Carbon Market Watch welcomes the European Commission initiative to develop a New Circular Economy Action Plan. The Roadmap of this initiative is presented in view of the European Green Deal and the contribution of the EU’s industry to achieve a climate-neutral continent by 2050. It is therefore crucial that the Circular Economy action plan to be adopted together with the EU industrial Strategy is fully aligned with the aim of addressing the climate crisis and to ensure the European economy operates within ecological limits.

The Roadmap for this initiative chooses to address “high-impact sectors” such as textiles, construction and electronics. However, the justification for this particular choice of sectors is lacking, as well as any qualification of the impact it seeks to address in these sectors.

Carbon Market Watch would like to stress the need for the New Circular Economy Action Plan to focus in particular on resource and energy-intensive industries such as steel, chemicals, and cement. Industrial circularity helps reduce greenhouse gas emissions and energy use, maintains security of supply, and enhances production while reducing costs.

With total greenhouse gas emissions of 708 MtCO2 per year, resource and energy-intensive industry is the third-largest EU greenhouse gas polluter and emissions from the heavy industry have not decreased since 2012. At the same time sectors like steel, chemicals, aluminium or cement, have the potential to reduce European emissions by 56% (300 MtCO2 ) in 2050, if they adopted fully circular economy models. This represents the second biggest CO2 emissions reduction potential after clean electrification.

Most energy-intensive industries have already fairly high levels of circularity but these can still be improved throughout their value chain and would bring about even further CO2 emission reductions, for example:

* Less than 40% of the current EU steel production is based on recycled steel. Increasing the share of recycled steel can cut emissions by 90% if using largely decarbonised electricity.
* Only 10% of new plastic demand is met with recycled plastic products. There is much greater potential that should be exploited in plastic recycling by the chemical industry. It is estimated that emissions from both plastics production and end-of-life incineration could be further reduced by 56% through a combination of different solutions such as increasing plastics reuse, increasing mechanical recycling, and developing chemical recycling to recycle types of plastics that cannot be effectively recycled through mechanical recycling.
* Cement and concrete are easier to recycle when the quality of the waste material improves. Cement producers and demolition companies must be encouraged to collaborate to ensure raw material returns to the cement plant. Almost all of the waste (90% ) from the construction sector can be revalorised.

In order to achieve higher circularity of resource and energy-intensive materials, and thereby reduce greenhouse gas emissions, it is crucial that the New Circular Economy Action Plan includes the following elements:

* Within the sustainable product policy, introducing an obligation for all semi-finished and finished products to contain a certain percentage of recycled materials, and targets to avoid contamination of waste streams (e.g. limit copper in steel scrap) would help reduce the quantity of raw material used and consequently reduce emissions.
* Emission performance requirements should also be applied at the material and product level. CO2 performance standards and Ecodesign can impose minimum performance standards on the production and consumption of energy-intensive materials. This will ensure greater uptake of zero-carbon and energy-efficient solutions on the European single market. Acting across the value chain, these policies would enhance the circular use of materials.