Theresa Mörsen, Waste & Resources Policy Officer, states: “Reducing environmental impact requires not just more efficient resource use, but also a fundamental shift in our use rate. The failure to fully internalise externalities, like environmental degradation and carbon emissions, keeps the market skewed in favour of primary materials, undercutting the competitiveness of secondary materials and circular business models.”
The report sets out a roadmap for how the EU can internalise such costs and reshape economic incentives. While the report presents three alternatives, the most immediate measure, it proposes is expanding the scope of the EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM) to cover downstream products and organic chemicals. In the long term, it also recommends pricing a wider set of pollutants and introducing border tax adjustments to reflect their true environmental impacts abroad. Crucially, it calls for a transition toward a tax-based scheme targeting resource use and pollution as a long-term strategy, shifting the burden away from labour-based taxation.
The report suggests investing the additional revenues these measures would generate into projects that not only reduce the carbon intensity of production but also reduce the consumption of primary resources via an extended EU Innovation Fund.
To support this transition, the report urges the EU to revise the ‘Circular Material Use Rate’ (CMUR) as an indicator for circularity.
“These changes,” adds Mörsen, “are essential to guide Europe towards greater resource resilience and environmental integrity. Ultimately, we need to remember that a strategic use of materials is directly linked to the EU’s long-term competitiveness and intergenerational fairness, ensuring future generations can live well within planetary boundaries. Our recommendations provide the bedrock for this to happen.”
Beyond economic instruments, the report highlights the need for targeted policy support to boost the uptake of high-quality recycling and increase the availability of secondary materials. It also suggests that the EU explore strategic cooperation with third countries to strengthen waste management systems abroad, securing access to critical raw materials. Zero Waste Europe urges decisive action in the announced Circular Economy Act to adopt measures and complementary policies outlined in this report.
