Economic tools can accelerate the transition, but not on their own

Textiles constitute a relatively substantial proportion of household waste, and the sector is linked to global challenges of overproduction and -consumption. It is therefore imperative to find more effective policies to reduce both quantities and the environmental impacts of waste, as well as hazardous substances in textile materials.

A comparison of three economic tools (fees, tax reductions, and subsidies) for the textile sector shows that a combination of different measures is needed to drive change (Table 1). Economic steering has strong informative value even when the direct economic impacts are less obvious. It is challenging to raise the costs so much through existing economic steering tools that it would make a significant difference on its own. Fees have the best potential in this, but are associated with risks of raising social inequalities, if they are targeted everyday commodities. Adjustments to VAT do not provide strong economic incentives but can provide strong messages of political will. There is a need for a cultural shift that fosters awareness and responsibility as the success of circular economy business models is heavily dependent on consumers. Economic instruments that incentivize reuse, repair, and rental services can help to steer attitudes and behavior to more sustainable direction in the long run.

Table 1. Evaluation of three economic instruments for waste prevention in the textile sector.

Economic steering instrument	Targeted fees for fast fashion	VAT reduction for second-hand trade and repair services	R&D funding for developing new circular business models
Implementing the economic policies: why, who and how?
Why should this be implemented?	To reduce the production, import and sale of unsustainable textile items. This economic instrument would directly target overconsumption and overproduction. The fees would demonstrate through political guidance that fast fashion is not considered to be sound.	To encourage prolonging the use phase of textile items and make purchasing second-hand products more attractive.	To accelerate market-based activity where value creation is detached from the use of (virgin) resources.
Who can implement this?	The government and the administrative sector of finance departments in collaboration with the environmental department in charge of EPR.	The government and the administrative sector of finance departments.	The government and public innovation and business funding agencies, possibly together with private investors.
Who will benefit?	Companies whose products receive high ratings in the ranking system gain a competitive advantage and even direct financial bonuses compared to those that are ranked lower, who will have to pay eco-fees for their products.	Consumers can benefit from more affordable repair services, leading to lower costs for maintaining textiles instead of buying new items. Second-hand and repair businesses may see increased demand.	Companies engaged in developing circular business will benefit from opportunities for new innovations, increased competitiveness, and risk reduction.
Obstacles for implementation	Defining what constitutes ‘fast fashion’ can be complex. This ambiguity may complicate the application of fees. Free riders (actors who do not register as part of the system) might also be a problem. Moreover, there is concern that low-income consumers may be disproportionately affected.	There are no major obstacles, but previous research suggests that VAT differentiation may have a limited impact on waste prevention. It remains uncertain whether, or to what extent second-hand purchases actually replace new purchases.	The biggest drawback is the uncertainty of results and impacts, i.e. the instrument does not provide any direct impacts on waste prevention, and results occur only in the longer run. Even good business ideas might not survive scaling after the initial phase, limiting their long-term impact.
How can it be done?	The first step is to gather insights from the French example and consider how similar fees could be implemented locally in the Nordic countries as part of ERP for textiles.	This instrument could be relatively easily applied in Nordic countries. Several EU countries, including Sweden, have already reduced VAT on repair services or second-hand products.	There are already established national and regional development programmes, as well as public innovation and business funding agencies that support businesses’ R&D activities. Requires targeting of funds towards these topics.
Implementing the economic policies: effectiveness and applicability
Applicability	Medium (requires a set of criteria similar to those already in use in France)	High (has been tested, and all Nordic countries work with differentiated VAT schemes)	High (instruments are already in use in all Nordic countries and can be improved)
Impacts on volumes of waste	Medium	Low	Low
Positive impacts on environment	Medium	Low	Low
Impacts on harmful substances	Medium–High	Low	Low
Summary of potential for waste prevention	The tool has the highest direct potential for impact of the instruments analysed, although no calculations of actual impacts were found. The tool combines EPR with negative economic incentives for producers who do not comply and information steering (marketing bans) for the market, showing that economic tools have higher potential when combined with other steering tools.	No evidence of a direct impact on waste. The price difference is not expected to affect consumer choices. However, businesses engaged in models that would be impacted by the change consider the tool to be important. For this reason, it would make sense to consider it as part of a larger policy package of incentives supporting the shift from linear to circular economic logic.	No evidence of a direct impact on waste but is considered an important tool for accelerating the transition from linear to circular economy. With more viable circular business models, it is expected that impacts on waste should occur over time.