Circularity and Climate Mitigation in the EU27: An Elasticity-Based Scenario Analysis to 2050

This study quantifies the decarbonisation potential of enhanced material circularity in the EU27 over the 2015–2022 period by integrating material flow data with elasticity-based emissions modelling. Using panel regression and logarithmic mean Divisia index (LMDI) decomposition, we evaluate the influence of recycling rate acceleration and material intensity decline on material-embedded emissions over the 2015–2022 period. The findings indicate that although recycling rates increased by 42% during this time, virgin materials remain responsible for over 97% of emissions. Decomposition results reveal that intensity improvements—measured as a cumulative LMDI intensity effect of −0.867 log-change units, equivalent to approximately a 58% reduction in emissions—offset most of the upward pressure from growing material demand and shifting composition. Scenario projections to 2050, based on empirically derived elasticities, show that accelerated circular economy pathways—assuming 4% annual growth in recycling rates and a 3% decline in material intensity—can reduce emissions by over 90%. In contrast, baseline policies fall short of net-zero targets. Sensitivity analysis confirms that policy ambition dominates parameter uncertainty in shaping future emissions trajectories. The study highlights the critical role of combined demand-side and supply-side measures in aligning material consumption with climate goals. The study highlights the crucial role of combined demand-side and supply-side measures in aligning material consumption with climate goals and advancing progress toward Sustainable Development Goal 12 (Responsible Consumption and Production).