The environmental and climate benefits of a circular economy

How a circular economy contributes to environmental and climate goals

The benefits of increased circularity for the planet have long been recognised in EU policymaking. The 2020 Circular Economy Action Plan refers to a ‘regenerative growth model that gives back to the planet more than it takes’; it also states that scaling up the circular economy ‘will make a decisive contribution to achieving climate neutrality by 2050’.

Other examples of policies relevant to the circular economy include the 2025 Clean Industrial Deal and, globally, the IPCC Sixth Assessment Report and the United Nations Environment Programme (UNEP) Global Environmental Outlook 7.

In Europe, as the transition to a cleaner energy production system is under way, the environmental and climate impacts related to material consumption become more pronounced (ETC CE, 2025a; EEA, 2026a). There are good reasons for this; the International Resource Panel estimates that 55% of global greenhouse gas (GHG) emissions, up to 40% of health-related impacts from particulate matter (PM) and 90% of land-based biodiversity loss can be attributed to the extraction and processing of natural resources (UNEP, 2024).

The circular economy is in a unique position to address these impacts by minimising the economy’s focus on creating value through the intake of natural resources. At the same time, it would increase value creation through economic activities focusing on circular design, product repair and shared use, and improved waste management.

These strategies narrow, slow or close material loops, thus mitigating environmental and climate impacts associated with the production of new materials (Figure 1) (ETC CE, 2025a). A circular economy can, therefore, help to ensure that the EU’s use of natural resources (and materials) is more efficient and has less impact.

This in turn can stimulate innovation, investment and job creation in other parts of the value chain. For example, it can support the development or expansion of service-based activities such as repair, reuse, sharing, material recovery and circular business models (EC, 2018; Wagner, 2024; ETC CE 2025b; EEA, 2026b). Increasing resource and material efficiency lowers resource demand (and related capital expenditure) at the same time as creating economic opportunities and value elsewhere in the value chain.

Moreover, these interventions can also influence broader aspects of well-being. For instance, reduced air pollution associated with lower material use and waste generation can contribute to improved environmental conditions and human health.

Figure 1. Illustrative example of circular economy benefits

However, although the link between circularity and environmental and climate benefits is clear, to date there has been no consensus on the circular economy’s precise potential contribution to the EU’s collective climate, biodiversity and air pollution objectives in line with Eighth Environment Action Programme goals (EEA, 2026a).

This briefing seeks to address this gap, while it also assesses the potential for circularity to increase Europe’s economic security. Future assessments will consider the potential socio-economic implications of a circular transition.

This briefing is based on the technical report Environmental Benefits of Circular Economy produced by the European Topic Centre on Circular Economy and Resource Use (ETC CE).

Scope and methods

This briefing focuses on 17 illustrative circular economy interventions selected to estimate the environmental and climate benefits of a circular economy. They span multiple provisioning systems, namely mining, housing, food, personal mobility, and other goods and consumables (Table 1).

The choice of circular economy interventions has a significant influence on the calculation of potential benefits. To reflect the ongoing debate on the scope of the circular economy (c.f. Kirchherr et al., 2023), an EEA-driven stakeholder process identified 13 interventions categorised as ‘core’ (commonly employed in circular economy strategies) and four ‘broad’ interventions (more systemic or behavioural change-based). For more details on this see the ETC 2026 technical report which underpins this briefing (ETC CE, 2026).

The final selection of circular economy interventions covers different stages across the product lifecycle:

• before use (e.g. designing products to last longer or to use less materials);
• during use (e.g. extending the life span of products already in use through repair or reuse);
• after use (e.g. increasing the supply and use of secondary raw materials in new products) (EEA, 2024a).

Combined implementation of these interventions would result in a substantially more circular economy compared to the current status quo.

An environmentally extended multiregional input-output (EEMRIO) model was used to estimate the environmental and climate benefits. It was based on FIGAROe3 and complemented with additional data from EXIOBASE and REX3. The results were estimated separately for (Table 1):

• the broad and core set of interventions;
• high and medium ambition level for their implementation;
• benefits occurring within and outside EU borders;
• the current economic structure and a future more decarbonised one.

Table 1. Circular economy interventions selected for modelling

Circular economy benefits

The following sections present the potential benefits of a circular economy for each of the impacts modelled:

• climate change, measured in greenhouse gas (GHG) emissions;
• biodiversity loss, measured in potentially disappeared fraction (pdf);
• air pollution, approximated by fine particle emissions;
• dependence on imported materials, using metals as an example.

Other impacts — for example, on water and soil — are likely to be reduced as well, but could not be modelled in the same way. The calculation of benefits from circular economy interventions is based on a comparison of impacts on the EU economy with and without the implementation of the 17 circular economy interventions.

Figures 2, 3 and 4 give visualisations of the estimated benefits of the sum of all 17 circular economy interventions if implemented with a high ambition level. The benefits are disaggregated into different provisioning systems – each with a unique colour. Impacts originating within the EU-27 are indicated by a coloured area, while impacts originating outside the EU-27 (Rest of the world) are indicated by a shaded area.

Climate change

Implementing the selected circular economy interventions would reduce the EU’s climate footprint by 22% or close to 1 billion (944 million) tonnes of carbon dioxide equivalent (tCO₂e) (Figure 2) if the current economic structure were to remain unchanged (see Box 2). Overall, 71% of this reduction would occur within the EU-27, while the remaining 29% would occur outside the EU.

It is important to note that the GHG footprint reductions referred to in this briefing relate to consumption-based emissions (see Box 1) and do not correspond to production-based emission reductions applied in national GHG inventories — which are consistent with UNFCCC and Intergovernmental Panel on Climate Change (IPCC) guidelines.

Figure 2. Potential of circular economy interventions to reduce GHG emissions

Of the 17 modelled circular interventions, the five with the largest climate mitigation potential are:

• less resource-intensive food systems;
• increasing car ride sharing;
• extending the useful service life of buildings;
• reducing car dependency;
• increasing the reuse of building components in construction.

The GHG emissions savings from the circular economy interventions are explained by the more efficient use of resources. For example, animal-based proteins are more resource-intensive than plant-based proteins (EEA, forthcoming). Meanwhile, extending the lifetime of buildings and increasing the reuse of construction components would lower demand for resource-intensive materials such as cement and steel (EC, 2026; EEA, 2024c).

The results do not represent an exhaustive list of circular economy interventions, but they do indicate that savings in the housing, mobility and food systems could deliver up to 85% of all reductions from the 17 modelled circular economy interventions (ETC CE, 2026).

Biodiversity loss

Circularity offers the potential to reduce land-based biodiversity loss by 19% (see Figure 3). More than half (55%) of this reduction in biodiversity loss would occur within the EU-27 territory, while the remaining 45% would occur outside the EU-27. 

Figure 3. Potential of circular economy interventions to reduce land-use-related biodiversity loss

Of the modelled circular interventions, the five with the largest potential for reducing land-based biodiversity loss are:

• a less resource-intensive food system;
• minimising food waste;
• improved waste management and recycling;
• increased repair and maintenance of textiles;
• extending the useful service life of buildings.

The food system is a key area where circular economy interventions can help reduce biodiversity loss in Europe. Moving to a less resource-intensive food system — in particular shifting diets away from meat consumption — is the single most significant circular economy intervention modelled for this briefing. It would deliver 50% of the overall reduction in biodiversity loss from all 17 interventions put together.

Additionally, lowering food waste could lead to reduced demand for food production resulting in lower pressure on land as less land is needed to produce food. Moreover, extending the lifespan of buildings or textiles (through repair and maintenance) would lead to lower demand for primary resources with their impacts on land use.

Air pollution

Figure 4 shows the benefits of implementing the selected circular economy interventions for air pollution, as approximated on the basis of fine particulate matter air emissions. Around two-thirds of the benefits would occur inside the EU and the rest abroad.

Figure 4. Potential of circular economy interventions to reduce air pollution (approximated by emissions of fine particulate matter)

The main source of fine particulate matter emissions is the energy sector where they are primarily caused by burning fuels in homes for heating; this source is not affected by increased circularity (EEA, 2025b). Other major pollution sources include road transport, construction and demolition, and manufacturing of construction products (such as cement, iron and steel). Overall, the highest potential for pollution reduction comes from housing.

The modelled circular interventions with the largest potential for reducing air pollution are:

• extending the service lifetime of buildings;
• reducing average floor space;
• reusing building components;
• ride sharing;
• reducing car dependency.

Much of the reduced air pollution can be achieved by avoiding the construction of new buildings and scaling back on the production of building components. These approaches would result in less dust from mining, less manufacturing of construction products, less transportation of those products to construction sites and therefore less fine particulate matter emissions and pollution. 

Circular economy interventions targeting housing represent 60% of the potential air pollution reduction from all the interventions modelled. As such, housing is a hugely significant area for policymakers to target.

Two other interventions, within personal mobility — namely ride sharing and reducing car dependency — account for 23% of total potential air pollution reduction as they result in fewer kilometres driven. Burning fossil fuels for transport as well as the wear and tear of tyres are currently significant sources of fine particulate matter.

Reduced dependence on foreign metal extraction

Increased circularity would affect the relationship between the EU and the rest of the world because of a reduced material consumption, which implies a reduced need for material extraction from other world regions to satisfy EU consumption. This development  would improve the EU’s resource security (ETC CE, 2024). The calculations for this briefing indicate that this is particularly relevant for metals (Figure 5). More than 200 million tonnes of metal ores were extracted abroad to satisfy EU demand for goods and services in 2020. In a scenario based on implementation of the 17 modelled circular economy interventions, this quantity could decrease by 49 million tonnes, a reduction of 17%.

For critical metals in particular, reduced dependency on foreign extraction would directly support the EU’s green transition and overall security. According to the modelling, circular economy interventions could reduce the need for extraction abroad of:

• aluminium by 20%;
• nickel by 19%;
• copper by 12%;
• platinum group metals (PGMs) by 20%.

Looking at metals overall, the circular economy interventions in housing have the highest potential to reduce EU dependency on foreign metal extraction. Extending the life span of existing buildings, reducing average floor space and reusing building components would achieve the greatest reduction in dependency on foreign metal extraction (more than 23 million tonnes avoided). This would be mainly due to reduced steel use in new buildings or new building components.

The second highest ranking group of interventions would be in the area of personal mobility. Ride sharing and longer life spans for vehicles would reduce dependency on foreign metal ore extraction by more than 12 million tonnes. Additionally, reducing the number of new cars, with their high concentration of metals, would have a direct impact on the volume of these materials required by the EU.

These calculations have been made based on an assumption that the ratio of foreign and domestic extraction to satisfy the EU’s material consumption remains the same. In this scenario, circular economy-induced reductions would affect foreign and domestic extraction equally.

In reality, economic considerations, protectionist policies, supply disruptions and other factors are likely to mean that reduced consumption would affect imports more than domestic extraction. If this is indeed the case, then the potential of the circular economy to reduce the EU’s dependency on foreign metal ore extraction could be even higher.

Figure 5. Potential of circular economy interventions to reduce EU imports of metals

Lessons learned from the results

Figure 6 gives a visualisation of the relative importance of the modelled circular economy interventions in delivering benefits for climate change, biodiversity loss and air pollution. The circular economy interventions included in this study would provide different benefits for each of the environmental dimensions, but there are certain interventions that would offer synergies, thereby substantially contributing to mitigating more than one environmental or climate objective. They are listed below:

• Extending the service lifetime of buildings and promoting ride sharing would result in amongst the highest benefits both for climate change and air pollution.
• Promoting a less resource-intensive food system would provide the bulk of the potential reductions in biodiversity loss, but would also provide significant reductions in GHG emissions.
• Reducing average floor space and reusing building components have significant mitigation potential for both climate change and air pollution.

Figure 6. Heat map for the 17 selected circular economy intervention

As discussed, consuming products in the EU is linked with environmental and climate impacts outside the EU, to the extent that production value chains operate outside the EU’s borders. Consequently, potential benefits from circular economy interventions fall both within and outside the EU.

Figure 7 illustrates that most of the reductions in environmental impact for each of the assessed environmental impact categories would occur within the EU, but that the distribution would differ depending on which impact is considered. For climate change and air pollution, over two-thirds of the impact reduction would take place within the EU. For land-use-based biodiversity loss, the distribution is more even; 55% of the impacts would occur within the EU.

When circular economy interventions target the avoidance of new products — for example by enabling more repair of existing products — it is likely that some of the benefits would occur outside the EU, as production activities partly take place abroad.

However, when interventions target the use of products — like ride sharing that reduces kilometres driven — it is more likely that a very significant share of the benefits would occur within the EU in the form of decreased emissions.

Land-use-based biodiversity loss is strongly related to agriculture and food production activities. As such, the benefits from more circularity in this area would occur wherever production takes place.

This discussion demonstrates that although EU policymaking has direct control over polluting activities within the EU, it can also positively influence environmental and climate mitigation abroad.

Figure 7. Reduced internal and external impacts from implementing circular economy interventions

The extent to which interventions are implemented is a key aspect of fulfilling the potential of circularity benefits. High-ambition implementation of the 17 modelled interventions would lead to over 80% more benefits than a medium ambition level in all three areas: climate change, biodiversity loss and air pollution. This understanding points to the need for high, far-reaching targets for circular economy policies to maximise the potential benefits.

In this context, it is essential to accelerate the current and forthcoming circular economy policies. For example, the Ecodesign for Sustainable Products Regulation, combined with its smart targeting in the area of product lifetime extensions, is key for harnessing the circular economy’s environmental and climate mitigation potential (EEA, 2025d). Similarly, the EU should stimulate the scaling of circular business models to help promote socio-economic gains and to reduce unintended consequences and rebound effects.