Towards resource autonomy: Proposals for a Circular Economy Act

In view of the announced EU Circular Economy Act, this report stresses that current circular policy measures are insufficient to reduce the absolute levels of resource use in the EU – a blindspot that threatens the EU’s strategic autonomy and competitiveness. Crucially, ensuring that future generations can live well within planetary boundaries requires a fundamental shift in material use.

The failure to fully internalise externalities, like environmental degradation and carbon emissions, keeps the market skewed in favour of primary materials, undercutting the competitiveness of secondary materials and circular business models. The report sets out a roadmap for how the EU can internalise such costs and reshape economic incentives. While the report presents three alternatives, the most immediate measure it proposes is expanding the scope of the EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM) to cover additional downstream products and organic chemicals. In the long term, it also recommends pricing a wider set of pollutants and introducing border tax adjustments to reflect their true environmental impacts abroad. Crucially, it calls for a transition toward a tax-based scheme targeting resource use and pollution as a long-term strategy, shifting the burden away from labour-based taxation.

The report also suggests investing additional revenues into projects addressing the consumption of primary resources and targeted policy support to boost the uptake of high-quality recycling and increase the availability of secondary materials.

Available in English.