Transition of textile and construction sectors requires a combination of instruments

In a study for the Nordic Council of Ministers, economists at IVL have analyzed how environmental taxes can promote the transition to a circular economy in the Nordic region. The focus was on two sectors with extensive material flows: textiles and construction.

The study looked at taxes on natural resources, such as commodity and import taxes, extended producer responsibility schemes and increased VAT, as well as green public procurement, waste taxes and different types of subsidies.

"While natural resource taxes can influence market and consumer behaviour in both the textile and construction sectors, our results show that the tax levels would have to be so high, that these taxes could realistically be introduced. Instead, a combination of economic instruments, other instruments and investments in resource-efficient business models is needed, in order to achieve a circular economy in these sectors", says Flintull Annica Eriksson, economist and project manager at IVL.

In the textile sector, a combination of instruments, such as import and consumption taxes on textile products, and subsidies aimed at reuse or recycling, can be effective.

Case studies on polyester and cement

For the textile industry, polyester has been studied, and for the construction industry, cement. Both are materials with a relatively high climate impact and are widely used.

Regarding the effect of introducing an import tax on polyester in the textile sector, the study shows that for the Nordic region, a relatively high tax is required to achieve a significant reduction in the amount of textiles made of polyester. The same applies to the construction sector; relatively high taxes are needed to have an effect and to reduce the demand for cement.

"In conclusion, the study shows that there are no simple solutions to incentivize circularity in complex and global value chains. Instead, a combination of different policies and strategies is needed to transform the sectors, and the key is to find an effective combination of economic and other policy tools to stimulate markets towards more sustainable textile and construction materials”, says Flintull Annica Eriksson.

The report was produced together with Gaia Consulting in Finland, and can be downloaded from the Nordic Council of Ministers' website: Can economic instruments promote a circular economy? External link, opens in new window.

For more information, contact:
Flintull Annica Eriksson, flintull.annica.eriksson@ivl.se, tel. +46 (0)10-788 67 37