Circular Economy

The Circular Economy (CE) is a pillar of the European Green Deal and an increasingly important area of EU external action, including EU international cooperation and development policy. It is an economic model contributing to the people, planet and prosperity priorities of the new European Consensus on Development. It has been consistently promoted in all relevant documents on EU international cooperation and development, as well as on neighbourhood and enlargement policy and on external action, such as the 2017 Communication on Achieving Prosperity through Trade and Investment, the 2019 Communication on EU, Latin America and the Caribbean, and the 2020 Communication Towards a comprehensive Strategy with Africa.

The EU Circular Economy Action Plan (CEAP) provides a strong policy steer to guide EU diplomacy and international cooperation. It communicates a high EU ambition to lead efforts at global level, while contributing to Policy Coherence for Development, e.g. by restricting exports of waste with harmful environmental and health impacts. It puts CE in the context of the economic transformation promoted by the Green Deal, stressing the ambition to promote a just transition to a climate-neutral, resource-efficient and circular economy globally, the need to dematerialise the economy, reduce dependence on primary materials and secure access to resources for resilient supply chains (a key objective of the complementary Critical Raw Materials action plan), and the importance of a transition that works for people, including through job creation.

The ambition to promote a CE transition is reflected in the Neighbourhood, Development and International Cooperation Instrument (NDICI) Regulation, which calls for more action “to address the scale of other environmental challenges such as biodiversity loss and depletion of natural resources”, including “programmes and actions (…) (that) mainstream climate change, environmental protection and gender equality and shall address interlinkages between Sustainable Development Goals”. The NDICI promotes priority areas of intervention, contributing to (among others) “resource efficiency and sustainable consumption and production, in particular throughout the entire supply chain, towards the transition to a circular economy”. It also acknowledges the importance of sustainable finance, stating that “the purpose of the EFSD+ as an integrated financial package supplying financial capacity” (…) “shall be to support investments and increase access to financing in order to foster sustainable and inclusive economic and social development and promote the socio-economic resilience in partner countries with a particular focus on the, eradication of poverty, sustainable and inclusive growth, the creation of decent jobs, economic opportunities, skills and entrepreneurship, socioeconomic sectors, micro, small and medium-sized enterprises.”

Support to a CE transition is re-iterated in the EU’s approach to the COVID-19 recovery. The Communication on the Global EU response to COVID-19 states that “our global response to COVID-19 will integrate the strategic objectives the EU has set itself as regards the environment and climate, as set out in the European Green Deal, and the Digital Agenda, which remain fully valid”.

EU action on the inclusive green economy

As underlined in its new CEAP, the EU’s CE strategic objective at global level is to drive a just transition to a climate-neutral, resource-efficient and circular economy.

This ambition calls for enhanced coordination on the circular economy, but also entails specific objectives across several policy areas. The EU is in a position to contribute to the mobilisation of government and business partners through CE missions and outreach activities and through the development of the partnership with Africa on the green transition and the CE. The EU can also complement efforts to ensure that Free Trade Agreements reflect the objectives of the CE, e.g. by supporting the development of harmonised standards. Finally, the EU can reach out to partner countries at the political level, contributing to a more favourable positioning on CE of third countries at the regional and multilateral level (e.g. UN General Assembly, UN Environment Assembly, G20, Global Alliance on the CE and resource Efficiency – GACERE, Africa CE Alliance, LAC-CE Coalition).

These objectives call for an active EU involvement in dialogue and outreach activities, sufficient funding allocation, and a better integration of CE in programmes funded under the NDICI. The EU should in particular ensure the mainstreaming of CE across relevant areas of EU cooperation, including the investment agenda, private sector development, employment, skills and education, cities, sustainable energy and climate change, agri-food systems, among others. In line with the EU CEAP, particular attention should be paid to the greening of value chains by focusing on sectors with high environmental/climate impacts (e.g. food production, plastics, textile, construction materials and building design, digital/electronic devices), while also taking into account their job creation potential. For neighbouring countries in particular, a specific objective of policy and legislative alignment is foreseen, given the strong policy and regulatory frameworks (i.e. linked to EU acquis and standards), as well as robust financial tools in close partnerships with key IFIs, especially through the EFSD+.

In line with this policy framework and with lessons from relevant EU’s cooperation experience in developing countries, four complementary areas of intervention characterise EU action on the circular economy:

• Inspiring and learning: Develop awareness and knowledge to build the case for the CE transition, in terms of job creation potential, welfare and economic benefits, and nature regeneration opportunities in the EU and our partner countries, identify CE strategies tailored to different regions / countries, and monitor global developments, including the impact of EU CE actions on partner countries;
• Enabling: Promote a conducive CE business environment & investment climate through government intervention (at both country and city levels), including on consumption policy, on measures to scale-up the uptake of circular economy business models and practices, and on improving coherence across relevant policy areas such as economy, finance, trade, enterprises, skills and employment, and environment (including climate change and biodiversity);
• Financing: Facilitate access to finance for CE business models and infrastructure to scale up related investments by MSMEs, including green entrepreneurs and start-ups, while at the same time redirect financial flows away from linear business models and polluting sectors or from investments based on the unsustainable use of resources;
• Implementing: Apply CE business models, investments and practices across value chains, through the development of appropriate capacities by both businesses and governments, to integrate circularity in business plans and operations.

Policy and Strategic Documents

• Neighbourhood, Development and International Cooperation Instrument (NDICI) (2021)
• Communication on the Global EU response to COVID-19 (2020)
• GAP III objectives and indicators (SWD2020 - 284 final)
• European Green Deal (2019)
• EU Circular Economy Action Plan (CEAP)
• Critical Raw Materials action plan