Climate change and environmental degradation call for global measures to decouple economic growth from the use of natural resources. The transition to a circular economy is one important means in turning environmental threats into opportunities and boost the wellbeing of our societies while battling climate change and biodiversity loss.
The Nordic countries wish to be at the forefront in EU and globally as a sustainable and integrated region. At the same time, the countries struggle to reach the Sustainable Development Goal for sustainable consumption and production (SDG 12). Nordic countries share many common strategic interests and features when it comes to the circular transition. These include e.g., a high level of technology and innovation, digitalisation know-how, skilled work force, and favourable environments for new business models. On the other hand, circular economy development is hampered by the low price of virgin raw materials in comparison to recycled materials, relatively high labour costs and income taxes, as well as low waste costs. For instance, high income taxes can discourage individuals from buying circular products and services, as they tend to be more expensive than traditional non-circular options. In turn, this may lead to a decrease in demand for recycled and re-used goods and services. Thus, can lead to a decreased supply for circular economy practices. Current regulation and economic instruments are not always designed to incentivise circular practices. It stands clear that the transformation from linear to circular economy practices, needs a systemic change on many levels. This includes changes in economic policy, both on the EU and national levels.
Objectives
The project aims to analyse the potential of developing new economic instruments or modifying existing ones to promote the transition towards a circular economy in the Nordics.
Analyse the potential of new economic instruments that can move the society in a circular direction by affecting e.g., the treatment of products and waste.
Assess to what extent existing environmental and energy-policy-motivated economic instruments and their costs for the society have positive and negative impacts on the circular transition.
Discuss how existing economic policy instruments could be strengthened to better support the circular transition in the Nordics.
Scope and delimitations
This study is divided into two main parts. The first part provides a broader overview of the use of economic instruments to support a circular economy, and their use across the EU and the Nordic countries, with focus on Finland, Sweden, and Norway. The overview is complemented with accounts of actual use of these instruments, in terms of lessons learned as well as need for further development. This overview is based on desk review and expert interviews conducted during the project, as well as learnings from the extensive “Circular Transition in the Nordics” - project of the Nordic Council of Ministers’ Working Group for Circular Economy.
In the second part of the report, studies of the effects of a natural resource tax on products made of virgin materials are analysed in detail. Focus lies on the textile- and construction sectors because of their prominent role and extensive material flows in the Nordic countries. Furthermore, there are various possible circular substitutes to the most commonly used materials available both for textiles and for construction materials. The cases for in-depth analysis have been scoped in close dialogue with the Working Group for Environment and Economics of the Nordic Council of Ministries. It was decided to limit the scope of our study to polyester within the textile sector and cement within the construction sector. This scope is presented in more detail in chapter 4.