As the European Union seeks to meet both climate and circular economy goals while boosting its competitiveness, the extension of the Carbon Border Adjustment Mechanism (CBAM) presents a unique opportunity to introduce financial incentives that simultaneously address carbon leakage and drive the transition toward a truly circular economy.
While the European Commission is preparing a Circular Economy Act announced for Q4 2026, the ongoing CBAM review offers a strategic pathway to integrate these two policy frameworks through market-based mechanisms that internalise environmental externalities. The current fragmented approach to environmental policymaking has largely overlooked the impact of absolute levels of resource consumption on climate, an omission that is increasingly dangerous as we continue to overshoot planetary boundaries.
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