Fragmented Waste Rules Threaten Europe’s Circular Economy Ambitions as Industry Urges Strong Internal Market Legal Basis for Circular Economy Act Reform 26-02-2026
What Legal Basis Should the Circular Economy Act Have?
The debate over the future Circular Economy Act is rapidly intensifying in Brussels. At the center of the discussion is a crucial legal question: should the Circular Economy Act be grounded in Article 114 of the Treaty on the Functioning of the European Union (TFEU), which governs the Internal Market, or Article 192, which focuses on environmental protection?
Seventy European packaging and plastics associations have made their position clear. In a coordinated appeal to the European Commission, they argue that the Circular Economy Act must be based on Article 114 TFEU. In their view, anchoring the legislation in Internal Market law is essential to ensuring harmonized rules, regulatory certainty, and a level playing field across Member States.
Their concern is straightforward. Without a strong Internal Market foundation, Europe risks perpetuating fragmentation in waste management systems, undermining both environmental objectives and industrial competitiveness.
Why Article 114 TFEU Matters for the Circular Economy Act
Article 114 TFEU provides the legal framework for measures that ensure the functioning of the EU Internal Market. It enables harmonization of national laws where divergences create barriers to trade or distort competition.
For the signatory associations, this is precisely the challenge facing Europe’s waste and recycling landscape. Waste management remains highly fragmented across the Union. Regulatory frameworks differ significantly between Member States, and performance levels vary widely.
A striking statistic underscores the urgency: only nine Member States are estimated to have met the 2025 recycling target. This uneven implementation demonstrates structural weaknesses that go beyond environmental ambition. It reveals systemic inconsistencies that disrupt the Internal Market for secondary raw materials.
By basing the Circular Economy Act on Article 114, the Commission would prioritize harmonization. This approach would aim to eliminate regulatory divergence, strengthen cross-border trade in recycled materials, and ensure that all economic actors operate under comparable rules.
From an industrial perspective, this is not merely a legal nuance. It is a strategic choice that could determine whether Europe builds a coherent market for circular materials or continues to navigate a patchwork of national regimes.
The Risks of Relying on Article 192 TFEU
Article 192 TFEU provides the legal basis for EU environmental policy. While it enables ambitious environmental measures, it also allows Member States greater flexibility in implementation. In certain cases, it may even require unanimity in the Council, depending on the policy area.
The associations warn that grounding the Circular Economy Act in Article 192 could exacerbate existing fragmentation. Greater national discretion may translate into divergent interpretations, uneven enforcement, and prolonged legal uncertainty.
In their view, this would weaken the creation of a truly integrated Internal Market for secondary raw materials. Diverging waste classifications, recycling standards, and compliance requirements already create obstacles for companies operating across borders. Reinforcing environmental subsidiarity without harmonization risks entrenching these disparities.
The industry coalition also raises concerns about legal uncertainty regarding residual Member State responsibilities. If the Circular Economy Act lacks a clear Internal Market anchor, questions may arise over competence boundaries, potentially triggering disputes and delays in implementation.
At a time when Europe seeks to accelerate its transition to a climate-neutral economy, regulatory ambiguity could undermine investment decisions in recycling infrastructure, advanced sorting technologies, and circular product design.
Structural Weaknesses in European Waste Management
The call for an Internal Market legal basis reflects deeper systemic challenges. The recent revision of the Waste Framework Directive aimed to address performance gaps and boost recycling rates. However, according to the associations, it failed to resolve “deep-rooted structural weaknesses” within European waste management systems.
These weaknesses include:
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Divergent collection and sorting standards
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Inconsistent definitions of recyclability
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Variable enforcement of extended producer responsibility schemes
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Disparities in landfill and incineration practices
Such fragmentation disrupts economies of scale. Companies investing in circular solutions must navigate 27 regulatory environments rather than one coherent market.
This fragmentation also limits the development of a stable supply of high-quality secondary raw materials. Without consistent standards and predictable regulatory frameworks, recycled materials struggle to compete with virgin inputs.
For the packaging and plastics sectors, this directly affects innovation, competitiveness, and long-term decarbonization strategies.
A Level Playing Field for All Member States
The associations emphasize that the ultimate goal of the Circular Economy Act should be convergence. Lagging countries must catch up with more advanced Member States, and all countries must contribute to achieving circular economy objectives.
In their appeal, they stress the need for firmness in drafting the legislation. Flexibility justified under the banner of national specificities, they argue, risks diluting ambition and delaying progress.
A harmonized Internal Market approach would support:
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Uniform recycling targets
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Consistent product requirements
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Predictable compliance frameworks
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Cross-border trade in recycled materials
Such measures would enhance investor confidence and stimulate innovation across the value chain.
Importantly, harmonization does not imply lowering environmental ambition. On the contrary, it may strengthen it by ensuring consistent enforcement and preventing regulatory arbitrage.
Strategic Implications for Europe’s Climate-Neutral Transition
The legal basis of the Circular Economy Act carries implications far beyond technical treaty interpretation. It shapes Europe’s industrial policy, competitiveness, and climate strategy.
A coherent Internal Market for circular materials is critical for reducing dependence on virgin raw materials and imported resources. It also supports decarbonization by promoting resource efficiency and lowering lifecycle emissions.
If regulatory fragmentation persists, the EU risks slowing its transition to a circular and climate-neutral economy. Conversely, a strong Article 114 foundation could transform the Circular Economy Act into a central pillar of Europe’s green industrial strategy.
The choice between Article 114 and Article 192 is therefore not merely procedural. It is strategic. It determines whether the Circular Economy Act will function primarily as an environmental directive with flexible implementation or as a market-shaping instrument designed to unify and strengthen the EU Internal Market.
Conclusion: A Defining Moment for the Circular Economy Act
The debate over the legal basis of the Circular Economy Act highlights a broader tension in EU policymaking: balancing environmental ambition with market integration.
Seventy industry associations have aligned behind a clear position. They believe that only an Internal Market legal foundation can overcome fragmentation, reduce legal uncertainty, and create a robust framework for Europe’s circular economy.
As the European Commission advances its drafting process, the decision will send a powerful signal about the EU’s priorities. Will the Circular Economy Act reinforce harmonization and competitiveness, or will it risk perpetuating divergent national approaches?
The answer may determine whether Europe can successfully scale its circular economy model and meet its long-term climate objectives.
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