Submission to FRF Circular Economy Act consultation

Need for a future-proof European level playing field

As an environmental organisation, Fair Resource Foundation welcomes the initiative of the Circular Economy Act. (Harmonised) rules around Extended Producer Responsibility (EPR), the introduction of Deposit Return Systems (DRS), circular public procurement and progressive taxation are all pillars to make the EU economy future-proof.

However, it is crucial that this opportunity is seized to create a long-term level playing field for new and existing circular businesses and initiatives, with a focus on product and material prevention, reuse, sharing economy, repair, refurbishment, remanufacturing and high-quality recycling. Currently, this level playing field is lacking due to unfair competition from products made of cheap, low-grade materials flooding the European market, affecting all stakeholders within circularity. Many circular pioneers in the Netherlands (New Optimist, Schreuder, Umincorp, i-did) and other European countries are going bankrupt due to the lack of fair market conditions. In 2024 alone, five Dutch plastic recyclers went bankrupt, not to mention many small businesses active in prevention and reuse.

Robust legislation is therefore essential to establish a fair and competitive market. This must go beyond mere environmental policy and should include progressive tax measures and targeted (import) bans on polluting products. Producers look to European policymakers for clear guidance and harmonisation; instead, they currently face fragmentation and a lack of direction towards an EU economy that is more resource-efficient.

We therefore call for legislation based on a clear, forward-looking vision that offers market stability and investment certainty. Deregulation is not the solution, as it undermines the necessary market stability and actually creates uncertainty, especially when existing legislation is repealed after being adopted.

Recommendations for a circular and competitive Europe

In line with our expertise, we provide specific recommendations below regarding the need for stronger extended producer responsibility schemes and market creation for secondary raw materials.

Enhanced Extended Producer Responsibility

EPR schemes cannot reach their full potential as drivers of the circular economy unless legislators establish legally binding circular targets focused on prevention, reuse, repair and closed-loop recycling, increase transparency, plan for monitoring and enforcement, and achieve a minimum level of harmonisation at the European level.

Producers operating in multiple Member States currently face a wide range of differing obligations, creating unnecessary complexity and administrative burdens. While it is important that Member States retain the flexibility to adapt European legislation to their local context and increase ambition, a certain degree of harmonisation is essential. This should apply at least to:

1. The types of targets to be achieved;

2. Mandatory inclusive governance structures for Producer Responsibility Organisations (PROs);

3. Dedicated funding for activities such as reuse, repair, closed-loop recycling and education/awareness raising;

4. Funds destined for waste management outside the EU when products are exported.

Additionally, a European register could prevent free-riding and ease the administrative burden for producers. A similar initiative is planned for Packaging EPR within the Packaging and Packaging Waste Regulation (PPWR, art. 44) and can serve as a template to be extended to all European EPR schemes.

Importantly, governance issues within EPR schemes currently hinder the efforts of key stakeholders like social enterprises, municipalities and recyclers in achieving high-performing circular systems. Currently, the boards of most PROs consist mainly of representatives from a limited number of large producers, meaning the perspectives of other textile actors are not sufficiently taken into account and there is insufficient accountability for the PROs' performance. The CEA should therefore mandate that a broad group of stakeholders from the product value chain is involved, both in national legislative processes (the design of EPR schemes) and within the governance of the PROs themselves.

For more information on improving EPR, see our manifesto for strong Belgian EPR on textiles and our broader position paper on improving EPR.

Key role for secondary raw materials in the circular transition

The production and use of recycled raw materials in products has not yet reached the scale needed for a circular economy. The main reasons for this are the lack of a level playing field compared to virgin materials and the perceived quality of secondary raw materials.

While it is true that some secondary raw materials are of lower quality than their primary counterparts, this is not a universal characteristic. Recycled plastic and paper, for example, often have lower quality and performance than virgin materials, limiting their applications. In contrast, materials such as stainless steel or glass can be recycled to a quality virtually identical to or even higher than the original, and used without problems in a wide range of sectors. For textiles, the technology to produce recycled materials of comparable quality to virgin material already exists within Europe. It is therefore important to avoid generalisations. The quality of secondary materials varies greatly depending on the material type (such as inert materials), the collection system and the recycling process. Recognising these differences is crucial when designing policies and incentives to support circular business models, so that investments are targeted both at high-quality recycling streams and at sectors that can effectively use lower-grade secondary materials, such as construction.

Looking specifically at plastics, we see that while governments set circular economy ambitions, the petrochemical industry continues to invest heavily in the production of virgin plastic. Because virgin plastic remains cheap, recycling struggles to compete economically. In Europe, plastic production is declining because international competitors can produce at lower costs. Countries like China and the United States benefit from state aid and relatively low fuel and raw material prices. Some describe this decline in European production capacity as a serious threat to the transition to circular plastic. In essence, this argument implies that sustaining polluting industries is necessary to maintain leverage for future sustainability transitions.

The Circular Economy Act is a crucial opportunity for the EU to create fair market conditions that reward prevention, reuse and high-quality recycling, that use public procurement as an opportunity to scale up circular initiatives, and that link circularity to progressive taxation. We call on policymakers to adopt ambitious, harmonised measures that strengthen circular businesses, reduce dependence on virgin raw materials, and ensure a resilient, competitive European economy.