Circular leverage

Circular Leverage is a forthcoming piece of legislation that will impose a levy on new fossil-based materials used in Dutch products and invest the proceeds in circular economy initiatives. In short: fossil-based materials will become more expensive and circular alternatives cheaper. On this page, you can read about what the Circular Leverage is, why this instrument offers a solution, and what it means in practical terms for businesses.

Circular leverage in short

If we want to scale up circularity and reduce our dependence on foreign raw materials, we need to start valuing circular entrepreneurship differently. This requires fair pricing of new fossil-based materials and targeted investments in circular scaling to get the market moving. Future Up has developed a tool or concept to achieve this: circular leverage. The revenue from the circular leverage on fossil fuels is invested in companies that keep materials within the economy. In short, the polluter pays for the investments of companies committed to circularity.

Why is circular leverage necessary?

New fossil-based materials are often cheaper than circular alternatives. As a result, circular initiatives remain small-scale and upscaling fails to gain traction. This is not a matter of unwillingness, but of price incentives. As long as fossil-based materials remain financially more attractive, the market will not change of its own accord. Rules are needed to bring about this change. We saw this with the energy transition too. Mandatory heat pumps in new-builds, or tax incentives for buying electric cars, resulting in more electric drivers. These government interventions were essential to kick-start healthy market forces.  

Just as targeted measures have previously transformed the energy market, the circular economy is reshaping the rules of the game in the materials market. This is essential if the Netherlands is to achieve its government target of a fully circular economy by 2050.  

Case study: the furniture chain

A furniture company sells a chair to a Dutch consumer that is made up of 50 per cent new plastic. The company pays a levy on that portion, but not on the portion made from recycled or non-fossil materials.

The fund invests in higher-quality recycled materials and affordable bio-based alternatives. This makes it more tax-efficient and attractive for furniture companies to work with circular materials. The more circular the product, the lower the tax liability. 

This creates a ripple effect throughout the entire chain. 

How can you ensure a fairer playing field using the circular lever?

EU Member States set their own taxes and, consequently, their own financial incentives. If you use these taxes as circular leverage, it works like this: through price differences, you make sustainable and circular choices more attractive and polluting products relatively more expensive. Such a levy or tax may apply to all companies selling their products on the Dutch market, meaning both Dutch and foreign suppliers. A plastic shirt from SHEIN would then be taxed in the same way as a plastic shirt from a Dutch brand.

The circular leverage in the law

Government departments and legal experts are currently drafting this circular leverage mechanism into law. Consultancy firms are also working on the impact assessment for this circular leverage mechanism. See here for the latest letter to Parliament regarding the leverage mechanism (in Dutch)

Frequently Asked Questions

How does the circular economy relate to Extended Producer Responsibility (EPR)?

Extended Producer Responsibility (EPR) is an existing government scheme. The principle is simple: a sector is set targets for waste management. For example, ninety per cent of a sector’s products must be recycled. Companies are then free to decide for themselves how to organise this, often through a joint foundation. 

UPVs are important. They drive the need for proper waste management and ensure that producers take responsibility. The circular lever is not necessary if UPVs can drive a transition towards circularity within a supply chain quickly and comprehensively enough. However, in practice, we are also seeing the limitations of some UPVs. 

In a number of sectors, targets are not being met. The parties responsible for keeping the circular economy running – collectors, sorters, recyclers and bio-based producers – often receive just enough funding to keep the basic operations going. Funding for innovation, automation and upscaling is usually lacking.

Furthermore, from a legal perspective, a UPV focuses on waste disposal. Whereas a circular economy actually requires that products do not become waste for as long as possible. This circular lever therefore focuses on a different aspect of circularity. 

If a UPV is functioning effectively and a sector is on track to meet its 2050 targets, then a circular lever is not immediately necessary. At most, it serves as an additional incentive. However, in sectors where the system is not accelerating sufficiently – and that is currently more often than not the case – the circular lever offers an additional tool to really pick up the pace. 

Can circular leverage be part of the UPV?

No, that’s not possible. And even if it were technically possible, it wouldn’t be advisable. 

Firstly, a UPV is usually organised through a foundation. The Ministry of Finance cannot designate such a foundation as the taxpayer liable for a levy on new fossil materials. A foundation can dissolve itself and is therefore not a stable entity on which to base tax instruments. 

Furthermore, within a UPP, the government cannot use the level of a levy as a policy tool in the same way as it can with a tax instrument. This scope is particularly limited now that an increasing number of UPP rules are being issued by Brussels, whilst tax powers remain with the Member States. 

But more importantly: a waste collection levy must cover its costs. This is laid down in European legislation. This means that, on a structural basis, no more money may be collected than is necessary to cover the direct costs of waste processing. 

It is precisely these additional investments – in innovation, economies of scale and new technology – that are needed to make circular materials truly competitive. The circular economy does provide that scope. 

Where does the circular lever come from?

The circular lever was developed at the so-called Plastic Table. This was a political initiative designed to bring together companies, trade associations and civil society organisations from across the plastics sector. Future Up was part of this initiative and developed the circular lever. 

The specific task: to propose a workable alternative to the National Circular Plastics Standard. That standard was intended to make the use of recycled content mandatory, but in practice it proved to be complex and insufficiently effective. Furthermore, the obligation was imposed at a stage in the supply chain where strategic material choices are not made. 

The circular leverage approach takes a different tack. Rather than imposing a blending requirement, the proposal uses price incentives. It corrects the market without losing sight of the goal: more recycled and sustainable materials in products. 

Is there support for the leverage?

Yes. The parties at the Plastic Table – ranging from VNO-NCW to Plastics Europe and from VNCI to Natuur & Milieu – have signed the final report, in which the circular economy lever plays a key role. 

This means that both the business community and civil society organisations are backing this approach. 

There is also political support. A motion tabled by MP Wingelaar (NSC), calling for the circular leverage mechanism to be developed into legislation and for steps to be taken towards its implementation, secured a comfortable majority of 109 seats in 2025. 

There is also strong support among the Dutch public for a circular levy: 86 per cent of those who took part in the National Climate Consultation voted in favour.

That sends a clear message: this is not just a theoretical idea, but a proposal with a solid foundation.