Analyzing the Role of a Circular Economy in Driving the Clean Energy Transition

Written by: Kéa Anderson

Edited by: Sunny Bell

A Need for Change

Reduce, reuse, recycle: three principles that have been drilled into many of us from a young age; three principles that are instrumental in a sustainable transition to renewable energy. With our rate of consumption of goods, technology, and raw materials, we are facing an imminent need to alter our current economic model of extraction and disposal. A transition to a circular economy offers a new paradigm for sustainable growth. When adopted on a global scale, this transition could allow for the development of clean energy infrastructure while minimizing its associated environmental impacts.

What is a Circular Economy?

A circular economy is an economic model for material use that aims to minimize waste, extend product lifespans, and recycle and repurpose components. By keeping products in use for as long as possible, unnecessary consumption is reduced. This is a direct departure from the historical and harmful ‘take-make-discard’ linear economic model. In addition to optimizing resource use, a circular economy enables the reduction of pollution and emissions, minimization of environmental degradation, creation of jobs, and opportunities for innovation. It decouples economic growth from the consumption of finite resources.

When applied practically to the growing renewable energy industry, a circular economy involves the development of systems that implement material recycling and waste-to-energy pathways, thereby maximizing resource efficiency. These are necessary practices for growing industries to meet sustainability goals and emissions targets while reducing material demands. Though potential for improvements lies prominently in solar and wind energy production, the implementation of circular practices is needed in all growing energy sectors. The large-scale shift to a circular economy, however, is accompanied by challenges, including enforcement and adoption hurdles, limited funding, and technological gaps. Nevertheless, solutions to these obstacles can and must be developed through international collaboration and incentivized innovation. In this demanding and rapidly changing world, achieving a climate-neutral economy depends on the system-wide adoption of a circular economy across renewable energy sectors and beyond.

The European Context

A rising example of the success potential for large-scale circular economy transitions is found in Europe. In response to growing awareness of waste production and its effects on climate change and environmental systems, the European Parliament submitted a call to action for European nations to update their legislation on waste management and switch to a more sustainable circular economy (European Parliament, 2023). In practice, the proposed policies involve recycling products within their current economy to encourage material reuse and the creation of further value, rather than landfill disposal.

The European Union (EU) has instated a Circular Economy Act, due for adoption in 2026, aiming to establish a single market for secondary raw materials, promote demand for high-quality recycled materials, and double the circularity rate – a measure of materials that are reused or recycled rather than thrown out – from 12% to 24% by 2030 (European Commission, 2025). This act builds upon the EU’s second Circular Economy Action Plan to accelerate Europe towards a resource-efficient, low-waste, climate-neutral, and competitive economy (European Commission, 2020). This is a large part of the European Green Deal – a measure for sustainable growth and an agenda to make Europe climate neutral by 2050 (European Commission, 2019). The implementation of a sustainable circular economy in the EU provides environmental benefits beyond the goals of waste reduction. With 90% of biodiversity loss caused by the extraction and processing of resources, opting for recycling rather than exploiting is one of the greatest steps that nations can take towards preventing species and habitat destruction (European Commission, 2025). The demand that a circular economy enables for the innovation of sustainable designs and usage plans contributes to a reduction in greenhouse gas emissions and raw material dependence, as well as an increase in competitiveness, economic growth, and job creation. The EU estimates that this economic transition could provide an influx of 700,000 new jobs by 2030 (European Parliament, 2023).

The EU Circular Economy Act pertains directly to the renewable energy sector with the creation of a circular energy system for the recycling of materials. In particular, the repurposing of solar panels, which have seen an increase in recycling rates by 35% since 2015, the reuse of wind turbine blades for alternative projects, and the recycling of lithium-ion batteries have been recent drivers of the circular economy transition (Abdirahman et al., 2025). Increases in local employment, reduction in waste production, rise in economic growth, and creation of circular value are derived benefits of this economic transition applied to the energy sector. The promotion of partnerships between government agencies, NGOs, independent recycling firms, and consumers is instrumental in promoting collaboration and innovation in the growing circular energy economy.

With the impending adoption of the Circular Economy Act, the EU will likely face challenges in the enforcement of circular policies across sectors and in emerging economies. Incentivizing circularity will be necessary, but potentially costly, and further challenges to funding circular models and practices may be encountered. Additionally, the technology required to repurpose many of the projected recyclable materials is not widely accessible and may, in and of itself, involve resource consumption and carbon emissions, raising the question of its practicality. The undoubtedly complicated future of the European economic transition will rely heavily on system-wide collaboration and innovation.

The African Context

Parallel initiatives in the African continent are underway to advance the move towards a circular economy. The African Circular Economy Alliance (ACEA) is a government-led coalition of African countries with the aim of generating circularity for economic growth, creating jobs, and preserving environmental systems. The ACEA, similar to the EU Circular Economy Act, has identified key areas of improvement to focus their economic transition: converting food waste to fertilizer, recycling plastic packaging, collecting and repurposing electronic waste, upcycling textile waste for garment exports, and redesigning the built environment for increased sustainability (World Economic Forum, 2021). By focusing on opportunities for circularity that promote local engagement, international cooperation, optimization of resource use, and economic resilience, the national governments of the Alliance are “taking a lead in shaping the circular economy policy agenda for Africa” (Ellen MacArthur Foundation, 2021).

Despite the absence of a clear pathway for circular energy, the facilitation of collaboration across African nations has positive implications for the renewable energy transition as a whole. Circular economic policies, and the subsequent public-private partnerships forged in order to integrate them, are supported by the ACEA and may aid the continent-wide acceleration away from fossil fuels and toward clean energy. Increased capacity building for energy developments, as well as economic resilience and community independence achieved through projects such as solar microgrids, exemplify the current integration of circular frameworks on a regional level (Abdirahman et al., 2025). These decentralized solutions are a cornerstone of the Alliance’s economic and development goals.

Challenges to international incorporation of a circular economy include limited funding and a high demand for technical expertise, which is necessary to further many of the ACEA-identified key improvement areas. Resistance to change, particularly in the dismantling of old energy infrastructure to instate circular energy systems, constitutes another setback. Additionally, the lack of alignment between the sustainability goals of the Alliance nations and the goals of many other developing African countries presents a barrier for continental adoption of these economic principles. Moving forward, it is essential to raise awareness on the social, economic, and environmental benefits of a circular economy, and a need for international and intercontinental cooperation to gather the support required to fuel this transition.

The Canadian Context

Through a combination of strategies, including provincial, national, and international initiatives on resource management and allocation efficiency, emissions-reduction targets, as well as investment and funding of circular innovation products, Canada joins the transition to a circular economy. Key steps for improvement in waste-reduction and renewable energy efficiency include an Action Plan on Zero Plastic Waste, a Greening Government Strategy to establish low-carbon operations, a Minerals and Metals Plan to promote the recycling of material, and a Platform for Accelerating the Circular Economy, which focuses on promoting leadership and innovation in the upcoming transition (Government of Canada, 2021).

As its circular economic pathway is in the early stages of adoption, Canada does not yet have a clear plan for how this transition will address and incorporate renewable energy developments. However, a nationwide focus on promoting clean energy growth and Indigenous-led projects, developing a national hydrogen strategy, and instituting a Clean Economy Plan lay out a positive framework upon which circular principles can be established (Natural Resources Canada, 2022).

While a main focus of the Canadian transition is to provide financial aid to circular economy transitions – a direct contrast to the approach of the EU or ACEA – the nation faces challenges in other facets of circular policy implementation. A distinct friction between municipal, provincial, territorial, and national economic strategies results in an “imbalance of progress,” with Canada lacking uniform policies to promote circular sustainable practices (Environment Journal, 2024). Given Canada’s headway in clean energy development, furthering circular energy systems has momentous potential. It will be crucial to forge this sustainable pathway as the nation’s Action Plan for a circular economy progresses.

The Bottom Line

A global transition to a circular economy has begun. The European Union, the African Circular Economy Alliance, and the Canadian government are leading examples. The benefits of such a transition are becoming increasingly accepted, as independent Action Plans are devised and targets are set. However, in this process, there needs to be a concerted focus on the shift to renewable energy and the impact that a circular energy system could have in driving this movement. With nations worldwide working towards building clean energy infrastructure, the resources and raw materials vital in constructing these are dwindling, and severe consequences, including greenhouse gas emissions, ecosystem degradation, and mineral scarcity, are emerging. A system of material collection and recycling, technological innovation, and consumption reduction is key in combating these encroaching dangers.

References

Abdirahman, A. A., Asif, M., & Mohsen, O. (2025). Circular economy in the renewable energy sector: A review of growth trends, gaps and future directions. Energy Nexus, 17, 100395. https://doi.org/10.1016/j.nexus.2025.100395  

Ellen MacArthur Foundation. (2021). Circular Economy in Africa: Examples and Opportunities. https://content.ellenmacarthurfoundation.org/m/700a2e091283a13b/original/Circular-economy-in-Africa-Public-policy.pdf 

Environment Journal. (2024, September 9). The Built Environment: Challenges and opportunities for the circular economy in Canada - The Environment Journal. The Environment Journal. https://environmentjournal.ca/the-built-environment-challenges-and-opportunities-for-the-circular-economy-in-canada/ 

European Commission. (2019). The European Green Deal. European Commission; European Commission. https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en 

European Commission. (2020, March 11). A new Circular Economy Action Plan. Eur-Lex.europa.eu; European Commission. https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1583933814386&uri=COM:2020:98:FIN 

European Commission. (2025). Circular Economy. Environment. https://environment.ec.europa.eu/strategy/circular-economy_en#circular-economy-act 

European Parliament. (2023, May 24). Circular Economy: Definition, Importance and Benefits. European Parliament. https://www.europarl.europa.eu/topics/en/article/20151201STO05603/circular-economy-definition-importance-and-benefits 

Government of Canada. (2021, August 20). Explore circular economy initiatives. Canada.ca.  https://www.canada.ca/en/services/environment/conservation/sustainability/circular-economy/circular-economy-initiatives.html 

Natural Resources Canada. (2022). Powering Canada’s Future: A Clean Electricity Strategy - Natural Resources Canada. Canada.ca. https://natural-resources.canada.ca/energy-sources/powering-canada-s-future-clean-electricity-strategy 

World Economic Forum. (2021). Five Big Bets for the Circular Economy in Africa. https://www.aceaafrica.org/_files/ugd/056cf4_9ef0689c02154ce68ba801c1c2731be1.pdf