Promising:

• 45% of Europe's total carbon emissions come from how we make and use products, and how we produce foodxxxi. This is an essential insight if we are to deliver on the EU commitment to reach carbon neutrality by 2050. It is therefore positive to see the Commission acknowledging the links between increased circularity of materials in the economy and reduced greenhouse gas emissions.
  

Potential issues:

• We would have welcomed clearer recognition of the role of consumption and demand to address these 45%, e.g. acknowledging the need for an absolute reduction in EU material consumption.

• Getting the economics right is essential. If primary raw materials are cheaper than reused goods or secondary raw materials, then policy interventions to deliver a circular economy will have little impact. We therefore welcome this focus from the Commission.
• The CEAP mentions an ambition to "encouraging reduced taxation on repair activities and second-hand goods", i.e. VAT adjustments. This is promising but depends on what will be proposed. Think 2030 has previously emphasised that low hanging fruit in this regard include using the VAT Directive and the European semester process to, for instance, give favourable rates to repair activities to support circularityxxxii.

Potential issues:

• Getting the economics right includes ensuring that products and services traded on the EU market to a greater extent than currently reflect their true costs with the overarching aim to phase out high-impact products. The European Green Deal mentions that it will "create the context" for broad based tax reforms, removing subsidies for fossil fuels, shifting the tax burden from labour to pollution, and taking into account social considerations. This aspect is largely missing from the CEAP. The European environment state and outlook 2020 stresses that the prices of internationally traded goods rarely incorporate the costs of environmental externalities, i.e. the embodied impact of the land and water used, the GHGs emitted or the biodiversity affectedxxxiii. According to Eurostat, environmental taxes as a share of total revenues is in fact declining in EU Member Statesxxxiv.
• We would have liked to see further support of extended producer responsibility (EPR) schemes in the context of "getting the economic right" and circular economy objectives more broadly (and not just as a cost recovery approach). IEEP research has shown that EPR can contribute to broader environmental and circular economy objectives, including reducing natural resource depletion (by encouraging upstream design changes). Commission actions to support improved approaches to EPR as per this commitment should therefore include means to maximise incentives for upstream design changes, for instance by encouraging sufficient eco-modulation of EPR feesxxxv.