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Knowledge category: Papers and reports

Incentives to boost the circular economy: A guide for public authorities

Updated on 18.11.2022

Incentives aim to address market failures that prevent transition to Circular Systemic Solutions (CSS) by pricing negative externalities, steering markets towards sustainability, and changing behaviour. Incentives can create value, de-risk investments and improve competitiveness of value chains bringing environmental benefits (compared to linear economies), economy and society.

Author: European Commission, Directorate-General for Research and Innovation, Directorate B — Healthy Planet, Unit B.1 — Circular Economy & Biobased Systems
Year of publication: 2021

More information

This guidance document aims to support public authorities in identifying the best-suited incentive or combination of incentives to speed up the transition towards a CE at national, regional or local level. As these incentives target different market failures or barriers, incentive type, combination, associated costs and infrastructure of implementation, temporality or scope, and relevant level of enforcement will inherently vary. These incentives can include modulation of Extended Producer Responsibility fees, lower VAT on green products and services, and communication on repairing products, among others. The incentives are powerful tools as they are analysed in connection to the lifted barriers, categorisation/affected life cycle stage, identified value chain, benchmarking (as in examples where they are implemented), description impacts and other incentives that are connected to the ones analysed.

Relevance for Circular Systemic Solutions

The report details some incentives relevant for the transition towards CSS and circular products and services, such as modulation of Extended Producer Responsibility fees, lower VAT on green products and services, and communication on repairing products, among others. These represent powerful tools for cities and regions to catalyse CSS.

Themes

Finance/economics