Capturing the Potential of the Circular Economy Transition in Energy-Intensive Industries

In a changing political landscape, the implementation of Circular Economy (CE) strategies presents significant potential for reducing greenhouse gas (GHG) emissions, decreasing fossil fuel use, and altering trade dynamics. CE strategies related to material reduction, reuse and recovery complement industrial decarbonisation measures and have the potential to double GHG savings by 2050. Through a multi-method analysis, this study shows that an ambitious CE scenario can yield substantial annual GHG savings across selected energy-intensive sectors, with annual emission reductions of 64-81 Mt CO2-eq. in steel, 12-14 Mt CO2-eq. in aluminium, 38-52 Mt CO2-eq. in cement and concrete, and 75-84 Mt CO2-eq. in plastics by 2050. Morover, the implemented CE strategies mainly decrease EU imports, reducing trade dependency and increasing the trade balance by over EUR 30 billion compared to the decarbonised baseline. The study underscores the importance of creating conducive framework conditions to support CE integration in hard-to-abate industries in the form of a policy mix. Policy recommendations include promoting recycling technologies to improve recyclate quality, reducing material input through more efficient design, and mandating Green Public Procurement to create market demand for more circular material use. These strategies align with EU goals to enhance sustainability and competitiveness, while mitigating macroeconomic risks from global dependencies.