Chapter 3Transitioning to a circular economy
3.1There has been much consideration given to implementing a circular economy in Australia and moving away from Australia's linear economy. Numerous inquiries and reports have supported the creation of a circular economy for the waste and resources sector, noting the environmental, health andeconomicbenefits.
3.2This chapter outlines the key features of a circular economy and the importance of Australia's transition towards such a model. It considers Australia’s approach to the circular economy, including the recently released national Circular Economy Framework and recommendations of the Circular Economy Ministerial Advisory Group and Productivity Commission.
3.3The chapter also examines the key challenges to Australia achieving circularity, and lessons that can be drawn from the transition in other countries.
3.4The next chapter explores product stewardship, including stakeholder views on the value of mandatory schemes and targets, and specific schemes for products such as batteries.
Transitioning to a circular economy
3.5Australia's current linear 'take-make-dispose' economy has been described as unsustainable. Australia relies on exporting primary and recycled materials which are then imported as products. A large amount of consumer goods and packaging end their life as waste.
3.6A circular economy is an economic model that promotes sustainable and efficient use of resources. There is no universally agreed definition of the circular economy, however, in practice, it requires the following elements:
(1)eliminating waste and pollution;
(2)keeping materials in use for longer;
(3)reducing the use of new raw materials;and
(4)regenerating natural systems.
3.7In a circular economy, products are either recycled, remanufactured or re-used after they have served their initial purpose. This minimises pressure on the environment, and helps tackle global challenges like climate change, biodiversity loss, waste, and pollution. Figure 3.1 summarises the circular economy framework:
Figure 3.1A circular economy
Source: Commonwealth Scientific and Industrial Research Organisation, Australia’s linear ‘take-make-dispose’ economy is unsustainable, https://research.csiro.au/circulareconomy/about/ (accessed 25 July 2024).
3.8The Ellen MacArthur Foundation, a non-profit organisation committed to creating a circular economy, conceives of the circular economy as 'a system where materials never become waste and nature is regenerated'. Thismodelseesthat:
Through processes of maintenance, reuse, repair, refurbishment, remanufacture, recycling, and composting, valuable resources are kept in use for as long as possible at their highest value. Waste does not exist in a circular economy. Materials once considered ‘waste’ become recognised as resources and are retained in the system.
3.9According to the Commonwealth Scientific and Industrial Research Organisation (CSIRO), transitioning to a circular economy can lead to additional benefits, including:
improving resource security;
decreasing import dependency;
improving economic growth and innovation;and
increasing jobs and markets.
International agreements
3.10Australia's efforts to transition to a circular economy are underpinned by its commitment to implementing United Nations Sustainable Development Goal12, which requires that countries achieve responsible consumption and production patterns by 2030. Australia is also a party to the Paris Agreement, which seeks to reduce rising greenhouse gas emissions and keep global warming to a manageable level.
3.11In terms of managing consumption, trade, and waste responsibly, Australia has other international commitments for which it must meet certain requirements. These govern the safe international trade of hazardous chemicals, the control of persistent and harmful chemicals, and the protection of the ocean from sea‑dumping and plastic pollution.
Global plastic pollution treaty
3.12In 2022, Australia endorsed the goal of ending plastic pollution by 2040 by enabling a circular economy for plastics, and has since been involved in negotiations to develop a global plastic pollution treaty. However, the intergovernmental negotiating committee failed to reach agreement on an internationally legally binding instrument by the target date of December 2024. It was widely reported that lobbyists from the chemical and petrochemical industries exerted significant pressure on governments duringthenegotiations.
3.13Minister for the Environment and Water, the Hon Tanya Plibersek MP (the minister), expressed disappointment at the lack of a finalised agreement and stated that Australia remains committed to finalising a global treaty inthefuture.
Australia's approach to the circular economy
3.14Australia's circularity rate—the proportion of materials used that are recycled/non-virgin—is 4.6 per cent, which is below the global average of 7.2percent.
3.15Around 75 per cent of Group of 20 (G20) countries have an overarching circular economy policy, strategy, or framework. For example, the European Commission adopted a Circular Economy Package which includes a suite of measures to transition to a circular economy. One of these measures is the Circular Economy Action Plan, which promotes efficient resource use throughout the economy. The Circular Economy Package includes clear targets for reduction of waste.
3.16Conversely, Australia has the fourth lowest rate of material productivity in the Organisation for Economic Co-operation and Development (OECD), 'generating only USD1.20 of economic output for every kilogram of materials consumed, compared with the OECD average of USD2.50'. A circular economy could add up to $210 billion in gross domestic product value, and 'an additional 17000 full-time equivalent jobs in Australia by 2047-48'.
3.17In recent years, Australia has committed to a national circular economy transition and taken steps to give effect to various policies and programs that incorporate circular economy principles. These are discussed below.
Circular Economy Ministerial Advisory Group
3.18In 2022, environment ministers made an agreement to transition Australia to a circular economy. The minister established the Circular Economy Ministerial Advisory Group (CEMAG) to provide advice to government on this transition. In June 2023, Australia’s environment ministers agreed that:
…the Australian Government will lead development of a national framework to direct Australia’s transition to a circular economy, informed by the work of the Circular Economy Advisory Group.
3.19Professor John Thwaites AM, who chaired CEMAG, told the committee that the work involved:
…very extensive stakeholder engagement; I think we engaged with more than 250 stakeholders around the country. We held five major workshops with industry, the food industry, plastics, Chemistry Australia, superannuation and investors. We took all that information and put it in our interim report and in our final report.
3.20CEMAG presented an interim report in April 2024, summarising its preliminary advice of 2023, and concluded its work with a final report to government in December 2024.
Interim report
3.21CEMAG’s interim report of April 2024 made numerous preliminary recommendations, including the following:
develop a National Circular Economy Framework, to articulate a clear vision for a circular economy for Australia and to define 'circular economy’ for Australia;
set national and sector-based circular economy targets and measure and report on progress against upstream indicators of circularity;
embed circular economy principles and actions across key climate policies including all net zero sector plans, to support emissions reductions;
develop an assessment on how the circular economy can be adopted to maximise the recovery of valuable resources to help deliver the net zero transition;
develop an Australian Circular Economy Systems Map, including identification of pain points and barriers to a circular economy transition;
leverage Commonwealth procurement in building and infrastructure to explore circular innovation before approaching the market;
embed circular economy principles in infrastructure Federation Funding Agreements; and
introduce a national 'recycled content first' procurement policy to help drive recycled content markets and ensure national consistency.
Final report
3.22CEMAG summarised the challenges Australia faces in introducing more circularity to the economy:
As a primary materials exporter, Australia faces structural factors that affect circularity, such as large volumes of low value waste from mining and higher material demands driven by geographic spread and population growth. Achieving even incremental increases in circularity—like a 1% rise—requires substantial effort but can significantly benefit Australia’s long-term sustainability and resource security. This journey will require strategic, targeted actions that reflect Australia’s unique conditions and opportunities.
3.23In December 2024, CEMAG delivered its final report to government, making 14core recommendations and 12 supporting sector-specific recommendations. The final report made several key observations, including that:
early movers in the circular economy 'stand to gain significant economic and financial advantages', with significant risks to those economies and industries which lag behind—for example, 'without ambitious domestic reform', Australia could become a 'destination for low-quality goods' that are no longer accepted internationally;
a strong market for recycled materials 'remains a missing foundation in Australia's circular economy', which reduces financial incentives to divert material from landfill;
Australia needs to move beyond the current National Waste Policy and 'must take action earlier in the product and material life cycle';
introducing more circular supply chains 'creates additional local sources of materials that can strengthen Australia's supply chain resilience' and boost local manufacturing;
a circular economy can help to reduce pressure on the cost of living and offer consumers more affordable options, while reducing waste and costs for industry;
a circular economy 'offers a powerful opportunity to address' issues with new types of waste and pollutants, by 'designing them out as well as creating systems to recover material, divert toxic substances from landfill and curb the environmental footprint of emerging waste streams';
the circular economy framework needs to address virgin resource consumption rates at the beginning of the material life cycle; 'extending material and product use in the middle of the life cycle; and recovering materials and products at their end of life';
a transition to a circular economy needs consumers and communities to understand what that means while seeing the benefits from their involvement; 'making it easier for consumers to find clear, specific information about products can greatly increase' participation in the circular economy and empower consumers to use more circular products; and
a 'proactive and predictable regulatory approach' together with environmental standards for materials and products in Australia are essential for a competitive and effective circular economy, and would be achievable via an 'agile, clear and comprehensive legislative instrument'.
3.24CEMAG made clear it had not made specific recommendations on the economic settings around a circular economy (such as taxes and fines/penalties). It noted that, as recommended by its interim report, the current inquiry by the Productivity Commission would be better placed to consider such levers (discussed below). Professor Thwaites elaborated at a hearing that CEMAG:
…saw that doing a Productivity Commission report would allow a real exploration of those [economic] levers. We did hear of some cases where tax incentives didn't necessarily work so well in Europe around repair where, for one reason or another, there were unintended consequences. We believe that those things need to be properly and robustly explored in order to ensure that you get the best outcome.
3.25The primary recommendations of CEMAG were:
Recommendation 1:Introducing a new National Circular Economy Policy Framework, which includes achievable targets, market opportunities and clearly defined priorities for governments, industry, researchers and others;
Recommendation 2:Mainstreaming circular economy principles in policies and programs, in particular net zero and climate policies; grants and procurements 'that significantly influence materials production and use'; and Australian Government corporate planning and reporting processes;
Recommendation 3: Recognising First Nations peoples and Knowledge systems, and integrate Knowledge systems and practices into the transition;
Recommendation 4:Legislating a Circular Economy Act to provide an overarching, integrated regulatory framework 'to regulate the environmental performance of materials and products, including imports' in line with priorities which should include mandatory product stewardship and mandatory disclosure requirements for businesses;
Recommendation 5:Harmonising circular economy rules to boost productivity, through a governance model which modernises and harmonises regulations, standards and specifications; with a clear cross-jurisdictional mandate, a time-bound delivery of results, industry engagement and an independent chair;
Recommendation 6: Using public procurement to grow and diversify markets, by including circularity requirements in all major agreements relating to procurement of materials, products and services and by leveraging Commonwealth procurement power;
Recommendation 7: Partnering internationally to develop supply chain partnerships with strategic international partners;
Recommendation 8:Unlocking Australia's competitive innovation edge through the circular economy, implementing a more strategic approach to innovation funding which drives market-disrupting and whole-of-supply-chain innovations (with consideration of a challenge-based funding model);
Recommendation 9:Embedding circularity in sustainable finance and corporate strategies, making it easier for business to reflect the circular economy in their corporate strategies, planning and disclosures;
Recommendation 10:Giving industry a front door to circular economy expertise, in order to support businesses to collaborate throughout the supply chain;
Recommendation 11:Defining and building skills in the existing and emerging workforce, including by defining and tracking circular economy jobs and skills; through the development of micro-credentials; and supporting a challenge-based undergraduate competition;
Recommendation 12:Supporting place-based transformation: regions, remote, precincts and regeneration, noting that a 'place-based approach tailors strategies to the unique strengths, resources and needs of specific regions';
Recommendation 13:Partnering with First Nations enterprises, people and communities, 'early and on an ongoing basis', noting they will play a critical role in Australia's circular economy transition; and
Recommendation 14:Empowering consumers and communities by building circular economy literacy, for example, by implementing packaging disclosure requirements and 'establishing repairability ratings to guide consumers towards sustainable choices'.
3.26Underpinning CEMAG’s recommendation for a new National Circular Economy Policy Framework is its observation that 'the lack of a clear, overarching national approach is a major gap, creating uncertainty and limiting investment and policy confidence'. CEMAG underscored the need for national policy leadership, stating that 'without a unifying policy framework, Australia risks a fragmented and less effective transition'.
3.27CEMAG’s recommendation for a Circular Economy Act is intended to support the goals of a national policy framework by setting 'clear, adaptable and predictable' regulations 'to lift the environmental performance of products entering the economy'.
3.28CEMAG pointed out that the current Recycling and Waste Reduction Act 2020 is limited in its power to set design standards for products, in contrast to the European Union (EU) framework which outlines when and how ecodesign requirements can be set for specific product groups. CEMAG recommended that Australia adopt similar ecodesign provisions to support circularity-focused improvements in product design, stating that a robust ecodesign framework would complement and enhance the effectiveness of product stewardship schemes (see further discussion below).
3.29CEMAG also emphasised that regulatory inconsistencies between different Australian jurisdictions have a detrimental impact on businesses, stating, 'Australian businesses are ready to embrace and expand the use of circular goods and services, but fragmented regulations across jurisdictions are holding them back'. Accordingly, CEMAG called for circular economy rules to be harmonised across jurisdictions to promote business growth, productivity and operational efficiencies.
3.30Further, the final report presented 12 supporting recommendations, specific to the following four areas: built environment; food and agriculture; resources; and water. It was put to CEMAG by stakeholders that sector-focused priorities would 'better engage those responsible for implementation across industry and government', especially in material-intensive sectors and supply chains 'where Australia holds a competitive advantage'. Figure 3.2 outlines the sector-specific supporting recommendations:
Figure 3.2Supporting recommendations—CEMAG final report
Source: CEMAG, Final Report: The Circular Advantage, December 2024, p. 7.
Ministerial response to CEMAG’s final report
3.31On 7 March 2025, the minister wrote to the Chair of CEMAG, welcoming the release of the final report as 'an important step in our circular economy journey'. The minister stated that CEMAG's advice 'provides a pathway to capitalise on the opportunities of the circular economy' and 'provides an exceptional basis for Australia to further our circular economy transition'.
3.32The minister stated that the Australian Government has already completed the first of CEMAG's core recommendations by releasing Australia's Circular Economy Framework in December 2024. The minister also asserted that 'substantial progress' has been made in relation to CEMAG's second and fourth core recommendations (to mainstream circular economy principles in policies and programs, and to include circularity requirements in all major public procurement agreements, respectively).
3.33In relation to CEMAG's 12 supporting recommendations relating to four specific sectors, the minister recognised that 'achieving greater circularity in Australia will require addressing barriers in these sectors'.
3.34The minister acknowledged that 'more will need to be done' to implement CEMAG’s recommendations.
Australia's Circular Economy Framework
3.35In December 2024, the Australian Government released the first national Circular Economy Framework. The framework was issued concurrently with CEMAG's final report. Professor Thwaites acknowledged that the release of the framework meant that CEMAG's first key recommendation had been adopted.
3.36DCCEEW officials gave evidence that the framework was:
…heavily informed both by research that the CSIRO have undertaken and by the work of the advisory group [CEMAG]…as well as our own departmental research and consultation with a range of different stakeholders… It's one that we consulted with across government departments as well to make sure that there's good buy-in to it.
3.37Figure 3.3 summarises the framework.
Figure 3.3Australia's Circular Economy Framework at a glance
Source: DCCEEW, Australia's Circular Economy Framework, 2024, p. 6.
3.38As shown above, the framework sets the goal of doubling the circularity of Australia’s economy by 2035. This goal will be measured through three targets which cover the front-, middle- and end-of-product life cycle:
(1)Reducing material footprint by 10 per cent.
(2)Lifting materials productivity by 30 per cent.
(3)Safely recovering 80 per cent of our resources.
3.39The material footprint measures 'how much material is consumed to make the products or services used in Australia'. It can be reduced through improving design and material choices, such as using recycled and more durable materials in products.
3.40Materials productivity measures 'the efficiency with which raw materials (such as metals, minerals, and biomass) are used in production processes'. It can be increased through scaling Australian innovation, advanced manufacturing on shore, and domestic reuse of Australian recycled materials.
3.41Increasing Australia’s resource recovery rate will require actions like designing products in a way that makes them easily recovered at end-of-life and supporting active markets for recovered resources.
3.42A Branch Head within DCCEEW’s Circular Economy Division described the framework’s goal of doubling circularity as 'ambitious, but feasible', and pointed to the four sectors where Australia could build on its competitive advantage to make significant shifts in circularity: industry, built environment, food and agriculture, and resources.
3.43In terms of implementing the framework, there will need to be 'a range of systemwide changes', and actions by governments, businesses, investors, researchers, non-government organisations and the Australian community.
Productivity Commission circular economy inquiry
3.44In response to CEMAG’s interim report, in August 2024 the Productivity Commission (PC) commenced an inquiry into the opportunities of a circular economy. The PC's terms of reference require it to examine several matters relevant to the committee's work, including:
priority circular economy opportunities for Australia, including identification of the sectors, products or supply chain segments where there is the greatest potential for improvements, and where other countries have made the greatest progress towards circularity; and
barriers to enhanced materials productivity and prospective approaches to addressing them—including regulatory frameworks and policy actions.
3.45The PC's inquiry has received strong interest and published over 180 submissions. The PC released an interim report on 5 March 2025, which identified and explored six priority areas where there are potential circular economy opportunities (shown in Figure 3.4 below): built environment; food and agriculture; textiles and clothing; mining; vehicles; and electronics.
Figure 3.4Six priority areas explored in the Productivity Commission's interim report
Source: Productivity Commission, Australia's circular economy: Unlocking the opportunities—Interim report, March 2025, p. 6.
3.46The priority areas were selected based on three broad considerations:
environmental and economic significance of the materials used;
applicability of circular economy opportunities to Australia (including behaviours and practices that Australian governments can more readily influence); and
whether there are viable policies to reduce barriers to taking up circular economy opportunities.
3.47The interim report made three recommendations:
(1)the Australian Government’s evaluation of the Motor Vehicle Service and Repair Information Sharing Scheme in 2025-26 should assess certain criteria;
(2)introduce a product labelling scheme for household appliances and consumer electronics; and
(3)include reuse and repair targets in the National Television and Computer Recycling Scheme and increase the use of tracking devices.
3.48Additionally, for each priority area, the PC stated that it was considering the following potential policy changes:
(1)built environment
enabling fit-for-purpose use of recycled materials in public projects;
coordination mechanisms to enhance the benefits of sustainable procurement policies; and
reducing unnecessary regulatory barriers to prefabricated construction;
(2)food and agriculture
reducing food waste through food relief and donation to charity; and
recognising the benefits of biogas in carbon reporting;
(3)textiles and clothing
product labelling for textiles and clothing;
(4)mining
reducing regulatory barriers to circular economy opportunities for mining waste and alternative post-mining land uses;
(5)vehicles
establish the foundations of a robust end-of-life electric vehicle battery industry;
(6)electronics
product stewardship for small electronics, including embedded lithium-ion batteries; and
product stewardship for small-scale photovoltaic systems.
3.49The PC acknowledged that progress towards a circular economy has been slow, with barriers to circular economy opportunities including 'prescriptive, outdated or inconsistent regulations; coordination challenges and difficulties diffusing circular innovations; and limited practical information on circular opportunities'.
3.50The PC also mentioned that it was considering cross-sectoral, system-wide opportunities to improve circularity, including supporting businesses to adopt and diffuse circular economy-related innovations. The PC noted that it received evidence on 'subsidies and tax incentives to encourage investment in circular opportunities, such as tax credits or accelerated depreciation', however the interim report did not make any recommendations on the economic settings around a circular economy.
3.51The committee expects this to be covered in the PC’s final report, as recommended by CEMAG.
3.52The PC sought further submissions by 11 April 2025 to inform the final report, which is due by 23 August2025.
Support for a circular economy
3.53The committee received strong support for a circular economy and for Australia to welcome both the environmental and economic opportunities presented by a truly circular waste and resource framework. This section presents some of that support.
3.54The committee heard that a circular economy would provide 'a boost to the Australian economy', while also helping to 'mitigate exposure to raw material price volatility and supply, including imports'. Professor Thwaites observed that a circular economy would be a 'real opportunity for jobs and prosperity'.
3.55The CSIRO's Circular Economy Lead and Senior Principal Research Scientist, DrHeinz Schandl, observed:
The research…shows that the short-term economically attractive opportunities are many… In the long term, you see a more beneficial economic outcome if you fully engage in a circular economy.
3.56The Australian Marine Conservation Society (AMCS) and WWF emphasised the wide-ranging benefits of a circular economy:
There are significant environmental and social benefits associated with circular economy transition, and clearly an urgent imperative to make this transition to reduce risks in relation to pollution, biodiversity loss, and climate change. At the same time, there is also strong evidence to show that while initial investment to achieve a truly regenerative circular economy is significant, the long-term economic benefits are substantial.
3.57Friends of the Earth Australia expressed its belief that 'building a zero waste and truly circular economy is crucial to address our interconnected environmental crises' because:
Raw material extraction often degrades our environment causing biodiversity loss, material production processes use vast amounts of energy that can contribute to dangerous climate change, and after consumption become waste in our environment and human health.
3.58Several submitters mentioned that a circular economy is an important factor in the net zero transition. For example, Mr Reed of the Australian Industry Group stated:
The circular economy—material efficiency, design of products, and buildings, for that matter, to minimise the amount of new material that is required—is a very important and underdiscussed tool towards net zero.
3.59Huhtamaki, a global manufacturer of food packaging, was supportive of a circular economy approach, arguing that it 'implies a holistic approach to packaging incorporating the sourcing, production, functionality and end of life of packaging where all the stakeholders share some responsibility'.
3.60Visy, Australia’s largest recycler of kerbside recycling, offered its support for requirements to create packaging which was designed for circularity—recovery and recycling. Visy explained that this includes:
…using materials that can be recycled back into packaging—and keeping material at its highest and best use. Currently there is confusion around certain products, such as packaging with composite materials, which leads to contamination of recycling streams, resulting in lower recovery rates and higher rates of material ending up in landfill.
3.61The Ecocycle Group of Companies argued that importers should also be required to ensure that 'products are reusable, repairable, and recyclable at the end of their life'.
3.62The Waste Management and Resource Recovery Association of Australia (WMRR) argued that, in order to create a circular economy in Australia by 2030, Australia needs to 'accelerate the creation of a national framework that requires integrated action across the supply chain, heavily at the beginning'.
3.63Some submitters called for the implementation of national and sector-based circular economy targets. For example, the Law Council of Australia urged the Australian Government 'to introduce measurable (and enforceable) sector-based targets, in order to begin necessary steps toward the target of an 80percent waste recovery rate by 2030'.
Challenges to achieving circularity
3.64While overall witnesses and submitters were strongly supportive of circularity in Australia's waste and resource system, evidence also suggested that there were several issues to be addressed and overcome before Australia could achieve a circular economy.
3.65In its 2024 report, Australian material flow analysis to progress to a circular economy, the CSIRO noted that Australia's current circular economy approach focuses on packaging and consumer goods, yet housing and transport make up 53per cent of the country's material footprint. The CSIRO suggested that focussing on housing and transport could therefore make a 'real difference' in embracing circularity—for example, by incorporating more crushed concrete into new concrete (within quality and safety limits).
3.66In a similar vein, an issue commonly mentioned by inquiry participants was the 'policy overemphasis on recycling' and a tendency to overlook the importance of processes at the start of the supply chain (such as design and production) and actions further up the waste hierarchy (such as reuse and repair). For instance, the Plastic Free Foundation submitted that:
To achieve these targets [in the National Waste Policy Action Plan] and create a safe circular economy for plastics in Australia, waste avoidance efforts must shift away from the current focus on recycling and diverting waste from landfill and instead start with an approach to responsible consumption and production.
3.67Likewise, the WMRR argued that all governments:
…continue to place too much emphasis on the end of the supply chain (collection, sorting and processing) with insufficient policy or regulatory action looking at the initial design, manufacturing and consumption of the products.
3.68Similarly, the Australian Council of Recycling acknowledged:
…it is a whole-of-system concern. At the moment, there does seem to be an inordinate focus on end of pipe. We do absolutely need to consider what happens at the production and consumption end.
3.69The Australian Council of Recycling noted that other key challenges to achieving a circular economy include:
'a misalignment between environmental protection objectives on the one hand, and circular economy objectives on the other, whereby many recoverable resources are regulated as industrial or regulated wastes that present a contamination risk';
'policy priorities and settings for resource recovery and recycling across Australia are fragmented and uncertain, particularly across industry sectors';
'the regulatory imbalance between raw/virgin materials and recovered/recycled materials'; and
'the uncertainty and long timeframes associated with the development/redevelopment of resource recovery and recycling facilities'.
International examples of the circular economy
3.70Evidence to the committee argued there were overseas examples of circular economies which could be drawn upon in developing Australia's approach to similar issues, particularly in the EU, as detailed below.
3.71CEMAG's final report recommended introducing a new Circular Economy Act which 'should include a clear framework for setting standards for the design of imported and locally manufactured goods mirroring the approach in the European Union'. Professor Thwaites explained that EU legislation incorporates:
…the Ecodesign for Sustainable Products Regulation, which enables the setting of standards for durability and repairability and also provides schemes for enforcement of that. [CEMAG] recommended that that should apply within Australia.
Box 3.1 EU Ecodesign for Sustainable Products Regulation The Ecodesign for Sustainable Products Regulation (ESP Regulation) came into force in the EU in July 2024, replacing the Ecodesign Directive 2009/125/EC (the Directive). While the Directive established a framework for setting ecodesign requirements for energy-related products, the ESP Regulation broadened this scope to almost all physical products and reinforced the range of ecodesign requirements that can be set. New ecodesign requirements can include rules to: improve product durability, reusability, upgradability and reparability; enhance the possibility of product maintenance and refurbishment; make products more energy and resource-efficient; address the presence of substances that inhibit circularity; increase recycled content; make products easier to re-manufacture and recycle; set carbon and environmental footprints; and improve the availability of information on product sustainability.
The European Commission intends to adopt the first working plan for the ESP Regulation in the first half of 2025 which will list the products for which ecodesign requirements will be prioritised in the coming years. The commission will consult the Ecodesign Forum (comprising a broad range of stakeholders and key ecodesign actors) before the adoption of the first ESP Regulation working plan. |
3.72Professor Thwaites said that while it was too early to assess whether the EU legislation has been successful, similar approaches have been 'demonstrably successful in countries like the Netherlands' which have a significantly higher circularity rate than Australia.
3.73The WMRR argued that to transition its economy from linear to circular, 'Australia needs a framework similar to the EU's Waste Directives in order that all states and territories have a consistent approach towards products placed on market, how these are to be managed through their lifecycle including collection and management at end of life'.[114]
3.74The WMRR argued that 'we can learn a lot from the EU and their Green Deal about how you bring countries (not states) together to develop both an economic and environmental blueprint for success'.
3.75Some submitters pointed to additional arrangements in other countries, suggesting that Australia also follow these examples to progress its circular economy. For example, MRA Consulting Group highlighted that:
France has banned certain products, mandated reuse requirements, and implemented right to repair legislation and repairability requirements.
Scotland charges packaging fees for producers who make packaging that cannot be reused or recycled.
The EU has mandatory return systems for plastic and glass bottles, and aluminium cans.
3.76In a joint submission, the AMCS and WWF also offered support for the EU model, suggesting that it provided 'an example of what can be achieved when there is strong appetite and ambition for transitioning to a circular economy'. The AMCS and WWF observed that:
The European Green Deal, which sets out a vision and path for Europe to become the first climate-neutral continent, includes the EU’s 2020 Circular Economy Action Plan as a key pillar. The Plan comprises initiatives along the entire life cycle of products. It targets how products are designed, promotes circular economy processes, encourages sustainable consumption, and aims to ensure that waste is prevented, and the resources used are kept in the EU economy for as long as possible. While the pathway to a circular economy for Australia will be unique to the Australian context, there is much to be gained by assessing the relevance and applicability of the EU’s approach to Australia’s market, geography and environmental considerations.
3.77MRA Consulting Group suggested following the European example by flagging certain products that should be banned, and 'giving proponents…six months to produce an alternative version, which does not cause environmental harm or they are banned'.
3.78A Branch Head within DCCEEW's Circular Economy Division also noted that Australia has 'a number of international partners…who are quite interested in circularity' and that Australia is well-placed to 'take advantage of our proximity, particularly to South-East Asia and other countries' that are moving towards a circular economy.
The importance of financial incentives
3.79Some submitters argued that increasing landfill levies—while reducing recycling levies—would help to incentivise the use of recycled materials, and that landfill levies also needed harmonisation across jurisdictions in order to work effectively. Submitters and witnesses suggested that landfill levies and taxes would be effective regulatory measures in waste management and recycling and in the promotion of a circular economy.
3.80The committee also heard about the efficacy of the United Kingdom’s (UK) Plastic Packaging Tax, and notes the PC is continuing its work in examining the role of taxes and levies in a circular economy. These matters are discussed below.
Landfill levies
3.81Mr Mark Biddulph of Cleanaway put forward a strong message regarding the role of taxes and levies in waste management, saying: 'tax what you don't want and incentivise what you do want'. Mr Biddulph called for taxing landfill and increasing the cost of disposal, while incentivising, for example, gas capture and recycling. He explained that:
…taxes have always been introduced at the bottom of the waste hierarchy to encourage industry to move further up. Landfill levies increase the cost of disposal and incentivise and enable the development of resource recovery infrastructure. A tax or levies on top of resource recovery will increase the cost of resource recovery and place the economic viability at risk.
3.82MRA Consulting Group noted that, as businesses generate 80percent of Australia’s waste, raising the cost of landfilling would drive behaviour change in favour of recycling:
More materials are recycled because landfilling costs more… Australia and particularly rural regional Australia, is still characterised by cheap (under-priced) landfill…we still landfill 40% of the materials generated by the economy… Recyclers compete with landfill for materials. Higher landfill gate fees…allows recyclers to compete for access to recyclable materials… Most people in Australia do not realise that recycling is in direct competition with landfill for access to materials. Changing that economic balance is the key role of the levy.
3.83Dr Kirkman of Veolia Australia and New Zealand (ANZ) asserted that the biggest driver to a circular economy was landfill levies. However, in Australia, 'landfill levies differ per state, differ between metro or rural areas and differ by waste type, and the complexity of that means that you're not always getting the right outcomes.' Dr Kirkman commended announcements in early 2024 that Victoria was increasing its landfill levies, to better align with New South Wales (NSW).
Harmonisation of landfill levies
3.84Many submitters called for harmonisation of landfill levies across jurisdictions, including between local councils. Veolia ANZ argued that discrepancies can lead to adverse outcomes:
Waste or landfill levies can act as a powerful regulatory tool to improve recycling and recovery rates. However, regional and inter-state variations in levy rates have led to a levy avoidance industry, where waste is improperly disposed of in areas with low or no levies. This results in increased stockpiling and illegal dumping and greenhouse gas emissions rise when waste is transported unnecessarily long distances.
3.85The Australian Resources Recovery Council (ARRC; formerly the National Waste and Recycling Industry Council) submitted that landfill levies were a 'key regulatory tool':
They have a significant effect on both the commercial environment of nearly every waste and recycling business and community behaviour. They also generate significant amounts of funds for each jurisdiction. Therefore, carefully considered levy regulations nationwide are essential to advancing Australia towards a circular economy.
3.86Mr Biddulph of Cleanaway suggested that the harmonisation of landfill levies across Australian jurisdictions was important and 'definitely required'. He explained that harmonisation:
…stops waste from being transferred out of state and incentivises to invest higher up the waste hierarchy. I also recommend an audit across Australia of what the capacity is, and alternatives and trends need to be looked at as well… Harmonising the waste levy will stop the transfer of waste but also…encourage that infrastructure and recycling.
3.87On a similar note, the Waste Contractors and Recyclers Association of NSW (WCRA) advised that reform was required:
WCRA conducted a review of these levies in 2019, revealing disparities across jurisdictions in levy rates, waste types levied, and reinvestment of levy funds into waste and recycling activities. Urgent reform is needed to ensure levies achieve their intended outcomes and do not drive waste down the hierarchy.
3.88Similarly, the Law Council of Australia called for 'consistency of…landfill levies across Australia'.
3.89Some submitters expressed frustration at Australia's lack of financial incentives to drive problematic waste streams—and especially plastic—out of the circular economy, and to increase demand for recycled materials over virgin alternatives. Several submitters and witnesses suggested that Australia should introduce a tax on plastic packaging, similar to the UK.
UK Plastic Packaging Tax
3.90The UK's Plastic Packaging Tax (PPT) came into force on 1 April 2022. It applies to all business which manufacture or import plastic packaging components, that contain less than 30 per cent recycled plastic. Packaging should only contain recycled plastic when permitted under other regulations and food safety standards. Companies need to register for the PPT if they:
expect to import into the UK or manufacture in the UK 10 tonnes or more of finished plastic packaging components in the next 30 days; or
have imported into the UK or manufactured in the UK 10 tonnes or more of finished plastic packaging components in the last 12 months.
3.91Originally charged at £200 per tonne in April 2022, since 1 April 2024 the tax has been charged at £217.85 per tonne.
3.92The tax was introduced to tackle plastic packaging pollution, with estimates that around five million tonnes of plastic are used annually in the UK. Only a small proportion of this is recycled, and the remainder sent to landfill or exported. The PPT aims to provide:
…a clear economic incentive for businesses to use recycled plastic material in their packaging. The tax should create a greater demand for recycled plastic material and therefore stimulate increased levels of recycling and collection of plastic waste.
The increased demand should also help divert plastic from landfills or incineration.
Increasing the demand for recycled plastic material should, in turn, result in increased investment in recycling infrastructure to facilitate this.
Support for financial incentives
3.93Some submitters suggested introducing control measures and financial levers, similar to those used overseas. For example, Catholic Religious Australia proposed:
…the implementation of a plastic tax, such as those being introduced in the EU or UK. These have various forms of taxes imposed on manufacturers and importers of non-recycled plastic products… Australia should ultimately extend this tax further to all goods containing plastics, to slow plastic production…the ultimate goal should be to disincentivise the manufacturing and importation of plastic, and push businesses towards more sustainable material choices.
3.94In a similar vein, the Bellarine Catchment Network suggested measures to phase down the use of plastic, including the imposition of taxes:
Current federal policies, aimed at reducing the amount of plastic waste, have failed. Their focus on recovery, particularly recycling, and not on reducing the production and consumption of plastics is an inherent weakness.
We must have policies that cap or phase down the use of plastics. It's time to follow other countries and introduce plastics control measures and taxes as we see with the UK’s Plastic Packaging Tax, Canada's Federal Plastic Registry and the EU's Green Deal.
3.95Mr Rick Ralph of the ARRC also supported a plastics tax in Australia, arguing that the UK's PPT presented a 'very simple way of funding the recycling opportunity', with the tax applied at the front end of the supply chain, and the money raised from the tax used to 'promote local recycling'. Mr Ralph stressed that without a mandate 'to actually make sure we use recycled content in this country', there was no incentive for businesses to invest in using Australian recycled content.
3.96Pact Group also argued that 'Australia could do well' to consider a similar enforcement mechanism to the PPT, where a fee per tonne is paid for packaging that contains less than the required percentage of local recycled material.
3.97Other witnesses expressed caution around the efficacy of the PPT. MsTanya Barden, Chief Executive Officer of the Australian Food and Grocery Council, posited that all elements of the waste and recycling system needed to be in place before implementing any taxes at the front of the supply chain, stating that:
…to impose recycled content targets before there is a significant increase in recycling infrastructure will lead to a situation like in the UK where brand owners face penalties for noncompliance due to a lack of supply of recycled content. To provide brand owners with no financial support for the significant packaging design changes, capital equipment changes and additional costs of procuring recycled content risks adding to consumer inflation at a time when other costs of manufacturing and transporting food and groceries continue to rise.