The circular economy: A building block for climate action and biodiversity

The circular economy involves more than waste management: it seeks to slow resource fluxes – for example, through the design and manufacturing of durable products which remain in use for as long as possible. Repairing and recycling then further extend service life, with more intensive use of products overall. Sharing-based business models, initiatives and practices and product-as-a-service offerings, such as leasing, also have a role to play. In a circular economy, raw materials are used more efficiently, with less resource input per unit of production. Finite resources are replaced with renewable raw materials, and harmful substances are phased out in favour of more sustainable substitutes. And not least, a circular economy is about closing resource loops and recovering and reusing raw materials through measures such as high-quality mechanical recycling.

Key to greater sustainability

A circular economy is a key prerequisite for achieving environmental, climate, biodiversity and resource conservation goals. The way in which we currently use and process resources often oversteps planetary boundaries and is unsustainable. For example, lithium mining uses up freshwater resources; harmful chemicals such as per- and polyfluorinated substances leach out of products into the environment, where they persist for very long periods of time; and natural resources like timber are extracted beyond sustainable limits. And at present, precious metals such as gold, indium, tantalum and rare earths contained in smartphones and tablets are inevitably lost during recycling.

According to current estimates, a circular economy has the potential to reduce global greenhouse gas emissions by around 40% and raw materials consumption by approximately 30%. More sustainable production practices would simultaneously protect other environmental assets such as water, air and soil. The circular economy is therefore one of the pillars of the European Green Deal, which aims to achieve climate neutrality for the EU by 2050.

An innovative, forward-looking and resilient economic model

A circular economy is nothing less than a new economic model in which consumption of materials and resources is decoupled from economic growth. In order to achieve an overall reduction in the use of materials, the fundamental principles of the waste hierarchy apply: Circular Business Models (CBMs) must prioritise prevention, followed by reduction, reuse and repair. The least impactful form of production and consumption is the one that does not occur. Sufficiency – which involves reducing resource and energy consumption – is also vital to macro-economic sovereignty and resource independence.

Policy-makers, industry, consumers – everyone can contribute to the major transition

In this model, businesses and consumers have an equally important role to play in building an integrated, closed loop economy. Policy-makers, for their part, must establish the necessary frameworks. Among other things, they need to:

  • set binding and ambitious minimum durability standards for products,
  • create disincentives for resource-hungry products and services,
  • hold manufacturers responsible for promoting prevention, reuse and repair,
  • offer substantial positive incentives, e.g. by aligning subsidies and taxes with circular economy principles and expanding consumer protection, including longer guarantee periods, and
  • set a high level of ambition for themselves, e.g. in public procurement.

The circular economy – information and services from the Oeko-Institut

The Oeko-Institut conducts extensive research on all aspects of the circular economy. Its researchers identify the circular economy’s specific contributions to climate change mitigation and the conservation of resources and biodiversity and draft policy recommendations on the development of a circular economic model. They pinpoint conflicts of interest and challenges arising in the transition to sustainable business models and highlight the impacts on global resource flows.

A circular economy model for Germany

How will the establishment of a circular economy affect climate change mitigation and the conservation of resources and biodiversity – and the German economy as a whole? On behalf of WWF Germany, researchers from the Oeko-Institut are currently exploring this question in the “Model Circular Economy Germany” study in collaboration with Fraunhofer ISI and Freie Universität Berlin. The study focuses on the scope for reducing environmental impacts and on the potential socioeconomic effects of 52 circular economy measures in nine sectors. On this basis, the Oeko-Institut researchers are developing a roadmap for a circular economy in Germany as a contribution to the national circular economy strategy planned for 2024. The results of the study will be available in early summer 2023.

Information on the feasibility study “Model Circular Economy Germany”: Oeko-Institut blog  

In addition, Oeko-Institut experts are monitoring the development of Germany’s national circular economy strategy as part of current research and consultancy projects on behalf of the German Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection (BMUV) and the German Environment Agency (UBA). At the international level, they are working on various aspects of the circular economy in Asia, Latin America and Africa and investigating scientific issues for the European Commission’s initiatives for sustainable products.

General information

eco@work online magazine, Issue 3/2022 – A perfect circle: How does the circular economy work?

Wie verlängern wir das Leben unserer Elektrogeräte?” zu Obsoleszenz und Verlängerung der Lebensdauer von Produkten [“How do we extend the lives of our electrical devices?” Obsolescence and longer product lifetimes]: Oeko-Institut podcast

More information



Feasibility study: Model Circular Economy Germany

Study: Strukturwandel zu einer Green Economy: Analysen und Empfehlungen zur Gestaltung [Structural change towards a Green Economy: Analyses and recommendations for action]

Study: Abschätzung von Treibhausgaseinsparungen von Maßnahmen und Instrumenten zu nachhaltigem Konsum [Assessment of greenhouse gas emissions reductions from sustainable consumption measures and instruments]

All publications in the Holistic Management of Energy and Resource Efficiency in Companies (MERU) research project

Study: Analyse der softwarebasierten Einflussnahme auf eine verkürzte Nutzungsdauer von Produkten [Analysis of software-based effects on shorter product service life]

Study: Stärkung der Nachfrage nach Kunststoffrezyklaten – Verpflichtende Quoten für mehr Kunststoffrecycling [Boosting demand for recycled plastics – mandatory quotas for more plastics recycling]

Study: Volkswirtschaftliche Bedeutung und Entwicklung von Batterieproduktion und -recycling in Deutschland [Economic significance and development of battery production and recycling in Germany]


Study: Climate impact of pyrolysis of waste plastic packaging in comparison with reuse and mechanical recycling

Study: Circular economy perspectives in the EU textile sector

Study: Emerging waste streams – Challenges and opportunities

Study: Assessment of options to improve particular aspects of the EU regulatory framework on batteries


Study: Economic measures for packaging waste prevention

Study: SUP and packaging waste prevention: Policy recommendation for Thailand