Green Trade Barriers? Circular Economy, Trade, and the Future of the Global South

By Pınar Yardımcı

In recent years, redesigning economic growth to reduce pressures on ecosystems has become central to sustainable development policies. The circular economy (CE) has emerged as a vital framework that not only aims to minimize waste and optimize resource efficiency but also promises to decouple economic growth from environmental degradation.

According to the World Bank’s 2024 Circular Economy Report, transitioning to circular practices could add up to $4.5 trillion in global economic benefits by 2030. However, this transformation is not merely about technological innovation or environmental management; it fundamentally reshapes global trade patterns, supply chains, and development strategies.

Transforming Trade through Circular Principles: Opportunities and Risks

The transition to a circular economy replaces the traditional “take-make-dispose” model with the principles of “closing,” “slowing,” and “narrowing” resource loops. These strategies aim to reduce dependency on virgin raw materials, minimize waste generation, and extend product lifespans through design innovation, remanufacturing, and reuse. Beyond reducing ecological footprints, these shifts fundamentally alter international trade structures.

• Demand for primary commodities, especially metals, fossil fuels, and agricultural raw materials, declines as secondary materials and recycling technologies gain prominence.
• New trade areas emerge, including reverse logistics services, repair and refurbishment industries, and circular design consulting.
• Environmental and social standards increasingly define market access, as sustainable certifications and lifecycle assessments become prerequisites in global trade agreements.

While these transformations are in line with the Sustainable Development Goals (SDGs), particularly SDG 12 on responsible consumption and production, they are not without challenges. The rising compliance costs associated with meeting circularity standards — such as certifications for recycled content or carbon footprint transparency — risk marginalizing developing countries with limited technical and institutional capacities. Consequently, circular economy transitions could exacerbate existing trade inequalities unless inclusive global governance frameworks are established.

Bridging Divides: G20 Initiatives and the Global South’s Circular Economy Challenge

According to the OECD’s 2023 Circularity Report, countries that increase their circularity practices over the next decade are projected to achieve more resilient and competitive positions within global supply chains. However, while the transition to a circular economy promises sustainability gains, it also risks deepening global inequalities if the benefits are unevenly distributed.

Recognizing these dynamics, the G20 Leaders’ Summit hosted by India in 2023 led to the establishment of the Resource Efficiency and Circular Economy Industry Coalition (RECEIC). This coalition aims to institutionalize circular economy practices by:

• Providing technical assistance and capacity-building programs for small and medium-sized enterprises (SMEs), particularly in emerging economies;
• Bridging technology gaps through knowledge transfer initiatives;
• Expanding access to sustainable finance and promoting green innovation ecosystems.

Notably, the G20 itself includes several emerging economies — such as India, Indonesia, Brazil, and South Africa — that straddle the line between Global North and South. These countries are positioning themselves to benefit from the circular transition through enhanced industrial capacities and proactive policy frameworks. RECEIC offers them a strategic platform to amplify their voice in setting global circular economy standards and practices.

However, for the broader Global South — particularly low-income countries outside the G20 — the situation is more precarious. While circularity presents opportunities for new industries in waste management, recycling technologies, and renewable energy, many developing countries face severe technical, financial, and institutional constraints that hinder their ability to transition effectively. Initiatives like the European Green Deal and the Carbon Border Adjustment Mechanism (CBAM) risk imposing additional barriers on carbon-intensive exports, potentially marginalizing these countries in global markets. Without targeted international support, circular economy transitions could exacerbate trade inequalities and entrench existing development divides.

Green Trade Barriers and Emerging Inequalities

As highlighted by the 2024 Circularity Gap Report and the UNCTAD 2023 Trade and Environment Review, circularity standards — including requirements for recycled content, carbon footprint disclosures, and sustainable sourcing certifications — could create new trade barriers for developing countries. According to UNCTAD, over 70% of developing country exports are vulnerable to non-tariff measures linked to environmental compliance. Meanwhile, the European Union’s Carbon Border Adjustment Mechanism (CBAM) and Green Deal policies have introduced carbon tariffs on high-emission products such as steel, cement, and aluminum, setting a precedent for other developed economies.

For the Global South, this implies heightened risks:

• Countries with low circularity compliance face the prospect of ‘Green Trade Barriers,’ which could limit their access to key markets in Europe and beyond.
• Countries unable to achieve the circular transition may risk losing their export markets altogether, as buyers increasingly favor suppliers meeting stringent environmental standards.

This emerging reality has been described as a form of “green protectionism,” where well-intentioned environmental policies in the Global North unintentionally marginalize economies that lack the financial and technological resources to adapt quickly. The African Continental Free Trade Area (AfCFTA), for instance, has yet to develop comprehensive circular economy policies, leaving many African exporters exposed to potential market losses. Without significant investment in green infrastructure and capacity-building, the circular transition could spark a new wave of global inequality, deepening the developmental divides it initially sought to bridge.

Policy Recommendations

An inclusive and sustainable circular economy transition requires more than ambition; it demands strategic investments and policy reforms, particularly for the Global South. To close the widening gap in circularity readiness, several critical actions must be prioritized.

First, increasing green financing resources is essential. Dedicated international funds and innovative blended finance mechanisms should be established to ensure affordable access to circular technologies. Special attention must be given to small and medium-sized enterprises (SMEs) in developing countries, which often lack the capital and technical know-how to transition. Without targeted financial support, the Global South risks being excluded from the new green economy.

Equally important is capacity-building. Investing in comprehensive training programs and infrastructure development for waste management, recycling, and green industries can equip countries with the tools needed to thrive in circular markets. Public-private partnerships and international technical assistance are pivotal in closing the persistent skills and knowledge gaps that hinder sustainable industrial transformation.

Trade policy reform must also accompany the shift towards circularity. Lowering tariffs on circular products and eco-friendly technologies would facilitate greater market integration for developing countries. Moreover, simplifying regulatory frameworks for sustainable goods could significantly reduce trade barriers and enhance the participation of Global South economies in global green value chains.

However, a one-size-fits-all approach to environmental standards risks deepening inequalities. Global standards must be flexible and context-sensitive, recognizing the diverse levels of development across countries. Multilateral organizations should ensure that the voices and needs of the Global South are adequately reflected in global standard-setting processes.

Investing in green skills development is another indispensable pillar. Preparing the workforce for emerging opportunities in the circular economy requires targeted education and vocational training initiatives. Building human capital will not only boost competitiveness but also ensure that the benefits of the green transition are broadly shared.

Finally, aligning trade incentives with the Sustainable Development Goals (SDGs) could amplify the positive impact of circularity. Green export credits, climate-smart trade agreements, and SDG-linked financing instruments can drive more inclusive and sustainable global trade dynamics, ensuring that no country is left behind in the transition.

The circular economy holds the promise of redefining sustainable development for a new era. Yet without deliberate efforts to integrate the Global South into this transition, circularity risks reinforcing the very inequalities it seeks to dismantle. Achieving a truly inclusive green future demands that international trade policies become not only greener but also fairer — ensuring that circularity opens pathways to opportunity, not barriers to progress.

Note: This article gives the views of the author, not the position of the EADI Debating Development Blog or the European Association of Development Research and Training Institutes

Pınar Yardımcı is an Associate Professor of Economics at Mersin University, Türkiye. Her research focuses on sustainability economics, international trade, circular economy, and environmental policy. She has published on the macroeconomic dimensions of environmental issues and the role of international trade in sustainable development. Her recent work explores how circular economy transitions reshape global trade patterns and affect development prospects for the Global South.

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