Incentives aim at addressing market failures that prevent or delay the transition towards circular products, services and solutions. They play an instrumental role in pricing negative externalities, steering markets towards sustainability, and driving behavioural changes. Incentives have the ability to create value, de-risk investments and improve the competitiveness of value chains that bring net environmental benefits when compared with linear economies. They also yield benefits to the economy and society.

As these incentives target different market failures or barriers, their type, combination, associated costs and infrastructure of implementation, temporality, scope, and relevant level of enforcement will inherently vary.

This report does not, however, fully address the role of incentives delivered through blended financial instruments, e.g. financial guarantees or blended finance where public investors take higher risk of investment. These instruments are directed towards investors and aim at increased investment in desirable economic activities. The expert group felt that this category of incentives should be described in a separate report addressed specifically to the investment institutions.

The incentives described in this report focus on multiple sectors where improvements can be made in terms of moving towards a circular economy. The report provides a description of the impacts of implementing the incentives on different stakeholders involved, as well as the relevant value chains that are involved, indicating relevance for Circular Systemic Solutions.