Regulatory framework for innovation and advancing climate neutrality through circular economy sandboxes

Abstract

The paper focuses on analyzing how decoupling economic growth from resource use reflects on transitioning to circular systems of production and consumption, which are essential to achieving climate neutrality by 2050. The hypothesis is that the current economy favors excessive consumption and endangers natural resources. The activities of extraction, processing and disposal of materials generate various negative environmental impacts, including the increase of greenhouse gas emissions, which jeopardies the achievement of essential environmental protection goals. The research shows that it is imperative to promote stricter resource efficiency policies and to advance the circular economy throughout the value chain, replacing traditional business models with circular ones. Today, the failure to accelerate innovation in the circular economy is more evident than ever, as the supporters of innovations face the challenge of framing their solutions within the relevant laws, policies and norms set by regulators during the development and implementation phases. This study is based on a comprehensive analysis of legislation and policy documents from various relevant sectors. The main objective of the study is to examine the strategic role of the Circular Economy Sandbox as a key mechanism for fostering innovation. This research confirms the hypothesis that the sandbox, by creating a flexible regulatory environment, the sandbox allows for the temporary testing of new products, technologies, services and business models and it provides for temporary exemptions from certain restrictive legal provisions – such as those relating to spatial planning, construction, environmental protection or tax procedures – while ensuring compliance with fiscal rules.