From production through consumption to disposal: Linear economic practices are firmly established after years of practice, despite alternative proposals. For example, of the 29.5 million tons of plastic waste in the EU in 2020, only about a third was recycled.

Linear strategies for dealing with products at the end of their life cycle ultimately mean either incineration or landfill. These disposal measures significantly contribute to greenhouse gas emissions, biodiversity loss, and other climate and environmental impacts. In addition, vast amounts of non-renewable resources are extracted to satisfy the increasing global demand for consumer goods (especially that of the 'global North').

As an alternative to such an economic system, the circular economy entered the stage of EU policy in the early 2010s. The circular economy aims to keep resources in a closed loop for as long as possible, reducing both the quantity of extracted primary resources and the generated waste. The entire life cycle of a product and possible measures at the end of its (first) life should be considered in the product design. At the end of their first lives, products or their components should be reused or recycled, thus remaining part of the cycle.

In the EU, the first Circular Economy Action Plan (CEAP) was adopted in 2015 as a strategy to reconcile economic growth and sustainability. With this approach, inherent tradeoffs between these two goals are to be overcome, and (green) growth is to be decoupled from resource consumption and negative environmental impacts. While the first CEAP focused on waste management measures, concepts such as eco-design, which focus on early stages in a product's life cycle, played a more significant role in the second CEAP in 2020. As a central pillar of the European Green Deal, numerous strategies were proposed under the CEAP to increase the circularity of specific sectors, with a particular focus on resource-intensive supply chains such as textiles, plastics, electronics, batteries, and  construction materials.

Such strategies have the potential to reduce the environmental impacts associated with production and consumption patterns. In the plastics sector, for example, this means optimizing the design of materials with a view to their end of life, facilitating waste separation, collection, repair, reuse, and recycling. This way, more plastics can be kept in the loop, and fewer new (mostly fossil) resources need to be extracted for polymer production. At the same time, the greenhouse gas emissions and environmental impacts associated with incineration and landfill are reduced – at least in theory.

Can the circle be closed?

Despite the discussed potential of the circular economy, the successful implementation of such a system poses some practical difficulties. For example, some of the necessary technologies are still in their infancy, and the expected positive impacts are limited by a high degree of uncertainty about their actual potential. In the plastics industry, for instance, various new technologies of chemical recycling are promising additions to conventional mechanical recycling. At the same time, little is still known about exact process losses and environmental impacts, and available data are sometimes extremely limited.

Furthermore, necessary investments are lacking in many places. Reasons for this include high costs, especially for smaller companies, the reluctance of some firms to change their ways, the lack of political requirements, or the insufficient availability of secondary resources. Deep-seated social inequalities also play a role, both between and within countries – such as between poorer and wealthier regions or between cities and rural areas, where establishing the necessary infrastructure is often more challenging.

Moreover, existing political frameworks are not always conducive to circular economies in practice. National regulations are not harmonized, which can be a challenge, for example, for the transport of waste given international supply chains, as companies must comply with all these different and sometimes contradictory requirements.

Although the discourse of consumer responsibility runs the risk of obscuring the true responsibility of political and economic structures, challenges on the consumption side cannot be overlooked. A successful implementation of the circular economy requires not only changes in product design, raw material extraction, or end-of-life strategies but also a shift in consumer thinking toward responsible consumption. This includes awareness of the possibility to repair rather than dispose, addressing skepticism about the quality of recycled products, and increasing waste separation at source.

However, the highlighted difficulties should not be seen as insurmountable limits – the nature of transformation processes implies a break with the old and with long-practiced patterns. Nevertheless, it remains questionable whether the desired benefits of circular economies (i.e., green growth) can actually be realized. Regarding plastic waste, even in an optimistic scenario of ambitious circular economy strategies, it is likely that waste volumes in the EU will stagnate at the current level or even increase by 2050. One reason for these bleak forecasts could be the result of inherent contradictions of current circularity approaches.

No closed circle

An immediate limit to full circularity is given by the enormous additional infrastructure required for circular economy scale-up. Despite the limited possibility of integrating additional technologies into existing infrastructure, large quantities of raw materials (metals, plastics, glass, etc.) would be needed to expand these structures, such as recycling and remanufacturing plants. The extraction and processing of these additional raw materials are associated with numerous environmental impacts. The same applies to the high energy consumption of certain circular processes. To stick with the example of chemical recycling of plastics: Some of these technologies operate at high temperatures or involve significant carbon losses. While the associated emissions are intended to be minimized by increased use of renewable energy, this use also relies on the further expansion of infrastructure, which, in turn, requires raw materials.

While a successful implementation of circular thinking can theoretically mitigate some of the negative consequences associated with linear economies, it is impossible in practice to close the circle completely. Process losses in recycling or recovery still require a supply of primary resources. The resource savings of circular economies are thus offset by the negative consequences of continuous economic growth.

The growth paradigm’s underlying idea that higher economic throughput can be decoupled from negative environmental impacts has been criticized in several studies (e.g., Korhonen et al., 2018). These studies show that there has been no historically sustainable, i.e., absolute and lasting, decoupling of both variables, and such decoupling is not expected in the future either. Rebound effects, on the contrary, lead to efficiency gains that, in the absence of balancing political requirements, may result in increased production (and associated externalities), thus nullifying savings. To defuse these inherent limits and the associated environmental impacts, a radical change in human economic behavior would be necessary – and a political shift away from green growth and toward sufficiency. Circular economies must go hand in hand with a fundamental rethinking and a paradigm shift toward post-growth economics.

Shrinking the circle

Concepts of post-growth or degrowth postulate the need to decouple societal prosperity from economic growth and resource consumption. This may imply consciously shrinking economic sectors with a high ecological footprint, taking into account social justice both within and between countries. This would dramatically reduce the production of consumer goods as well as associated resource consumption and environmental impacts.

However, reducing resource consumption and thus the size of the circle is not the only goal of the degrowth movement. It also focuses on distributive justice and the good life for all. From this perspective, transformative measures for ecological economics must always be socially just. Such a focus highlights that a transition to circular economies, in the absence of social measures, could deepen existing inequalities. Currently, access to services such as repair or the affordability of recycled products is not guaranteed for everyone.

However, the degrowth movement’s critique does not imply that circular economies lack transformative potential. It is evident that linear economies, especially combined with the growth paradigm, not only encounter numerous climate, environmental, and social limits but also exceed them. An effective implementation of the circular economy is necessary to significantly reduce the footprint of human consumption.

At the same time, circularity alone will not be enough. Their transformative potential can only unfold when accompanied by a fundamental change in social and economic systems toward an economy based on human needs and sufficiency. Circular economies, combined with the targeted shrinking of certain sectors in affluent countries as well as political measures for social justice, could bring about the necessary change to lead human activities back within planetary boundaries – at least those that have not already been irreversibly crossed.

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Disclaimer: This article is a translated version of the intervention that was originally published in German language as part of the Economists For Future Debate Series in the online magazine Makronom. Hence, some of the linked references are in German. 

About the author:

Patricia Urban is a researcher at the Centre for European Policy Studies (CEPS). She specializes mainly in the circular economy, decarbonization of industry, and socio-economic implications of green policies.