• Italy is one of the most sustainable economies in the G20 and the European Union. In 2023, the emission intensity of the Italian economy was 0.12 kg CO₂e per dollar of GDP, almost a third lower than the G20 average (0.32 kg CO₂e/$). Despite being the EU's second largest manufacturer, Italy ranks only 17th in terms of emission intensity. 
• The emission intensity of the manufacturing sector decreased by 17.1% between 2014 and 2023 and is 5.1% lower than the EU average and among the lowest in Europe. Despite the broad diversification of Italian industry, about 71.5% of Italian manufacturing emissions come from four main sectors: non-metallic minerals (23.8%), petroleum derivatives (19.0%), chemicals (14.9%) and metallurgy (13.8%). These sectors account for about 15% of the manufacturing value added.
• There is a two-speed Europe' as far as the adoption of circular practices is concerned. Where countries belonging to the so-called 'Old Union' (Germany, Belgium, the Netherlands, France, Spain and Italy) lead the transition. This disparity calls for more coordination and support at European level to ensure a smooth circular transition.
• One of the strengths of the circularity of the industrial system can be found in the low use of resources for production. The Italian economy has a resource productivity of €3.6/kg, well above the EU average (€2.2/kg). Energy productivity is €11.80 per kilogram oil equivalent (kgoe), higher than France (10.23) and Spain (9.94).
• We are also among the European leaders in waste management: in 2022, the country recycled 53.3% of municipal waste, exceeding the EU average of 49.1%. Key sectors such as recycling of plastic packaging (54.6%), glass (80.8%) and metals (78.0%) show performance above the European average.
• The added value of the circular economy represents 2.7% of the total in Italy, higher than the EU average (2.3%) and also higher than the other major European countries. The employment implications are also high, with over 613,000 people employed in the sector.
• Despite its excellent performance, Italy should increase its innovation capacity. In fact, the number of patents related to recycling and the circular economy (0.36 patents per million inhabitants) is lower than in Germany, France and Spain. To stimulate sustainable and competitive growth, we need targeted policies, plans to increase investment and more public-private collaboration.

Italy is one of the most sustainable economies in the G20 and the European Union. In 2023, Italy's greenhouse gas (GHG) emission intensity was 0.12 kg CO₂ equivalent per dollar of GDP (kg CO₂e/$). This is well below the G20 average of 0.32 (Chart 1), showing an efficiency almost three times higher. Only France and the United Kingdom record lower values, both at 0.10 kg CO₂e/$. Outside Europe, Italian efficiency is also evident. The US, despite being one of the most advanced economies in the world, shows an intensity of 0.24 kg CO₂e/$. Even more distant are the emerging economies: China reaches 0.51, while South Africa even records 0.61.

Italian manufacturing is a particularly virtuous example of environmental performance. The emissions intensity of the manufacturing sector dropped by 17.1% between 2014 and 2023 and is 5.1% lower than the EU average and among the lowest in Europe. Despite being the EU's second-largest manufacturing sector, Italy ranks only 17th in terms of emission intensity (better than us only Germany, if only large manufacturing countries are counted). 

Efforts to reduce waste, scarcity of raw materials and optimisation of resources, also in response to the energy shock of 2022, have enabled the Italian industrial system to reduce emissions substantially. Despite the broad diversification of Italian industry, in 2023, about 71.5% of Italian manufacturing emissions come from four sectors: non-metallic minerals (23.8%), petroleum derivatives (19.0%), chemicals (14.9%) and metallurgy (13.8%). These sectors account for about 15% of the manufacturing value added (Chart 2).

A comparison with other major European economies - Germany, France and Spain - gives a clear picture of Italian performance in some of the most emissive sectors (Table A). 

In the metallurgy sector, Italy stands out for a greater reduction in emission intensity with an average annual change from 2008 to 2022 of about 3.6%, much lower than in France (-1.0), while Spain and Germany even show an increase (+0.4 and +2.2 respectively). Non-metallic minerals (-3.8) and chemicals (-1.2) also perform well.

The circular economy is a strategic response to the growing scarcity of natural resources and the high environmental impacts associated with the traditional linear economic model, based on the 'extract, produce, use and discard' scheme. In this context, the circular economy aims at closing the life cycles of products, extending their lifespan and minimising waste through practices such as recycling, reuse and regeneration of materials. 

The importance of the circular economy is now recognised globally, not least to limit the risk of overshooting planetary limits, i.e. exceeding the Earth's capacity to regenerate consumed resources. It is therefore necessary to accelerate the transition from a linear to a circular model to ensure long-term sustainability.

The European Union has taken the lead with initiatives such as the European Green Deal and the Circular Economy Action Plan, which aim to make Europe climate neutral by 2050 and to develop a low-emission, resource-efficient economy. The Action Plan includes legislative measures and incentives to support the transition to a competitive circular economy, and emphasises material reuse and recycling, eco-design and the promotion of circular business models.

Italy, which ranks among European and global leaders in the adoption of circular practices, has launched a series of initiatives to reduce dependence on virgin raw materials and promote the efficient use of resources. Another key aspect concerns the role of the circular economy in improving economic resilience, especially in times of crisis. Some studies underline how a transition towards circularity can reduce dependence on global supply chains and mitigate risks related to commodity price volatility. In particular, some more material-intensive sectors could benefit greatly from the adoption of circular practices, not only in terms of reduced environmental impact, but also through the creation of new jobs and more sustainable business models.

Despite the important progress undertaken in Italy and Europe, some studies point out that there is still a 'two-speed Europe' as far as the adoption of circular practices is concerned.

In fact, the countries belonging to the so-called 'Old Union' (Germany, Belgium, the Netherlands, France, Spain and Italy) lead the transition. As they are characterised by a high level of economic development, they began to experience the problems of excessive waste generation, resource depletion and pollution earlier than others and have therefore taken measures to mitigate these problems. In contrast, Eastern and Central European countries lag significantly behind, mainly due to the different economic strategies adopted and different levels of socio-economic development.

In Italy, in particular, the most widely used circular economy practice is recycling. Studies show that about 39% of companies use recycled materials, especially in the manufacturing sector . These companies adopt circular practices such as the use of materials derived from industrial waste or post-consumer stages. Many companies, especially small non-profit enterprises, engage in reuse, repair and regeneration activities, such as collecting and distributing surplus food or recovering production waste.

One of the strengths of the circularity of the industrial system can be found in the low use of resources for production. Undoubtedly also influenced by the scarce presence of raw materials in the territory, and thus a high dependence on imports, our manufacturing system has developed a more efficient use of the material needed to produce. Italy records a resource productivity of EUR 3.6 per kg (Chart 3), clearly exceeding the European average of EUR 2.2 per kg and being more efficient than countries such as Germany (3.0), Spain (3.1) and France (3.2).

An important effect of these behaviours is the decoupling between economic growth and resource consumption. Over the last 20 years, Italy's real GDP has grown by an average of 0.2% per year, while domestic material consumption has decreased by more than 2.5%, thus signalling an absolute decoupling. This phenomenon has occurred in many European countries, but Italy has made some of the best progress in terms of reducing resource use relative to economic growth. There is also a noticeable trend in waste reduction among SMEs. According to a European Commission study, some 79% of Italian SMEs have taken action to reduce waste and improve resource efficiency, well above the European average (66%). 

This significant improvement in resource productivity is also linked to energy productivity, where Italy ranks among the best in Europe, the best if only large manufacturing countries are counted. In 2023, Italian energy productivity reached EUR 11.80 per kilogram oil equivalent (€/kgoe), exceeding the EU average of 9.84. Over the past 20 years, energy productivity in Italy has increased by 36%. This means that Italian companies have significantly improved their production process to make it less and less energy intensive. These actions are even more relevant in the current context where European companies, at the end of 2023, were paying natural gas prices 5 times higher than in the US (2.54 €/mmbtu versus 13.11 in the EU, average 2023) and electricity prices 158% higher. Italian companies are further disadvantaged, in fact, their higher energy productivity partially offsets the higher price they pay for electricity compared to other major European countries: +34.7% compared to Spain, +15.1% to France and +7.3% to Germany.

Waste management is a key pillar of the circular economy model, helping to reduce pressure on the environment through recycling and reuse of materials. Italy produced 3,212 kilograms of waste per inhabitant in 2022, which is significantly lower than the EU average (4,991), France (5,076) and Germany (4,604) but higher than Spain (2,480).

In addition to low waste production, our country stands out in the European landscape for a solid performance in material recycling, with 53.3% of total municipal waste being recycled compared to 49.1 in the EU average.

In recent years, Italy has consolidated its position among the leaders in packaging recycling within the European Union (Chart 4), often exceeding European averages in various material categories. In 2022, Italy recycled a total of about 71.9% of its packaging waste, well above the EU average of 65.4%, positioning itself as one of the most virtuous countries in this area. This performance is remarkable when compared to other major European economies: Spain has a recycling rate of 69.4%, Germany 68.5, while France stands at 67.2%.

Italy's recycling infrastructure efficiently handles a wide range of materials, including paper, plastics, metals, glass and wood, with high recovery rates in each category, demonstrating the country's commitment to circularity. 

1. Paper and board The paper and board recycling system in Italy is supported by a well-developed infrastructure. With around 5.3 million tonnes of paper and cardboard packaging released for consumption, Italy has established an advanced recycling network, with a recycling rate of 80%, just below the EU average of 83.2%.
2. Plastic: Italy produces about 2.3 million tonnes of plastic and bioplastic packaging every year. Plastic is one of the most difficult materials to recycle, mainly due to contamination problems and the complexity of sorting different types of plastic. Despite these challenges, Italy has made significant progress, with an annual recycling rate for plastic packaging of 54.6% the highest among EU countries and well above the EU average of 40.7%.
3. Glass: Glass lends itself particularly well to recycling as it can be processed repeatedly without loss of quality; Italy has a recycling rate of 80.8%, above the EU average of 75.6%. Glass packaging, thanks to its durability and recyclability, has multiple uses such as in the food, beverage and pharmaceutical sectors and in Italy, some 2.8 million tonnes were produced in 2022.
4. Metals: Even for this packaging, which includes both ferrous and non-ferrous materials, our country has a recycling rate of about 78.0%, higher than the EU rate (76.9%). The Italian production of metal packaging amounts to about 600 thousand tonnes per year, the majority in aluminium (519 thousand) and to a lesser extent steel (82 thousand).
5. Wood: Wood packaging, widely used in the Italian manufacturing, construction and logistics sectors, reflects the country's strong circular approach to industrial processes. Italy produces around 3.4 million tonnes of wood packaging each year, of which around 62.8% is recycled, a percentage that is almost double the continent's average (34.2), third in the EU after Denmark (87.8%) and Spain (80.1). 

Secondary raw materials are therefore crucial for an effective transition to a circular economy, as they allow recycled materials to be reintroduced into the production cycle, reducing dependence on virgin raw materials, of which our country is not rich. Italy has made considerable progress in the use of secondary raw materials, increasing the share of recycled material reintroduced into the economy, almost doubling it between 2010 and 2023 (from 11.6% to 20.8%). A figure well above the European average (11.8).

Europe has a slight negative balance with non-EU countries in terms of trade in secondary raw materials. In 2023, the European import was about 39.8 million tonnes, against an export of about 39.3. In recent years, Italy has had a consistently negative net export with a considerable difference depending on the materials. In particular, it is a net exporter (extra-EU) of paper and cardboard (+1.7 million tonnes) and plastic (+33 thousand), while it is an importer of ferrous metals (-347 thousand tonnes.), and to a lesser extent of wood (-30 thousand tonnes.). As far as non-ferrous metals are concerned, there is a positive balance of approximately 66 thousand tonnes while glass has a negative balance of 114 thousand tonnes.

As highlighted above, measuring the added value (VA) generated by the circular economy is not a simple exercise, given the numerous aspects of the production process involved and permeating many sectors of the economy. However, the Eurostat surveys provide a fairly complete, albeit conservative, picture. In fact, narrowing the analysis down only to the sectors that are directly involved in the circular economy, i.e. those of recycling, reuse, repair, rental and leasing, the added value produced by these activities is higher in Italy (2.7% of the total added value in 2021, 43.6 billion euro) than the European average, which stops at 2.3%, and higher even than the other major European countries (Chart 5). The sector also appears to be particularly expanding in recent years. Between 2017 and 2021, years of no particular dynamism given the pandemic crisis, the VA grew in Italy, on average, by 3.6% per year, compared to 1.2 for the economy as a whole. A similar dynamic is also seen in the European average, albeit with smaller growth differentials. The circular economy is therefore a 'sector' that is running faster, thanks also to significant investments by companies. In the last ten years of available data (2012-2021), private investments in the circular economy in Italy have slightly more than doubled (+50.8%), compared to an increase of 18.5% in the EU.

Italy is the second among large countries to have increased investments the most, second only to Germany (+61.2%) and ahead of Spain (+46.4) and France (+2.3).

This acceleration of the sector has also led to significant positive employment impacts. In Europe, there are about 4.3 million people employed in the CE sector, with a growth of 5.1% between 2017 and 2021. In Italy, more than 613,000 (+3.6%), or 2.4% of the total employed. The recycling, reuse and repair sector represents an important part of this employment, highlighting the potential of the circular economy in creating local and sustainable jobs.

However, progress remains to be made on the innovation side. Looking at patents filed related to recycling or secondary raw materials, Italy is last among the large European countries with 0.36 patents per million inhabitants, behind France (0.40), Spain (0.45) and Germany (0.55).

The circular economy is often described as an inherently sustainable solution, as it aims to close the life cycles of products and materials, reducing the need for new virgin raw materials. However, some studies have raised concerns about the possibility of a rebound effect, a phenomenon that can reduce or even cancel out the expected environmental benefits. This concept is particularly relevant when the increased efficiency resulting from circular practices leads to an increase in overall production and consumption. One of the main reasons for this effect is the insufficient substitutability of secondary goods for primary goods. Recycled materials tend to lose quality during the recycling process, making them less competitive for certain uses. Similarly, reconditioned products, such as smartphones or household appliances, often do not compete in the same market as new goods, but are destined for different segments, such as emerging markets. This means that recycled or reconditioned goods do not really replace primary goods, leaving the demand for new products intact.

The rebound effect also manifests itself through price dynamics. Secondary goods, in order to attract consumers, are generally sold at a lower price than new goods. This lowering of prices may stimulate an increase in demand and, in some cases, encourage greater use of resources instead of reducing it. In addition, the increased supply of secondary goods may cause market prices to fall further, making consumers or businesses relatively wealthier ('income effect') and so they will buy more goods (secondary and otherwise). On the other hand, a substitution effect will also be present, whereby if secondary goods are good substitutes for primary goods, there will be an increase in consumption and thus production of these goods.

According to recent studies, in order to avoid the rebound effect, it is crucial that circular economy policies focus not only on the reuse of materials, but also on the production of secondary goods that are true substitutes for primary goods, ensuring that they operate in markets where demand is less price-sensitive. There are several effective strategies, including the implementation of early detection mechanisms. Identifying potential rebound effects at an early stage of design and implementation can help reduce or eliminate these effects before they have a significant impact. 

Furthermore, targeted environmental policies can play a key role in mitigating rebound, especially if they are designed to promote structural change in consumer behaviour and production, rather than focusing only on short-term interventions. Sustainable research and development can also help reduce the negative impacts of rebound by promoting innovations that do not increase resource consumption, but rather encourage long-term changes in production practices and consumer behaviour. For example, innovations in eco-design or low-energy production can help reduce resource use and overall environmental impact.

Motivating the population to look forward to the long-term success of these strategies is also of paramount importance. Actively involving consumers in the process of transition to the circular economy, by promoting awareness and changing consumption behaviour, is essential to prevent a return to linear and less sustainable consumption patterns once incentives or restrictions have ended. Involving the population ensures that changes are lasting and rooted in daily habits.

The adoption of fiscal and business and consumer support instruments is key to accelerating the transition to the circular economy. Among the most effective instruments used in Italy and other advanced countries are tax incentives and taxes on virgin materials, designed to reduce the use of primary resources and encourage the adoption of secondary raw materials. 

It seems necessary to incentivise the purchase of products made from reclaimed materials, with specific certifications and/or collective marks, through the reduction of the VAT rate to 5%, together with the strengthening of Green Public Procurement (GPP) and green procurement by PAs. Likewise, it seems useful to provide non-repayable incentives so that SMEs that are not directly obliged but are part of the supply chain of companies subject to the new EFRAG/CRSD framework can bear the costs of compliance with the standards of the upcoming legislation.

However, fiscal policies alone are not enough. For example, the spread of circular business models, which focus on providing services instead of selling products, encourages reuse and maintenance, extending the life cycle of goods. Another determining factor is the adoption of technological innovations. Emerging technologies such as the Internet of Things (IoT) and digitisation make it possible to monitor and optimise material recovery, improving resource management. Finally, the success of the circular economy depends on the adoption of a coherent regulatory framework, with policies that encourage resource efficiency and the reduction of carbon emissions.

The transition to a circular economy in Italy is already underway, but there are still challenges ahead. The adoption of more targeted tools can accelerate the process, incentivising the use of secondary raw materials and reducing dependence on virgin ones. Moreover, public-private collaboration and the adoption of circular business models are key to fully exploit the economic and environmental potential of the circular economy. The challenge for Italy will be to integrate these tools coherently into national and European strategies, promoting sustainable and competitive economic growth.