Economic instruments for a resource-efficient circular economy

Countries around the world are pursuing a transition to a more circular economy. Economic instruments can support these efforts, by setting price signals that can impact decisions by producers, consumers and waste managers. Governments use a wide range of economic instruments that target different parts of the product lifecycle. “Price-based” economic instruments include taxes, credits and deductions, deposit refund systems and advance disposal fees. They aim to directly change the price of products and services. “Performance-based” economic instruments include tradeable permits, extended producer responsibility take-back schemes and green public procurement. These aim to assign businesses with environmental performance targets or goals that translate into prices. This paper reviews economic instruments that are used by governments to support the transition to a more circular economy, taking a product lifecycle approach. It outlines lessons learned about the use and effectiveness of these instruments. It also identifies gaps in circular economy policymaking.