Europe needs a single market for secondary raw materials
Europe is entering an era where economic resilience, security and environmental sustainability can no longer be pursued separately. Yet our circular economy transition is not delivering at the speed and scale Europe needs. Regulation is needed as a catalyst — creating a level playing field, encouraging innovation and safeguarding the environment.
Despite policy efforts, circular material use has barely improved since 2010, and secondary raw materials markets remain fragmented.
The European Commission’s forthcoming Circular Economy Act (CEA) is a pivotal opportunity. Done right, it can become a genuinely market‑shaping instrument: correcting structural market failures that favour virgin materials, reducing administrative barriers that prevent scale, and mobilising investments into Europe’s recovery and processing capacity. Enhancing recycled material quality at competitive prices requires targeted support—price signals or private investment alone won’t ensure a secure, diversified supply of critical raw materials.
The real bottleneck: a market that cannot scale
The problem is not a lack of circular economy ambitions. The problem is that secondary raw materials often cannot compete on price, quality is not consistent and cross‑border movement of waste and recyclable fractions faces legal uncertainty. Diverging national interpretations — especially around definitions of waste and end‑of‑waste status — slow shipments, raise transaction costs and prevent the emergence of a true single market for secondary materials.
This fragmentation matters because scale matters. Simply relying on market dynamics cannot justify the capital‑intensive investments needed for modern sorting, dismantling, recycling and refining plants. Active public policy is required to de‑risk and finance large‑scale industrial capacity and to steer investments back to Europe, particularly for critical raw materials that are central to the green and digital transitions.
At the same time, Europe’s strategic vulnerability is growing. Critical raw material extraction and processing is geographically concentrated, and price volatility for key inputs creates unstable conditions for industry. The circular economy is one of the clearest pathways to reduce import dependence, retain value within Europe and build resilience against external shocks.
What the Circular Economy Act should prioritise
To move from ambition to results, the Act should focus on a handful of high‑impact levers.
1) Create a stable and sufficiently large market for secondary raw materials.
The CEA should enhance market certainty by harmonising rules that currently fragment markets. In practice, this means establishing EU‑level end‑of‑waste criteria for prioritised material groups, grounding criteria in material performance and evidence. By improving conditions for the movement of secondary materials within the EU, the CEA can reduce the pressure to incinerate or export waste and support a functioning single market.
2) Strengthen demand for high‑quality recycled materials.
Markets don’t scale on supply alone. The CEA should introduce robust demand‑side measures such as product‑specific recycled content requirements — particularly in product groups that concentrate critical raw materials (renewable energy technologies, ICT and electronics). Stable demand reduces price volatility and unlocks investments.
3) De‑risk investments in secondary critical raw materials.
Europe will not build competitive recycling and processing capacity purely through price signals. Public policy must actively de‑risk industrial investments, using EU‑level financial instruments and targeted support. Simply relying on private investments will not deliver a secure, diversified and resilient supply of critical raw materials. The goal is to enable bankable projects that create a resilient, geographically diversified industrial base for recovery and processing.
4) Make policy coherence a design principle.
The CEA must complement and activate existing legislation — notably the Ecodesign for Sustainable Products Regulation (ESPR) and the Critical Raw Materials Act (CRMA) — so that businesses receive consistent signals. Strong implementation capacity and compliance matter as much as new rules.
5) Treat data and digital tools as core market infrastructure.
Trust and quality assurance are recurring bottlenecks for secondary materials. Digital product passports (DPPs), interoperable data flows and AI‑enabled solutions can improve transparency, traceability and intelligence across material flows. Digital tools enable circular markets and multiple life cycles — not just bring additional obligations.
6) Europe’s circular economy is global — and the Act must reflect that
Products, components and materials move across borders and so do circular business models such as repair, refurbishment and remanufacturing. This creates both opportunities and risks.
One challenge is the export of end‑of‑life products and waste containing valuable materials to non-EU countries, amounting to over 32 million tonnes in 2022 alone. If Europe is serious about resilience and circularity, it should reduce material leakage.
The CEA should align with trade policy and external partnerships. It should encourage better data compatibility across jurisdictions and improve the ability to distinguish between waste, secondary raw materials and second‑hand goods in trade flows. Trade and investments must work together: initiatives like the Global Gateway strategy offer untapped opportunities to integrate circular economy objectives, support advanced recycling infrastructure in partner countries and strengthen supply‑chain security.
What Sitra has learned — and why it matters now
At Sitra, we have worked for years to help turn circular economy principles into practical, scalable solutions, and sharing these with the world through the World Circular Economy Forum (WCEF). Finland was the first country in the world to develop a national circular economy road map, with Sitra facilitating its creation and supporting the implementation. Sitra has also funded dozens of practical experiments and now co-operates the EU Circular Economy Resource Centre (EU CERC).
In our recent memorandum on policy levers for the Circular Economy Act, we show that both regulatory mechanisms and catalysing actors are needed. The Act should combine harmonised rules, demand pull, investment de‑risking and digital enablers into one coherent, market‑building package.
A chance to make circularity investable
Europe’s strategic objectives are clear: strengthen resilience, competitiveness and security by reducing dependence on imported critical raw materials. The Circular Economy Act is a chance to align industrial policy, environmental goals and economic growth into a single market‑shaping initiative.
If the Act focuses on building a genuine single market for secondary raw materials, strengthens demand for high‑quality recycled inputs, de‑risks enabling investments and treats data as market infrastructure, Europe can move from fragmented pilots to scalable systems and deliver a circular future.
Kari Herlevi leads the Global Circular Economy Programme at Sitra, the Finnish Innovation Fund. Since 2017, Sitra hosts the annual World Circular Economy Forum (WCEF) and now co-operates the EU Circular Economy Resource Centre (2025–2029).
