In the face of climate change and resource depletion, traditional governance models have struggled to keep pace with the urgent need for sustainability. However, a new paradigm is emerging: polycentric climate governance, a dynamic approach in which multiple governing bodies operate at different levels to collaboratively address environmental challenges.
At the heart of this transformation is the circular economy, an economic model that moves away from the traditional “take-make-dispose” system, instead emphasizing reuse, regeneration, and sustainability. The question is: Does polycentric climate governance drive the circular economy? This discussion seeks to unravel the profound impact of multi-layered governance structures on building a future where waste is minimized, resources are maximized, and environmental harmony is achieved.
How Local Governments Are Leading the Way to a Circular Economy?
As the world grapples with climate change and resource scarcity, subnational governments (SNGs) are emerging as powerful catalysts for change. Across Europe, they are not just implementing policies but actively driving the transition to a circular economy—where economic growth is decoupled from resource consumption.
A recent study in the journal Ecological Economics, “Does Polycentric Climate Governance Drive the Circular Economy? Evidence from Subnational Spending and Dematerialization of Production in the EU,” addresses a critical question: Do decentralized climate actions accelerate circular economy progress? The research, which examines climate-related expenditures from SNGs across 30 European countries between 2001 and 2019, provides compelling evidence that they do.
The Power of Local Action
The study reveals that every $100 increase in per capita climate-sensitive spending by SNGs significantly enhances resource productivity, measured as GDP per kilogram of raw material consumption. In contrast, central government (CG) spending often shows limited or even negative effects on resource efficiency.
Why are local governments more effective? The answer lies in their ability to develop tailored, place-based solutions. While national policies set the framework, local governments are on the ground, investing in waste management, renewable energy, and sustainable transport—areas where immediate and meaningful impact is possible. Their agility and responsiveness to local needs make them instrumental in driving economic dematerialization.
A Case for Empowering Local Governments
This research is one of the first empirical studies to establish a direct link between SNG climate expenditures and circular economy outcomes. The findings reinforce a crucial message: “If we want to accelerate the shift towards sustainable growth, we must empower subnational governments with the resources, autonomy, and policy tools to act”.
As the global community races toward carbon neutrality, polycentric climate governance—where decision-making is distributed across multiple levels—will be key. Local governments are proving that they can lead the way, often surpassing the ambitions of central administrations. Their role in shaping a greener, more circular economy is not just important—it is indispensable.
Results and Discussion: A Game-Changer for Circularity
Investing in climate-sensitive expenditures at the subnational level isn’t just a policy choice—it’s a catalyst for transformation. The evidence is clear: When regions and cities commit financial resources to climate mitigation and adaptation, they drive tangible improvements in resource productivity, accelerating the shift toward a circular economy.
Every additional $100 per capita spent by subnational governments on climate initiatives can lead to a measurable boost in resource productivity—far more efficiently than central government interventions. This highlights the unique advantage of local action in tackling environmental challenges with precision and impact.
While economic growth is often seen as the primary driver of prosperity, these findings reveal a compelling alternative: A strategic reallocation of resources to empower local governments could deliver sustainability gains faster and more effectively than waiting for GDP growth alone. What might take a decade through conventional economic expansion could be achieved in a fraction of the time with targeted, climate-conscious fiscal policies at the local level.
The path to a sustainable future is clear—by strengthening the role of subnational governments in climate governance, we accelerate the dematerialization of production, enhance resource efficiency, and move decisively toward a world where growth and sustainability go hand in hand.
Key Concluding Points
- Subnational governments drive circular economies – Climate-related expenditures by SNGs significantly boost resource productivity, unlike central government (CG) spending.
- Polycentric climate governance accelerates sustainability – Empowering SNGs supports circular business models through mechanisms such as reverse logistics, urban symbiosis, and energy democratization.
- Resource allocation matters – How climate funds are distributed between central and subnational governments impacts the transition to a circular economy. SNGs show a clear advantage in driving resource productivity.
- Decentralization is crucial for climate governance – Shifting more resources and power to SNGs can improve climate outcomes, especially in the energy sector, where they currently control only 10% of expenditures despite having a major impact on economic dematerialization.
- Central governments face “carbon lock-in” – Entrenched interests slow national-level climate action, but empowering SNGs can help overcome these barriers while contributing to national climate commitments (NDCs).
- Sector-specific impacts of SNG spending:
- Positive effects – Waste management, energy, transport, and agriculture enhance circular economy practices and resource efficiency.
- Limited effects – Urban planning and technological innovation need improvement due to inefficiencies in land use and managing toxic chemicals.
- Reevaluating governance structures is essential – Optimizing fiscal decentralization and governance strategies can maximize the role of SNGs in achieving sustainable, circular economies.
The transition to a circular economy is not a distant dream—it is happening now, driven by the power of collective action. The question is: Will we seize this opportunity to build a regenerative future? The answer must be a resounding yes.
Read the full open-access report:
Francisco Mango and Rose Camille Vincent, “Does Polycentric Climate Governance Drive the Circular Economy? Evidence from Subnational Spending and Dematerialization of Production in the EU”, Ecological Economics, Volume 231, May 2025.
