Governments around the world have spent decades taxing what they want less of — cigarettes, alcohol, carbon emissions — while subsidizing what they want more of — renewable energy, electric vehicles, affordable housing. The logic is elegant in its simplicity: price signals shape behavior, and governments control the most powerful price signals available in any economy. So here’s the obvious question that not nearly enough policymakers have asked with sufficient urgency: if circular consumption and second-hand market growth are genuinely desirable outcomes for both environmental and economic reasons, why aren’t more governments using their most powerful levers — taxation, subsidies, and VAT policy — to accelerate them deliberately and at scale?
The honest answer is that some governments have started doing exactly this, with results that are genuinely instructive for anyone watching the space. France, Sweden, the Netherlands, and a handful of other nations have moved from sustainability rhetoric into concrete fiscal policy that changes the economic calculus around repair, reuse, and second-hand purchasing in meaningful ways. The results aren’t uniform, and the lessons are nuanced, but the evidence is accumulating in ways that deserve serious attention from policymakers, businesses, and consumers alike.
This article examines what’s actually worked, what’s been tried and fallen short, and what the most promising emerging approaches look like for governments serious about building circular economies rather than just talking about them.
Why Fiscal Policy Is the Fastest Route to Circular Economy Scale
Before examining specific interventions, it’s worth understanding why fiscal policy matters so much more than awareness campaigns or voluntary industry initiatives when it comes to changing consumption patterns at the national level. Consumer behavior, at its core, is shaped by a combination of values, social norms, and — most powerfully — price. You can run awareness campaigns about the environmental benefits of buying second-hand for decades. You can get influencers to post about their thrift store hauls. You can publish reports about the circular economy. But when buying a new product is meaningfully cheaper or more convenient than buying pre-owned, most consumers will buy new regardless of their stated environmental values.
Fiscal policy changes the price signal. When repair services are VAT-exempt while new product purchases attract full tax rates, the price gap between extending a product’s life and replacing it narrows or reverses. When second-hand platforms face lower regulatory burdens than new goods retailers, the business economics of resale improve. When consumers receive direct subsidies for repair costs, the decision to fix rather than discard becomes economically rational rather than requiring moral commitment. This is why fiscal intervention consistently outperforms education-based approaches in producing measurable behavior change at scale.
France’s Repair Bonus: The Most Studied Example in Europe
France’s bonus réparation — repair bonus — launched in late 2022 and represents one of the most ambitious and carefully designed fiscal interventions in the circular economy space attempted by any major economy. The program provides consumers with a direct financial discount when they have eligible goods repaired by accredited repair professionals. The discount ranges from approximately €10 for small electronics up to €45 for larger appliances like washing machines, and it’s applied directly at point of service by the repairer — meaning consumers don’t need to claim anything back, file paperwork, or wait for reimbursement. The friction removal is deliberate and critical to the program’s design.
The funding comes from an extended producer responsibility scheme called the éco-organismes, where manufacturers pay into funds that finance the repair bonus. This creates a system where the people producing new goods financially support the infrastructure that extends the life of existing ones — an elegant inversion of the usual dynamic in which manufacturers benefit from planned obsolescence while society bears the disposal costs.
Early data from France’s program is encouraging. Accreditation applications from repair professionals increased significantly following launch, suggesting the program created new economic opportunity in the repair sector. Consumer uptake grew month-over-month through the program’s first year. Perhaps most importantly, the design of the program — with manufacturer funding, professional accreditation standards, and direct point-of-sale application — addresses several of the most common failure modes of government incentive programs simultaneously.
Sweden’s VAT Reduction on Repair Services: A Decade of Evidence
Sweden implemented a VAT reduction on repair services for clothing, bicycles, shoes, leather goods, and household appliances back in 2017 — making it one of the longest-running natural experiments in repair-focused tax policy available for analysis. The reduction brought the VAT rate on these repair services down from 25% to 12%, effectively making repair services meaningfully more price-competitive against new product purchases.
The Swedish results have been studied carefully and the findings are genuinely interesting. Research published by Swedish economists found that the VAT reduction did increase repair service uptake, particularly for clothing and bicycle repairs where the price reduction was most visible and where the quality of repair services was most easily assessed by consumers. Employment in affected repair sectors showed growth. The intervention demonstrated that VAT policy can shift the repair-versus-replace calculation in measurable ways when the category and price differential are right.
Where Sweden’s intervention showed limitations was in the higher-cost repair categories — major appliances and electronics — where even with reduced VAT, repair costs still frequently exceeded replacement costs for entry-level new goods. This points to an important lesson: VAT reductions on repair services are most effective when combined with other interventions that address the structural price competitiveness of repair versus new production, particularly in categories where labor costs are high relative to manufactured goods prices.
The Netherlands and Extended Producer Responsibility: Shifting Costs to Manufacturers
The Netherlands has taken a different but complementary approach, focusing heavily on extended producer responsibility (EPR) schemes that require manufacturers to fund collection, refurbishment, and recycling infrastructure for their products at end of first consumer use. The logic is elegant: if producers bear the cost of their products’ end-of-life management, they face a direct financial incentive to design products that are cheaper to refurbish, easier to recycle, and longer-lasting in the first place.
Dutch EPR schemes covering electronics, packaging, and certain textiles have demonstrated that producer-funded collection and refurbishment infrastructure can significantly increase the proportion of products that enter secondary markets rather than waste streams. The Netherlands consistently performs above the EU average on electronics recycling rates, and the country’s second-hand market has grown proportionally with the infrastructure investment that EPR funding has enabled.
The challenge with EPR as a circular economy accelerant is that its primary effect is on end-of-life management rather than on consumer purchasing behavior. EPR schemes make it more likely that recovered goods get properly refurbished and resold, but they don’t necessarily make it more likely that consumers choose to buy second-hand in the first place. The most effective national policy frameworks combine EPR-style producer accountability with demand-side interventions like repair bonuses and VAT reductions that change consumer behavior directly.
Stamp Duty Equivalents and Resale Transaction Costs
One of the most overlooked dimensions of second-hand market policy is the transaction cost burden on resale — the fees, taxes, and administrative requirements that make selling or buying second-hand more cumbersome and expensive than it needs to be. In some European jurisdictions, second-hand goods sold between private individuals have historically attracted VAT or similar transaction taxes that professional retailers must collect and remit, creating compliance burdens that effectively suppress informal resale markets.
Countries that have moved to simplify the tax treatment of peer-to-peer resale — establishing clear thresholds below which private sales are not treated as commercial activity for tax purposes — have seen measurable growth in their domestic second-hand markets. The EU’s revised VAT rules for digital platforms, implemented from 2021 onward, aimed to create more consistency across member states, though the impact on small private sellers has been controversial in some jurisdictions where new reporting requirements have created compliance anxiety disproportionate to the actual tax amounts involved.
The policy lesson here is that reducing friction in resale transactions — not just reducing taxes, but reducing the complexity of compliance — is itself a meaningful intervention for second-hand market growth. Simplicity is a form of subsidy.
South Korea’s Green Credit System: Incentivizing Circular Purchases Directly
Moving beyond Europe, South Korea has experimented with an interesting demand-side approach through its eco-point and green credit systems, which reward consumers directly for environmentally certified purchasing decisions including buying certified refurbished electronics. Participants accumulate points for qualifying circular purchases that can be redeemed for discounts on future purchases or converted to transit credits.
The Korean approach represents an interesting alternative to direct financial subsidies — instead of making repair or second-hand buying cheaper through tax intervention, it makes it more rewarding through a positive incentive system. Early evidence suggests this approach works well for digitally engaged consumer segments but has lower penetration among older demographics and those less comfortable with digital reward platforms. The lesson is that incentive design must account for the demographics of the target behavior change, not just the financial magnitude of the incentive.
What the Evidence Says About Subsidy Combinations
Perhaps the most important finding from comparing national interventions is that no single fiscal tool — whether VAT reduction, repair bonus, producer responsibility scheme, or consumer reward system — performs as well in isolation as combinations of complementary interventions. The most effective national policy frameworks pair supply-side interventions (funding repair infrastructure, accrediting repair professionals, requiring producer take-back) with demand-side interventions (repair bonuses, VAT reductions at point of service, consumer reward schemes) in ways that simultaneously make circular options more available, more affordable, and more attractive.
France’s repair bonus works better because the éco-organisme funding creates a professional repair sector worth subsidizing. Sweden’s VAT reduction works better because there’s already an established culture of bicycle and clothing repair that the price signal reinforces rather than creates from scratch. The Netherlands’ EPR success builds on decades of consumer recycling behavior that makes the collection infrastructure meaningful.
This suggests that the sequencing and cultural context of interventions matters enormously alongside their technical design. Dropping a repair bonus into a country with no accredited repair professionals and no consumer expectation of repairability produces different results than deploying it within an ecosystem that’s already primed for the behavior change.
The Role of Public Procurement in Market Development
One underappreciated tool in the government circular economy toolkit is public procurement — the purchasing decisions made by government bodies, schools, hospitals, and public institutions that collectively represent enormous purchasing power in most economies. When governments commit to purchasing refurbished electronics, second-hand furniture, and remanufactured goods for public institutions, they create demand at scale that validates and develops secondary markets without requiring direct consumer subsidies.
Denmark and Belgium have both made circular criteria mandatory components of public procurement for certain categories, creating guaranteed demand for refurbished and remanufactured goods that has supported market development. Public procurement commitments don’t make headlines the way consumer-facing incentive programs do, but they create steady, predictable demand that enables refurbishment businesses to invest in capacity and quality — which ultimately improves the supply of quality second-hand goods available to private consumers as well.
The Emerging Right to Repair Legislation as a Market-Shaping Tool
Right to repair legislation — which requires manufacturers to make spare parts, repair manuals, and diagnostic software available to independent repair professionals and consumers — is increasingly recognized as a fiscal-adjacent market-shaping tool. While not a tax incentive in the traditional sense, right to repair legislation changes the economic structure of the repair market by breaking manufacturer monopolies on repair services and reducing the cost of independent repair.
The EU’s right to repair directive, which came into force in 2024, extends repairability requirements across a growing range of product categories and represents the most significant legislative intervention in the European repair market in decades. By requiring manufacturers to support repairability rather than designing against it, the directive effectively subsidizes the repair sector through mandated market access rather than direct financial transfer.
Conclusion
The evidence from France, Sweden, the Netherlands, South Korea, and other pioneering jurisdictions tells a consistent story: governments that combine supply-side infrastructure development with demand-side financial incentives, reduce friction in resale transactions, enforce extended producer responsibility, and use their own procurement power to validate circular markets produce measurably better circular economy outcomes than those relying on awareness campaigns and voluntary corporate commitments alone.
The most effective fiscal interventions are those designed with behavioral economics in mind — applying incentives at the point of decision, minimizing compliance complexity, and creating financial rewards proportionate to the behavior change sought. The circular economy is not going to scale primarily through consumer virtue. It will scale when circular choices become economically rational for the majority, and that’s a policy design challenge as much as a sustainability challenge.
Frequently Asked Questions
Which country currently has the most comprehensive fiscal policy framework supporting circular consumption?
France currently leads among major economies in terms of policy comprehensiveness, combining its repair bonus system with extended producer responsibility schemes, right to repair legislation compliance, circular procurement requirements, and explicit circular economy targets in national planning frameworks. The French approach is notable for its attention to behavioral design — particularly the point-of-sale application of the repair bonus that removes the friction of claiming reimbursements — as well as for its producer-funded financing model that makes the scheme financially sustainable without relying on general tax revenue.
Do VAT reductions on repair services actually change consumer behavior, or do they mostly benefit people who were already going to repair things anyway?
Research from Sweden’s decade-long experiment suggests that VAT reductions do attract some consumers who would otherwise have replaced rather than repaired, particularly in categories where the price differential between repair and replacement is relatively small. However, there’s genuine evidence that a portion of the benefit accrues to people who would have repaired anyway — economists call this deadweight loss. The size of this effect depends heavily on how large the price reduction is, how visible it is to consumers, and how price-sensitive the target demographic is. VAT reductions work best when combined with consumer awareness of the new pricing and when repair service quality is consistently high enough that the decision is genuinely competitive.
Why don’t more governments implement repair subsidies and circular economy tax incentives?
Several structural barriers slow government adoption of circular economy fiscal policy. The most significant is short-term budget framing — repair subsidies have upfront fiscal costs that are visible in annual budgets, while their environmental and economic benefits accrue over longer timeframes and are harder to attribute precisely. There’s also resistance from manufacturing industry lobbies that correctly identify that successful circular economy policy reduces demand for new goods. Political cycles that prioritize visible economic growth metrics over harder-to-measure circularity outcomes create incentives for legislators to focus elsewhere. Finally, the cross-departmental nature of circular economy policy — spanning environment, finance, trade, and consumer protection portfolios — makes ownership and coordination challenging within government structures optimized for siloed decision-making.
Can extended producer responsibility schemes backfire and increase prices for consumers?
Yes, this is a genuine risk that policy designers must address. When producers are required to fund end-of-life management through EPR schemes, they typically pass some or all of those costs on to consumers through higher new product prices. If the EPR funding creates excellent refurbishment and resale infrastructure, the higher new product prices and better availability of affordable refurbished alternatives can represent a net positive for consumers. If the EPR scheme creates compliance bureaucracy without meaningful circular outcomes, it functions as a consumption tax with limited environmental benefit. The design quality of EPR schemes — particularly whether they create genuine circular infrastructure versus simply funding waste management — is the critical variable determining whether they help or hurt consumers and the circular economy simultaneously.
What can individual consumers do to advocate for better fiscal policy supporting second-hand markets in their countries?
Consumer advocacy for circular economy fiscal policy is more powerful than most people realize, particularly when it’s organized around specific, evidence-based policy asks rather than general sustainability sentiment. Supporting and publicizing the work of organizations actively lobbying for right to repair legislation, repair VAT reductions, and circular procurement requirements creates political visibility for these issues. Engaging with consultation processes when governments review VAT policy or product regulation provides direct input into policy design. Choosing representatives who demonstrate specific understanding of circular economy fiscal tools — rather than just general environmental rhetoric — creates electoral accountability for the policy gap between sustainability talk and fiscal action.
Richardson Gray is a writer who specializes in legal and compliance basics for solopreneurs, as well as the growing second-hand and circular economy. With 21 years of experience, he has written extensively about business trends, sustainable consumption, and practical strategies for independent entrepreneurs. He holds both a BSc and an MSc in Economics, giving him a strong understanding of business systems, market behavior, and financial practices.
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