Policy Instruments

Regulatory and legislative instruments are designed to achieve compliance through enforcement. Such efforts can be both prohibitive or prescriptive. Next to enforcement, regulatory instruments give strategic direction to engender focused action or to coordinate and implement policies. As such, governments can issue concrete guidelines and frameworks or compulsory legal rules and objectives for the circular economy specifically, in an overall socially desirable outcome in general.

Economic instruments are designed influence stakeholder behaviour by making use of and influencing market dynamics through fiscal, economic or financial incentives. They serve to overcome market entry barriers, market failures and financial barriers that impede efforts to comply with regulations or create socially desirable outcomes. As such, economic instruments harness market dynamics to influence behaviour and decisions by changing prices, imposing  or exempting taxes or mandating carbon accounting.

Soft instruments create boundary conditions to smoothen the transition to the circular economy by influencing knowledge levels, collaboration and network structures and governance structures. They represent essential means to accelerate the transition towards the circular economy.