Analysis of the European Circular Economy Act: new rules for the secondary raw materials market, quality standards for recycled materials, digital traceability, and economic impacts

Author: Marco Arezio

Date: March 15, 2026

Introduction: The moment when the circular economy becomes an industrial policy

For over twenty years, the European Union has built an increasingly complex regulatory framework around waste management and the promotion of the circular economy. Waste directives, plastics strategies, ecodesign regulations, and extended producer responsibility systems have progressively transformed the way companies design, produce, and manage materials.

Despite this progress, the European recycling system continues to face a structural contradiction: the supply of recycled materials is growing, but industrial demand remains uncertain and often unstable. In many sectors, recycled material struggles to compete with virgin material, both for economic reasons and for issues related to quality and consistent availability.

It is precisely within this tension that the Circular Economy Act project was born, a new European legislative initiative that aims to transform the circular economy from a simple environmental policy to a true industrial policy.

The goal is no longer simply to improve waste collection or increase recycling rates, but to create a stable and reliable European market for secondary raw materials.

The hidden problem of European recycling: a fragile market

To understand the scope of the new legislation, we need to start with an observation that is often overlooked in public debate: recycling is not just an environmental issue, but above all an economic one.

A recycling plant may be technologically advanced, energy efficient, and capable of producing high-quality materials. However, if the market doesn't absorb those materials, the entire system becomes fragile.

This phenomenon is particularly evident in the plastics sector. The price of virgin polymers is closely linked to fluctuations in oil and natural gas prices. When the cost of fossil raw materials drops, industrial processors often find it more cost-effective to purchase virgin material rather than recycled material.

This imbalance creates a paradoxical situation: just as Europe is investing billions in the circular transition, many recyclers find themselves operating in a context of great economic uncertainty.

The Circular Economy Act was therefore created to address a crucial question: how can we structuralize the demand for recycled materials?

Towards a true European market for secondary raw materials

One of the main objectives of the new legislation is to overcome the regulatory fragmentation that still characterizes the European recycling market.

Today, many rules related to waste and secondary raw materials are applied differently across Member States. This means that a recycled material considered fully usable in one country may encounter regulatory or administrative obstacles in another.

This situation limits the circulation of recycled materials and makes it more difficult to build truly integrated European industrial supply chains.

The Circular Economy Act aims to reduce these barriers through greater harmonization of rules. The underlying idea is to create a single market for secondary raw materials, where recycled materials can circulate as freely as traditional raw materials.

Greater market integration could facilitate the matching of supply and demand and improve the economic stability of the sector.

The end-of-waste issue: when waste becomes a resource

One of the most delicate points of the legislation concerns the definition of end-of-waste status, that is, the moment in which waste ceases to be considered as such and effectively becomes a secondary raw material.

This legal step is essential to allow companies to use recycled materials in their production processes. However, in European practice, the interpretation of end-of-waste rules is often uneven.

Some countries adopt more restrictive criteria, while others apply more flexible interpretations. The result is a complex regulatory framework that can discourage investment and make industrial planning more difficult.

The Circular Economy Act could introduce clearer and more uniform criteria, increasing the predictability of the regulatory system and facilitating the use of recycled materials in production processes.

Quality standards and industrial trust

Another central element of the new European strategy concerns the quality of recycled materials.

Many manufacturing companies still approach secondary raw materials with caution, especially when they are to be used in technical applications or in products with high performance requirements.

Concerns often relate to variable mechanical properties, the presence of contaminants, or the difficulty of ensuring a consistent material composition.

To overcome these mistrusts, the European Commission is considering introducing European technical standards for secondary raw materials.

These standards could define quality parameters, classification criteria, and testing methodologies, helping to strengthen industry confidence in recycled materials.

The crucial question: creating demand for recycled materials

The heart of the new European strategy, however, concerns an even more profound aspect: the creation of stable industrial demand for recycled materials.

In recent years, many environmental policies have focused on supply, improving waste collection and developing new recycling technologies. However, without robust demand, these policies risk producing limited results.

The Circular Economy Act could therefore introduce tools capable of strengthening demand, such as minimum quotas of recycled content in some products or more stringent environmental criteria in public procurement.

The goal is not to artificially impose the use of recycled materials, but to create market conditions that make their use increasingly natural and competitive.

Digital traceability and material passports

Another dimension of the circular transition concerns the transparency of supply chains.

More and more companies must demonstrate to customers, investors, and regulators the origin of the materials used in their products. In this context, traceability becomes a fundamental tool.

The Circular Economy Act could strengthen the use of digital systems to track the journey of materials along the entire value chain.

Among the most discussed solutions are digital material passports, tools that allow users to record information on a material's origin, composition, treatments, and recycling potential.

These systems could make the secondary raw materials market more transparent and facilitate integration between manufacturing and recycling supply chains.

Industrial opportunities for the recycling sector

If implemented in a balanced way, the new European regulation could represent a turning point for the recycling industry.

A more stable market, clearer technical standards, and greater integration of supply chains could encourage investments in new technologies for selecting, purifying, and regenerating materials.

The most innovative companies could find new growth opportunities, especially in segments where the quality of recycled material can reach levels comparable to that of virgin material.

In this scenario, recycling would no longer be just a solution for waste management, but would become a true circular raw materials industry.

The risks of the new regulation

However, every regulatory transition also carries risks. An overly complex regulatory system could increase administrative costs for businesses and slow down innovation. Furthermore, if European policies are not accompanied by adequate trade protection tools, European companies could find themselves exposed to competition from recycled materials produced in countries with less stringent environmental standards.

The challenge of the Circular Economy Act will therefore be to find a balance between environmental ambition and industrial competitiveness.

Conclusion: the challenge of the next European economy

The Circular Economy Act represents one of the most important steps in the transformation of the European economy.

If it succeeds in strengthening the market for secondary raw materials, the circular economy could finally become a pillar of the continent's industrial policy.

It's not just about improving waste management, but about rethinking the relationship between production, consumption, and natural resources.

A significant part of Europe's industrial future will be played out in this transformation.

Sources

European Commission – Circular Economy Action Plan

European Commission – EU Waste Framework Directive (Directive 2008/98/EC updated)

European Environment Agency (EEA) – Circular economy in Europe: progress and future perspectives

European Commission – Joint Research Center (JRC) – End-of-Waste criteria and secondary raw materials

European Parliament Research Service – Secondary raw materials market in the EU

Eurostat – Recycling rates and circular economy indicators in Europe

Ellen MacArthur Foundation – The Circular Economy Framework and industrial implications

OECD – Global Material Resources Outlook and circular economy policies