prepared for the OECD Task Force for Circular Strategic Thinking.
Societal engagement and justice
Recent shifts in EU consumer preferences underline growing demand for sustainable products and services in line with circular economy principles. As awareness of environmental issues grows, consumers are increasingly demanding that companies offer products that are durable, repairable and environmentally friendly. This demand not only reinforces the regulatory push towards a circular economy but also establishes it as a societal imperative. Social engagement is on the rise, reflected in growing awareness of the need for more sustainable consumption practices. By 2025, second-hand sales are expected to account for 12.6% of total online sales in Europe, which represents more than double the market share of 5.7% in 2020 (RetailDetail, 2024[199]). Research indicates that in 2024, 65% of EU citizens recognised the impact of environmental issues on their daily lives, expressed concern about increasing waste generation, and were willing to take personal steps to reduce waste. There is also a considerable willingness among EU citizens to adopt more sustainable consumption habits. Furthermore, consumers are willing to pay more for products that are easier to repair and recycle and that are produced sustainably. However, this figure has decreased from 72% in 2007 to 59% in 2024, potentially due to inflation rates, which may have reduced households' capacity to afford more expensive sustainable products. Concerns about waste issues have increased from 27% in 2007 to 58% in 2024 (EEA, 2024[200]).
Studies suggest that there is widespread support for climate action. For example, one study estimates that 69% of the global population is willing to contribute 1% of their personal income to climate action and 89% call for increased political action (Andre et al., 2024[201]). Moreover, there is extensive approval of pro-climate social norms, with 86% of respondents endorsing such norms. Countries with stronger approval rates are found to have implemented significantly more climate change-related measures. Concerns about harmful chemicals in daily products further illustrate the link to circular economy principles. In 2024, more than four out of five EU citizens (84%) were concerned about the impact of these chemicals on both health and the environment. Significantly, 72% of Europeans considered the chemical safety of products when making purchasing decisions, indicating a preference for safer, sustainable options. This trend is reinforced by the fact that 59% of the EU population shows a willingness to pay a premium for products that are easier to repair and recycle and are produced in an environmentally sustainable way, highlighting the role of consumer behaviour in driving the transition to a circular economy (European Commission, 2024[202]).
Waste disposal, resource extraction, and other activities that result in environmental degradation affect the most vulnerable communities. For instance, a study has found that waste incinerators in the UK are three times more likely to be built in low-income areas and neighbourhoods (Unearthed, 2020[203]), exposing residents to higher levels of noise, litter, traffic, odours and air pollution, potentially leading to health-related issues. Illegal dumping, hazardous waste mismanagement, and illicit waste exports not only degrade the environment but also pose serious health risks, particularly for those in low-income areas with limited access to proper waste infrastructure. In 2020, annual revenue for the trafficking of hazardous and non-hazardous waste in the EU reached EUR 1.8 billion and EUR 10.3 billion, respectively (Europol, 2022[204]). Between 2019 and 2023, illegal dumping cost the Dublin City Council, Ireland, more than EUR 5.2 million to remove (Dublin City Council, 2024[205]).
Social inclusion is key to combating waste crimes, as community sources provide vital intelligence to support waste enforcement efforts. For instance, since 2013, the city of Los Angeles (US) has maintained the MyLA311 platform to enable residents to report issues like illegal dumping directly to city departments (LACITY, 2021[206]). Significant regional disparities exist in illegal waste dumping across the EU. In 2024, the number of illegal dumps containing plastic waste ranges from just 8 in Ireland to over 10 000 in Romania (Statista, 2024[207]). Social inclusion is key to a just transition in the plastics value chain, enabling a circular economy. Waste reduction policies and additional investments in waste sorting and recycling could limit additional costs to end plastic leakage to only USD 50 billion globally by 2040, compared to business-as-usual costs of USD 2.1 trillion between 2020 and 2040. Yet the social costs of plastic pollution and the distributional consequences of inaction for different household groups still require further research (OECD, 2024[74]).
Source: Author’s elaboration
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← 1. The EU Taxonomy is a classification system that helps companies and investors identify “environmentally sustainable” economic activities to make sustainable investment decisions. Environmentally sustainable economic activities are those which “make a substantial contribution to at least one of the EU’s climate and environmental objectives, while at the same time not significantly harming any of these objectives and meeting minimum safeguards.”
← 2. The 16 EU Taxonomy economic sectors include: (1) Accommodation activities, (2) Arts, entertainment and recreation, (3) Construction and real estate activities, (4) Disaster risk management, (5) Education, (6) Energy, (7) Environmental protection and restoration, (8) Financial and insurance activities, (9) Forestry, (10) Human health and social work activities, (11) Information and communication, (12) Manufacturing, (13) Professional, scientific and technical services, (14) Services, (15) Transport, (16) Water supply, sewerage, waste management.
← 3. NDCs are national climate action plans by each country under the Paris Agreement. A country's NDC outlines how it plans to reduce greenhouse gas emissions to help meet the global goal of limiting temperature rise to 1.5C and adapt to the impacts of climate change (UN, 2025[222]).
← 4. The CMUR corresponds to the total share of material recycled and fed back into the EU economy, i.e. the circular use of materials in overall material use, known as the circular material use rate or the circularity rate.
← 5. The EU uses the NUTS (Nomenclature of Territorial Units for Statistics) classification to define regions for statistical purposes. It categorises each country into three levels: NUTS 1 (Major socio-economic regions), NUTS 2 (Basic regions for regional policies), NUTS 3 (Small regions for specific diagnoses).
← 6. Decoupling occurs when the growth rate of an environmental pressure (e.g. DMC) is less than that of its economic driving force (e.g. GDP) over a given period. Decoupling can be either absolute or relative. Absolute decoupling occurs when the environmental variable is stable or decreases while the economic driving force grows. Relative decoupling occurs when the rate of change of the environmental variable is less than the rate of change of the economic variable.
← 7. The Environmental Kuznets Curve hypothesises that environmental degradation initially increases with rising per capita income. However, beyond a certain income threshold, environmental impact begins to decline as societies prioritise sustainability. This shift is driven by increased investments in infrastructure, stricter environmental regulations, and a greater societal willingness to pay for improved environmental quality.
← 8. Mismanaged plastic waste (MPW) refers to the transport of macroplastics from global rivers to the ocean. Beyond a certain economic level, rising prosperity can improve waste management, allowing growth to benefit the environment and reduce ocean pollution.
← 9. Municipal and packaging waste recycling targets are the following: 55% preparing for reuse and recycling of municipal waste, 65% recycling of all packaging waste, and material-specific packaging waste recycling targets of 75% for paper and cardboard, 70% for glass, 50% for aluminium, 50% for plastic and 25% for wood.
← 10. The end values are not SDGs targets. The OECD index is calculated based on best performers rule, according to which the OECD estimates an unweighted average using the top performer region of each country. For example, if a region achieves a municipal waste rate below 366 kg it means it achieved the end value.
← 11. Represented by recycling, repair and reuse as proxies of the circular economy.
← 12. Biocomposites are materials composed of two or more distinct constituent materials (one being naturally derived) that are combined to yield a new material with improved performance over individual constituent materials (Rudin and Choi, 2013[223]).
← 13. Amending Directive 2008/98/EC on waste.
← 14. Amending Directive 1999/31/EC on the landfill of waste
← 15. Amending Directive 94/62/EC on packaging and packaging waste
← 16. Amending Directives 2000/53/EC on end-of-life vehicles, 2006/66/EC on batteries and accumulators and waste batteries and accumulators, and 2012/19/EU on waste electrical and electronic equipment.