Is EU circularity policy killing plastic recycling in Europe?

Reading this title, I observe how this seemingly counterintuitive observation triggers my own convictions. I have stated so many times that circularity makes us more competitive and helps the environment that I feel strongly challenged by this very thought. But sadly, this is what I see when I look at what is happening in Europe under the flag of circularity.

The Paradox

Ten years after the first EU circular economy roadmap, we face a troubling reality: despite the most advanced and detailed EU policies on circularity, Europe’s circularity rate has stagnated and recycling capacity in some sectors is declining. Something is fundamentally wrong with how we’re implementing circularity, and it’s harming both our competitiveness and our environment.

The Challenge: The case of PET recycling

This isn’t true for all waste streams, but plastic—the material most targeted by circular policies—reveals the problem most clearly. PET, the most recyclable and recycled polymer, received dedicated recycled content targets in the Single-Use Plastics Directive, intended to demonstrate how circular policies could drive investment in recycling infrastructure. The Packaging and Packaging Waste Regulation subsequently extended these targets to other polymers.

Yet the outcome has been the opposite of what was intended. Rather than catalyzing investment in European recycling capacity, we’ve seen capacity decline. Industry reports suggest approximately 1 million tonnes of PET recycling capacity has been lost or not developed as anticipated. This represents both idled existing facilities and cancelled investment plans.

Why? The root cause lies in how we’ve structured our recycled content mandates. During PPWR negotiations, concerns about WTO compliance led to removing any requirement that recycled content targets be met with European post-consumer waste. While I understand the legal reasoning—WTO non-discrimination principles and Article III of GATT create real constraints—the result has been perverse.

European manufacturers can now meet their targets more cheaply by importing recyclate from regions with lower labor and environmental standards. This has three consequences:

1. European recyclers cannot compete on price and are closing facilities

2. Collected European plastic waste goes to incineration instead of recycling

3. We’re exporting jobs while importing materials with higher embedded carbon footprints

I acknowledge that the European Commission faces genuine legal constraints under international trade law. However, we must ask whether we’ve been creative enough in finding WTO-compatible solutions, or whether we’ve been overly cautious in ways that undermine our stated policy objectives.

The unresolved question: What is the goal of EU circularity policy?

This situation forces us to confront an uncomfortable question: What are we actually trying to achieve with circular economy policy?

If the goal is to maximize global circularity metrics—ensuring recyclate flows wherever it’s cheapest to produce—then current policy may be defensible. But this approach creates several problems:

Economic Impact: We’re undermining the viability of European recycling industries we claim to be building. The circular economy was supposed to create jobs and increase European resilience, not offshore both.

Environmental Impact: When cheaper imported recyclate displaces local recycling capacity, we don’t eliminate the waste—we just incinerate it instead. The net environmental impact may be negative when accounting for:

• Emissions from incinerating collected recyclable material

• Transportation emissions from importing distant recyclate in comparison with potentially accessible local recyclate

• Lost opportunity for higher-quality circular material flows

Strategic Coherence: How can circularity be “at the core of our industrial policy” (as stated in multiple Commission communications) if we design policies that systematically disadvantage European circular businesses?

Some Commission officials would argue that European manufacturers need cost-competitive inputs to remain globally competitive. This is true. But we need to acknowledge the contradiction: We cannot simultaneously build a competitive European recycling industry AND give manufacturers the cheapest possible recycled inputs from anywhere in the world. These goals are in tension, and current policy chooses cheap inputs over local industry without openly acknowledging this choice.

Learning from strategic autonomy debates

Plastic recycling isn’t a strategic autonomy issue in the same way as critical raw materials or semiconductors. However, the comparison is instructive. For truly strategic materials, we’ve been willing to consider supply security, industrial capacity, and resilience alongside pure cost efficiency. We’ve used tools like the Critical Raw Materials Act to balance multiple objectives.

Why not apply similar thinking to circular economy policy? A circular economy built on imported recyclate may show good metrics, but it fails to deliver the industrial policy benefits we’ve promised stakeholders and leaves us vulnerable to the same supply chain disruptions we’ve experienced elsewhere.

Many in industry call for a level playing field in recycling. Today virgin plastic often costs half the price of recycled plastic, so leveling the field would at least allow recycled plastic to make economic sense. However, as long as recycled content produced outside Europe remains cheaper than EU-made recyclate, a level playing field will improve global circularity and support foreign recyclers while undermining EU competitiveness and resilience.

This is why one can claim that a level playing field is necessary but insufficient to achieve European circularity that fosters competitiveness and strategic autonomy. Hence, a preferential treatment for EU-made recycled content is essential for aligning the circularity agenda with economic, geopolitical, and environmental goals. However, establishing preferential treatment policies violate our trade obligations and undermine the rule-based world order that the EU claims to defend.

Given the state of the world and how countries like the US ignore WTO obligations it could be justifiable that the EU decides to also forego world rules and among many other things decide to implement preferential treatment for processes which, for economic and environmental reasons, make sense to keep in Europe.

However, despite the latest tariff negotiations between Commission president and US president might indicate the opposite, the EU continues to stand behind WTO and hence we need to contemplate WTO-compatible paths forward.

WTO-compatible paths forward

1. Carbon Border Adjustment for recyclate. Extend CBAM principles to recycled materials. Recyclate imported from regions with lower environmental standards would face carbon pricing equivalent to the difference. This is trade-neutral (applies equally to domestic and imported materials) while ensuring environmental standards drive competition, not race-to-the-bottom pricing. The challenge is that by the time this would be implemented there might be no recycling industry left in Europe.

2. Organise Producer Responsibility to reward proximity. Restructure EPR fees to be based on full lifecycle environmental impact, including transportation. This doesn’t discriminate by origin but does properly price the environmental cost of global logistics. Products using locally-sourced recyclate would naturally pay lower EPR fees due to lower transportation emissions. If the right ecomodulation is applied the way France is considering this could be a good and quick fix.

3. Quality standards that reflect true circularity. Implement ambitious quality and traceability standards for recycled content. Rather than treating all recyclate as equivalent, reward higher-quality, better-documented circular material flows. European recyclers could compete on quality and transparency rather than price alone.

4. Public procurement preferences. Use government purchasing power (legally permitted under WTO Government Procurement Agreement exceptions) to preference circular products using local recycling infrastructure. This creates guaranteed markets without trade barriers.

5. Strategic investment rather than protection. Match China and the US not through protectionism but through serious public investment in recycling infrastructure, border and customs controls and support for circular business models whilst divesting from linear economy. The level playing field issue isn’t just about imports—it’s about virgin materials being artificially cheap due to unpriced externalities.

Beyond incrementalism: What real commitment looks like

The EU’s incremental approach to circularity is insufficient, but there’s a middle ground between impossible radicalism and ineffective incrementalism.

The fundamental problem is that circular economy policy has been treated as environmental regulation rather than industrial strategy. Compare our approach to:

The US Inflation Reduction Act: Massive subsidies specifically tied to domestic production, creating clear market signals that drove unprecedented private investment.

China’s 14th Five-Year Plan: Integrated resource efficiency targets across industrial policy, with state backing for circular economy enterprises and explicit connection to manufacturing competitiveness.

The EU has detailed circular economy regulations but minimal financial backing and no connection to our broader industrial tools (trade policy, state aid rules, procurement). We regulate circularity while subsidizing linearity.

What would real commitment look like?

• Align state aid rules to explicitly favor circular over linear business models

• Reform taxation to shift burden from labor to resource extraction (requires Council unanimity, but worth pursuing)

• Use trade policy offensively by requiring circular economy standards in new trade agreements and using our market access as leverage

• Integrate circularity into industrial alliances for batteries, chips, clean tech—making it central to industrial strategy, not an add-on

These approaches respect legal constraints while demonstrating real commitment.

Addressing the political reality

The Commission officials work within real constraints. But constraints can also be excuses for inaction. The question isn’t whether political challenges exist—they always do—but whether we’re being strategic in how we navigate them.

When the Commission wanted the Green Deal, CBAM, or the Critical Raw Materials Act, officials found creative ways to navigate legal constraints and build political coalitions. We need the same creativity and determination for circular economy policy.

The fact that France is implementing proximity principles unilaterally in 2026 should alarm us. Not because it’s wrong—though it may face legal challenges—but because it shows member states are filling the void left by EU-level inaction. This fragmentation is exactly what EU policy should prevent.

Conclusion: Toward honest trade-offs

After ten years of circular economy policies, we need honesty about trade-offs. We face real tensions between:

• Supporting European industry vs. providing cheap inputs

• Local resilience vs. global efficiency

• Environmental ambition vs. WTO compliance

• Political feasibility vs. policy effectiveness

Current policy pretends these tensions don’t exist or can be resolved through clever policy design alone. They can’t. We need to make explicit choices about what we prioritize.

My argument is this: If circularity is truly core to EU industrial policy—and not merely environmental virtue signaling—then we must design policies that actually build European circular markets and industries. This requires creativity in finding WTO-compatible paths, political courage in confronting member states about necessary economic instruments, and intellectual honesty about the costs and benefits of different approaches.

The current path—ambitious targets combined with cheap imports and incomplete circular markets—delivers the worst of all worlds: declining European capacity, stagnant circularity rates, and erosion of stakeholder confidence in the circular economy agenda.

Real European circularity, built on WTO-compatible policies, serious investment, and honest trade-offs, would be better for Europe—and ultimately for the world.