Once framed as an environmental goal, circularity is now an economic priority in Europe’s shifting geopolitical landscape. Yet on the eve of the EU’s landmark Circular Economy Act (CEA), critics warn the plan could fail on both fronts, driving up costs while exposing consumers and businesses to material shortages and chemical risks.
That risk reflects a broader shift. Unlike previous EU circular economy strategies, the CEA is no longer framed primarily as environmental legislation. Instead, it is expected to form a core instrument of Europe’s competitiveness, industrial resilience and economic security agenda.
As part of the Clean Industrial Deal and the Competitiveness Compass for the 2024–2029 mandate, the Act should play a central role in reducing Europe’s dependence on imported raw materials, strengthening the single market for secondary materials and lowering input costs for industry. The Commission is expected to unveil the CEA in fall.
That shift matters because progress has stalled. For more than a decade, EU circular economy policy has relied on a combination of waste legislation, recycling targets and voluntary commitments. Progress has been real but limited. Europe remains roughly 90 percent linear, its circular material use rate has stagnated at just over 12 percent, and material consumption continues to exceed planetary boundaries. A recently published report by the European Parliament’s Think Tank (EPRS) underlines that recycling alone will not be sufficient to reverse these trends.
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As Dr Tom Voege, Policy Director at the PRO Circularity Alliance, put it: “Europe doesn’t have a recycling problem, it has a waste governance problem.”
Circularity as an economic necessity
The political context of the CEA is shaped by the Draghi and Letta reports, which argue that Europe cannot decarbonise, secure its supply chains and remain competitive without reducing its dependence on virgin materials and unstable global imports. Circularity is thus increasingly reframed as a strategic economic tool.
This explains why the CEA is anchored in the Clean Industrial Deal and the Competitiveness Compass. The Commission has made clear that the Act should help double the EU’s circular material use rate to 24% by 2030, create a genuine single market for secondary raw materials, and reduce strategic dependencies — especially for critical raw materials.
Chemicals
Chemicals policy is emerging as one of the most contested fault lines in the Circular Economy Act. Zero Waste Europe (ZWE) argues that failing to integrate chemicals, products and waste regulation into the CEA risks locking Europe into a “toxic circularity” model with serious public health and economic consequences. The organisation warns that recycling contaminated materials without stronger safeguards will undermine trust in secondary materials markets. As Dorota Napierska, Policy Officer at ZWE, puts it, Europe “cannot build a future-proof, circular economy while simultaneously harming society”.
The Rethink Plastic Alliance has similarly warned that such an approach risks weakening material standards and distorting markets for genuinely recycled plastics, setting a precedent that prioritises accounting flexibility over material integrity. Stakeholders fear, circularity could become a paper exercise rather than a pillar of industrial resilience. Stakeholders fear circularity could become a paper exercise rather than a pillar of industrial resilience
No collection, no circularity
The EPRS report also underlines that access to a stable supply of affordable, high-quality secondary materials is crucial for companies to remain competitive. Extended Producer Responsibility (EPR) schemes — which require producers to finance and organise the collection, sorting and recycling of the products they place on the market — are central to delivering this.
However, in some Member States, EPR systems have evolved into state-run or quasi-fiscal instruments. In these cases, fees paid by producers are diverted to unrelated public spending instead of being reinvested in collection and recycling infrastructure. The results, critics warn, is weaker circular value creation is limited and higher cost for industry.
Reducing dependence on imports — including for recyclates
Another area where the CEA is expected to bring greater clarity is Europe’s reliance on imported materials. While reducing dependence on virgin raw materials from third countries is a stated objective, the EPRS analysis suggests that the same logic will increasingly be applied to secondary raw materials.
At present, EU recycled-content targets have increased demand for recyclates, while collection and recycling capacity has not expanded at the same pace in all Member States. This imbalance has contributed to price pressures and, in some cases, greater reliance on imported recyclates.
The CEA is therefore likely to focus on scaling up domestic collection, sorting and recycling capacity, while improving market conditions for EU recyclers. Establishing a level playing field — including through quality standards and certification — is also expected to be part of the discussion, alongside careful consideration of trade implications.
Enabling SMEs in a complex regulatory landscape
The impact of the Circular Economy Act on small and medium-sized enterprises is another issue that features prominently in stakeholder discussions and is reflected in the EPRS briefing.
For these companies, regulatory complexity, frequent changes to requirements and a lack of long-term visibility have acted as significant barriers to investment. As circular economy investments are typically capital-intensive and planned over long time horizons, stakeholders expect the CEA to prioritise regulatory simplification, harmonisation across the single market and greater predictability, particularly for smaller operators.
What’s next
The final proposal for the Circular Economy Act is expected in the third quarter of this year. In the meantime, Commissioner Jessika Roswall continues to urge stakeholders to contribute to shaping the initiative, acknowledging that there is no single “silver bullet” to address Europe’s circular economy challenges. As she has put it: “Help us to close the loop and drive this transition to a competitive, resilient and equitable circular economy.”
