Draft bill amending the Circular Economy Act: new recycling options, tougher enforcement measures – stakeholders have until 7 August 2026 to comment

On 26 June 2026, the Federal Ministry for the Environment (Bundesumweltministerium) published a draft bill to amend the Circular Economy Act (Kreislaufwirtschaftsgesetz, “KrWG”). The draft, which still has to undergo interministerial consultation, places chemical recycling on an equal footing with mechanical recycling within the waste hierarchy, introduces new obligations for public waste disposal entities and increases fines fivefold. The proposed amendments also introduce specific waste prevention targets, expand reuse obligations, tighten restrictions on the illegal mixing of hazardous waste, and establish a property-specific value compensation mechanism for waste management measures that increase the market value of a property. Additional requirements for manufacturers registers, proof of registration, residual waste analyses and prohibitions on placing products on the market will initially be established by statutory ordinance. 
The draft creates both substantial investment opportunities and regulatory challenges for the energy and commodities sectors, while offering public sector contractors valuable scope to strengthen their strategic market position. 
Companies, trade associations and public waste disposal entities affected by the proposed reform have until 7 August 2026 to comment on the draft legislation.

Background, next steps and timing

The KrWG is Germany’s key waste management law and was last comprehensively amended in 2020. The new draft bill is primarily intended to transpose the EU Waste Framework Directive (Directive 2008/98/EC), as amended by Directives (EU) 2025/1892 and 2018/851, into German law. The transposition deadline expires on 17 June 2027. 
At the same time, it implements commitments set out in the coalition agreement between the CDU/CSU and the SPD, most notably the equal treatment of chemical and mechanical recycling, and strengthens enforcement measures targeting illegal waste disposal. The proposed reform is also driven by the need to meet the EU’s municipal waste recycling targets (55 % for 2025), with the draft’s explanatory memorandum indicating that Germany’s recycling rate stood at just below 50 % in 2023. The draft further broadens the KrWG’s purpose (section 1(1) KrWG (draft)) by adding the goals of raw material sovereignty and security of raw material supply, underscoring the growing importance of extracting critical raw materials from waste.
The inclusion of the note “Notified in accordance with Directive (EU) 2015/1535” on the first page of the draft suggests that notification to the European Commission will not be deferred until completion of the consultation process but may already have been initiated when the draft was published. This appears to be at odds with information published on the Ministry’s website stating that notification is not expected to take place until after the consultation process has been completed and any resulting amendments have been incorporated into the draft. During the standstill period following the notification, the draft cannot be enacted into law. Following completion of the consultation process (further information (in German only)) and incorporation of any feedback received, the German cabinet is currently expected to reach a decision in January 2027, with the legislative process due to be completed by June 2027.

As currently drafted, the reform will be implemented in three stages. The provisions on the collection of bulky waste from private households, the stricter treatment of illegally mixed hazardous waste, the value compensation mechanism for properties cleared of waste, and the significantly increased fines will generally take effect upon the entry into force of the amending act, namely on the first day of the calendar month following its promulgation. By contrast, the reuse obligations under section 20a KrWG (draft) will not apply until 1 January 2033, and the associated reporting requirements until 1 January 2034. Most of the proposed requirements relating to registers, analyses, the provision of proof and restrictions on placing products on the market have yet to be fleshed out and established by statutory ordinances.

Key provisions and practical implications

Chemical and mechanical recycling: equal status within the waste hierarchy, no blanket priority

• The draft’s most strategically significant change may well be its treatment of chemical recycling. For the first time, chemical recycling technologies, especially pyrolysis, liquefaction and solvolysis, are explicitly placed on an equal footing with mechanical recycling within the five-stage waste hierarchy (section 6(1), no. 3 KrWG (draft)). The proposed definition of chemical recycling in section 3(25b) KrWG (draft) covers processes in which plastic polymers are fully or partially broken down, with the recovered constituents being used as feedstock for new polymers or other materials, rather than as a source of energy. 
• This amendment grants these processes legal equivalence and means they are no longer to be classified as “other recovery” below recycling in the waste hierarchy. This is reinforced by the deletion of the word “subsequent” in section 8(2), sentence 2 KrWG (draft).
• This explicit classification strengthens the legal position of these technologies, especially for plastic waste streams that have so far been challenging to process through mechanical recycling. However, the amendment does not give chemical recycling automatic priority, nor does it create an unconditional right to choose chemical recycling. Instead, section 8(1) KrWG continues to require that preference be given to the recovery option delivering the most favourable environmental outcome. 
• From an industry perspective, the proposed reform provides a strong investment incentive, especially for operators and developers of pyrolysis and liquefaction plants in Germany. Energy companies and petrochemical operators planning to build or already operating such facilities will benefit from a clear waste legislation framework. At the same time, the EU has yet to clarify whether and to what extent chemically recycled feedstocks may be credited towards recycled content quotas, and which mass balance models will be accepted. This is a key issue for the petrochemical and other energy-intensive sectors, since chemically recycled feedstocks are routinely processed alongside fossil feedstocks in integrated plants. Operators of chemical recycling plants therefore have an interest in clear rules on the provision of proof and crediting of recycled content, whereas operators of established mechanical recycling processes have an interest in ensuring that case-by-case assessments properly recognise the value of preserving materials through their processes. Investment decisions on pyrolysis or liquefaction facilities also largely depend on long-term feedstock supply and offtake agreements, the project’s bankability, and the early contractual confirmation of recognised mass balance standards, as these determine whether customers can claim credit for the recycled content produced.
• Implications for authorisation: The equal treatment of these technologies is likely to impact the authorisation of new plants under emissions protection law via section 5(1), no. 3 Federal Emissions Control Act (Bundes-Immissionsschutzgesetz, “BImSchG”) in conjunction with the 4th Ordinance on the Implementation of the Federal Emissions Control Act (Verordnung zur Durchführung des Bundes-Immissionsschutzgesetzes, “BimSchV”). Specifically, classifying an activity as recycling rather than “other recovery” could affect plant categorisation under Annex 1 of the 4th BImSchV, as well as what waste prevention and recovery documentation must be provided for the authorisation procedure under section 5(1), no. 3 BImSchG. For existing plants, reclassification may also raise the question of whether a substantial change within the meaning of sections 15 and 16 BImSchG has occurred. Operators would be well advised to assess the potential impact on current and planned authorisation procedures as early as possible.

Waste prevention: statutory targets and policy implications for the food sector

• Section 7b KrWG (draft) introduces non-binding targets: waste intensity is to be reduced by 40 % (compared to 2020) by 2045, while per-capita municipal waste generation is to decrease by 20 %. By the end of 2030, food waste is to be reduced by 10 % in processing and manufacturing, and by a total of 30 % per capita in the retail sector, other forms of distribution, the food service sector, catering services and households, compared to 2020 levels.
• These targets are not accompanied by individual company quotas, new reporting obligations or standalone sanctions. However, the programme for the prevention of food waste under section 33a KrWG (draft) may become increasingly significant in practice. It is intended to address inefficiencies and waste-generating market practices along the entire food supply chain, from primary production, processing and manufacturing through to wholesale and retail trade, out-of-home food services and private households.
• Affected businesses should review the availability and quality of their data as well as their supply, returns, donation and cooperation models. Key practical issues during the consultation process are likely to include the involvement of stakeholders throughout the supply chain and the allocation of costs arising from waste-prevention initiatives.

New obligations for public waste disposal entities – opportunities for businesses

• Section 20(2), sentence 1, no. 7 KrWG (draft) requires public waste disposal entities to provide a bulky waste collection service for private households as soon as the legislation comes into force. How the service is organised and funded – including through additional fees or charges – is likely to be left up to the entities concerned. Local authorities should promptly review service levels, eligibility requirements, fee structures, staffing needs, access and liability issues, as well as the potential outsourcing of services to third parties. The measure may therefore create new opportunities for private and non-profit service providers.
• Under section 20a KrWG (draft), public waste disposal entities must establish drop-off points for items suitable for further use, provide for their collection from households, and offer a digital channel for redistribution and reuse. The items must be kept separate and made available for reuse, and annual reports must be submitted to the Federal Environment Agency (Umweltbundesamt) from 2034 onwards. Key details, including the items covered, the number of drop-off points, collection arrangements and reporting format, are to be set out in a statutory ordinance by the end of 2030. Many public waste disposal entities will source these services from the market rather than provide them directly. While local authorities may develop appropriate concepts and assess potential partnerships in terms of public procurement and organisational law, they should defer any significant investment until the details have been clarified. This opens up opportunities for private and non-profit providers through public-private partnerships, including service concessions, public procurement contracts or inter-municipal cooperation for the operation of drop-off points, bulky waste and collection logistics, or the provision of digital platforms for redistribution and reuse. Given that the statutory ordinance is only to be issued by the end of 2030, contract terms and adjustment clauses should be structured with sufficient flexibility to accommodate future regulatory developments.
• Take-back and sharing platforms: Digital reuse and redistribution models are emerging as a key focus, as a result of both the new requirement for waste disposal entities to establish a digital redistribution and reuse platform under section 20a KrWG (draft) and the new product responsibility obligations applicable to online channels and fulfilment service providers under section 25(1), no. 9 KrWG (draft). While operators of existing or planned sharing, repair and second-hand platforms may benefit from opportunities to work together with public waste disposal entities, they should also assess whether early action is required to reflect future registration and notification obligations in their own platform architecture. Given that the relevant details will be determined in a statutory ordinance, cooperation agreements and internal compliance processes should be designed with sufficient flexibility, and larger investments should be deferred until the respective ordinance has been issued.

Product responsibility: new terms and powers to issue ordinances – removal of the national duty of care

• Section 25(1), no. 9 KrWG (draft) empowers the federal government to issue an ordinance requiring manufacturers, platforms and fulfilment service providers to communicate their registration status and confirm that only duly registered products are offered. Under section 24, no. 10 KrWG (draft), a statutory ordinance will also be required for manufacturers registers to be made publicly accessible. The draft does not however impose any new direct documentation or monitoring obligations. The newly introduced definitions of product responsibility organisations, online platforms and fulfilment service providers likewise derive their practical significance primarily as the basis for future ordinances. Businesses should nevertheless ensure that manufacturer, registration, product and distributor data can be linked clearly and consistently. In the further legislative process, standardised digital formats and clear allocation of responsibility for incorrect certificates will be key.
• The draft repeals section 23(1), sentence 3 and (2), no. 11 KrWG, removing the standalone duty of care which requires businesses to maintain the usability of products and avoid waste during distribution, take-back and return processes. This does not amount to a licence to destroy unsold goods, however. Article 24 of the EU’s Ecodesign Regulation establishes transparency obligations, while Article 25 prohibits large enterprises from destroying unsold clothing and footwear products that are listed in Annex VII as from 19 July 2026. The prohibition will extend to medium-sized enterprises as from 19 July 2030. Businesses should therefore continue to document decisions regarding returns, donations, resale and destruction and ensure compliance with the relevant product categories, disclosure requirements and exemptions. The deletion therefore primarily reduces regulatory overlap at national level rather than reducing the need to comply with EU requirements.

Separate collection and hazardous waste

• Waste bins will have to be clearly labelled with the relevant waste category, and active awareness-raising campaigns must be carried out at least once a year. While section 10(2), no. 2 KrWG (draft) does not currently require residual waste analyses, it does provide the legal basis for future ordinances in this regard. According to the explanatory memorandum, the proposed restriction of the exceptions to the separate collection of paper waste is unlikely to have significant practical impact, given the already well-established system of separate collection.
• Section 9a(3), sentence 2 KrWG (draft) eliminates economic infeasibility as justification for exempting operators from the obligation to separate illegally mixed hazardous waste. Treatment of mixed waste in an authorised facility will remain possible where separation is not required or is technically impossible; high costs alone, however, are unlikely to be accepted as sufficient justification in the future. Waste producers and waste management companies should review their waste declaration processes, acceptance and sampling checks, rights of refusal, evidence preservation measures, and contractual indemnity and cost-sharing arrangements. For stakeholders participating in the consultation process, it is important to note that the draft is based on the assumption that only minimal compliance costs will be incurred, even though technically feasible separation measures may, in individual cases, entail a considerable outlay. 

Further developments

• Under section 62a KrWG (draft), property owners who are not liable for the costs of the underlying measure may be required, irrespective of fault, to pay compensation for an increase in value of their property where the market value increases to a more than insignificant extent as a result of the use of public funds for waste management measures pursuant to section 7(2) or section 15(1) KrWG; the amount of such compensation is capped at the level of the public funds expended. This aligns the Circular Economy Act with measures already familiar from German waste and soil protection law (section 25 Federal Soil Protection Act (Bundes-Bodenschutzgesetz)). According to the explanatory memorandum, it is intended in particular to address cases involving illegal waste disposal where waste management authorities have taken substitute measures and recovery of costs from the responsible party is unlikely to be successful. For property owners and purchasers of contaminated sites, this new provision entails significant liability risks.
• Section 24, no. 4 KrWG (draft) expands the regulatory powers to impose product bans on products whose waste can only be treated at disproportionate cost. The Act itself does not yet prohibit any products. However, the draft cites lithium batteries and single-use e-cigarettes as examples. Manufacturers and distributors should review both product design and take-back schemes. 
• The proposed amendment to section 67 KrWG is intended to expedite the adoption of ordinances. Corresponding amendment resolutions adopted by the Bundesrat should no longer trigger resubmission to the Bundestag.
• Section 2(2), no. 15 KrWG (draft) updates the exemption for CO₂ to reflect the revised Carbon Dioxide Storage and Transport Act. For CCS/CCU projects, the legal position remains clear: captured CO₂ that is transported and permanently stored does not fall within the scope of the KrWG.

Significant increase in fines 

• The draft significantly raises maximum fines, increasing them fivefold from EUR 100,000 to EUR 500,000 and from EUR 10,000 to EUR 50,000. The underlying substantive obligations – including separate collection, in particular under the Commercial Waste Ordinance (Gewerbeabfallverordnung), proper record-keeping and appointment of a waste management officer – remain unchanged.
• The increase in fines will have a direct impact on energy-intensive companies with complex waste streams, significantly increasing the costs of non-compliance with separate collection or record-keeping obligations. In addition, the expanded producer responsibility for critical raw materials has important implications for the raw materials strategies of affected companies.
• It should also be noted that the third amendment to the Commercial Waste Ordinance, which entered into force on 1 July 2026 and tightens the requirements for separate collection, should be viewed in conjunction with the proposed amendments to the Circular Economy Act, particularly given the close link between the respective administrative fine regimes.

Conclusion and recommended action

The draft bill is neither a straightforward deregulation measure nor simply a tightening of existing rules. It improves the legal classification of chemical recycling procedures and removes regulatory overlap by removing the standalone duty of care under the KrWG. It also imposes new obligations on public waste disposal entities, introduces stricter requirements for improper waste separation, creates a property-specific value compensation mechanism for waste management measures affecting property values and increases maximum fines. The draft also lays the basis for future statutory ordinances which may have significant implications for manufacturers, platforms, waste disposal entities and suppliers of high-risk products. The federal government will evaluate by the end of 2033 whether the waste prevention targets have been met, with failure likely to trigger further tightening of requirements.

Affected stakeholders should in particular consider the following:

• Chemical recyclers and the plastics industry: Key issues such as the definition of chemically derived recycled content, the application of mass balancing methodologies, documentation requirements and the treatment of chemically recycled content for waste prevention targets should be clarified and put on a legally sound footing during the further legislative process. Operators of mechanical recycling processes, by contrast, have an interest in ensuring that established high-quality processes are not sidelined in case-by-case assessments. Investors in pyrolysis and liquefaction plants should also address financing, off-take arrangements and certification requirements during the project planning phase.
• Public waste disposal entities should review their service levels, fees, staffing needs, liability and the potential outsourcing of services to third parties in connection with the collection of bulky waste from private premises before the new legislation comes into force. While certain preparatory steps can be taken for the systems envisaged under section 20a KrWG (draft), major investments should be deferred until the respective statutory ordinance is issued by the end of 2030. Local authorities and private-sector partners should start exploring potential public-private partnership structures and assessing their feasibility under public procurement law.
• Manufacturers, distributors, platforms and fulfilment service providers should review registration, product and distributor data to ensure that it can be clearly attributed and continually updated. At the same time, a distinction must be made between the removal of the duty of care under the KrWG and the requirements of the EU Ecodesign Regulation, which remain in force.
• Operators of take-back and sharing platforms should explore potential partnerships with public waste disposal entities for digital reuse and redistribution channels and incorporate future registration and notification obligations into platform architecture at an early stage.
• Waste producers and waste management companies should adjust their separation and acceptance procedures, documentation and contractual provisions relating to hazardous waste as high separation costs will potentially no longer qualify as a legal ground for exemption.
• Review of waste compliance: Given the proposed fivefold increase in potential fines, companies should review their waste disposal documentation, waste separation practices and contractor structures well ahead of the legislation taking effect.
• Property owners and buyers should ensure that waste-related due diligence includes an assessment of past site activities, disposal practices, security measures, regulatory proceedings and potential claims for recourse and that transaction and usage agreements explicitly reflect the property-specific value compensation mechanism for waste management measures in accordance with section 62a KrWG (draft).
• Manufacturers and distributors of high-risk products should factor the expanded powers to issue ordinances into product and portfolio planning at an early stage.

Affected companies, associations and public authorities should first assess the extent to which they are impacted, use the consultation period ending 7 August 2026 to provide targeted feedback, and begin reviewing any processes that may be directly exposed to risk.