The circular economy is expected to play a key role in strengthening Europe′s competitiveness while also helping to ensure that its environmental objectives are achieved. Applying circular economy principles could boost EU gross domestic product (GDP) by 0.5% by 2030. At the same time, the European remanufacturing market alone could grow from EUR 31 billion to EUR 100 billion by 2030. The transition is also projected to generate around 700,000 new green jobs, particularly in the repair, remanufacturing and recycling sectors; the Clean Industrial Deal estimates 500,000 new jobs in the remanufacturing sector. The report “Unlocking the circular economy: investment needs, barriers and enabling conditions” published by the European Environmental Agency (EEA) gives authoritative information on the scale of financing needed for this transition and the necessary conditions for efficient implementation and effective change. It relies on assessments available in the report from the European Topic Centres on Sustainability Transitions (ETC ST) and Circular Economy and Resource Use (ETC CE) report Financing circular economy ambitions in Europe: trends and gaps.
The report highlights how linear economic models prevail in the EU, which involve very high material demand, a dominance of short-lived products and increasing waste generation. The EU′s circular material use rate increased by just 1.5 percentage points between 2010 and 2024. This is far short of the required rate of change set out in the Clean Industrial Deal to double circular material use to 24 percent by 2030. Significant improvements in efficiency will be required to achieve the EU′s circular economy objectives. These are not only necessary in production processes but across the entire lifecycle of products. According to the latest estimates of the European Commission and the European Investment Bank, private investment in circular activities has plateaued at around 0.8 percent of GDP since 2019. However, a 68 percent increase in circular investment – an additional EUR 82 billion annually until 2040, is required to fully implement the EU circular economy policies that have been adopted.
The analysis points out that the largest investment gaps are currently at the upstream product design stage and in the end-of-life phases, with construction, textiles, batteries and vehicles identified as priority sectors. Structural economic and financial barriers impede the necessary acceleration. These include unpriced environmental externalities that disadvantage circular over linear models, split incentives along value chains, information asymmetries limiting investor confidence, and financial tools, such as the EU Taxonomy, that incompletely capture circular activities. Innovative business models also face high perceived risk and fragmented markets that constrain access to capital. Unlocking this investment opportunity requires coordinated action. Public finance plays a catalytic role in de-risking projects and attracting private investment. Targeted economic instruments can reshape market incentives across the product lifecycle. Improved sustainability disclosures and better monitoring of circular investment flows are also necessary enabling conditions.
Access the report here