The Brussels and California Effects? Circular Economy Policy Influence Across Borders.

Abstract

The influence of environmental policy has been known to move beyond the country or regional contexts in which they have been implemented. Examples in literature include the "California effect" and the "Brussels effect", showing how the policies adopted in the EU and California influence other jurisdictions. In this paper we study the following: To what extent are companies operating in the United States influenced by circular economy policies outside their direct context? By interviewing companies operating in the United States, we find that firms are influenced by and actively work to influence circular economy policy, both as it originates from outside the United States (the Brussels effect, referring to policies in Europe) and from within the United States (such as the California effect). Key barriers to circular innovation include the lack of a comprehensive policy framework in the U.S., opposition from competitors, and making the business model work in the U.S. legal context. Strategies to overcome these include: getting legal support for circular business models, developing U.S. regulations, level the playing field for all U.S.-based companies, lobbying for supporting regulation, and collaboration. We find that EV battery recycling is a positive exception where U.S. policy provides clarity for circular innovation. Finally, we find that the characteristics of the 'typical' U.S. consumer may call for specific circular business models. We suggest future research to enhance our understanding on how policy might positively drive circular economy innovations in international companies.