A strategic framework for managing the circular economy transition - the role of tax policy in an emerging economy

Oct 21, 2026

The study addresses the circular economy transition as a crucial environmental management objective that often stalls in emerging economies due to institutional fragmentation, limited fiscal capacity, and policy incoherence. It proposes the lifecycle fiscal governance for circular economy (LFG-CE) model to guide policymakers in designing and managing tax reforms aligned with CE principles. Using Indonesia as a representative case, it triangulates literature, policy documents, and expert interviews to map tax instruments across product lifecycle stages and overcome context-specific barriers.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages19

Reading Time48 min

AccessFree to download

Abstract

Purpose

Design/methodology/approach

Findings

Originality/value

Introduction

A strategic framework for managing the circular economy transition: the role of tax policy in an emerging economy Ekawati Rini Lestari Department ofFiscal Administration, Universitas Indonesia, Depok, Indonesia Haula Rosdiana Cluster Research Politic of Taxation, Welfare, and National Resilience, Universitas Indonesia, Depok, Indonesia, and Titi Muswati Putranti Department ofFiscal Administration, Universitas Indonesia, Depok, Indonesia Abstract Purpose – The global transition to a circular economy (CE) is a critical environmental management objective. Yet, in many emerging economies, implementation is stalled by institutional fragmentation, limited fiscal capacity and policy incoherence. This study introduces the lifecycle fiscal governance for circular economy (LFG-CE) model, a framework designed to guide policymakers in systematically designing and managing tax reforms that support CE principles. Design/methodology/approach–This study employs an integrative research design focused on Indonesia as a representative case study. The methodology triangulates evidence from three sources: a qualitative literature review, national policy documents and empirical insights derived from expert interviews with key fiscal and industrial stakeholders. This combination allowed us to map tax instruments directly to product lifecycle stages, creating a policy framework grounded in local realities. Findings – The study presents the LFG-CE framework, a strategic tool for environmental and fiscal management. The framework organizes tax instruments across upstream, midstream and downstream lifecycle stages. Beyond simple categorization, the research identifies and integrates solutions for overcoming contextspecific institutional barriers, and advances three formalized theoretical propositions concerning policy sequencing and effective revenue recycling. The findings culminate in a phased, narrative reform roadmap (short, medium and long term) for public sector managers. Originality/value – The paper ’s originality lies in two areas. Theoretically, this paper refines the double dividend hypothesis into a socio-fiscal double dividend concept for emerging economies, and operationalizing the Polluter Pays Principle as a dynamic policy sequencing guide. Practically, it delivers an actionable roadmap that directly addresses the policy incoherence and capacity gaps identified in the Indonesian context, moving beyond high-level theory to implementation. Keywords Circular economy, Sustainable development, Environmental policy, Environmental management, Tax policy, Policy framework Paper type Research article 1. Introduction The international community confronts intensifying environmental and economic pressures from unsustainable resource consumption and rising waste volumes (UNEP, 2021) . In response, the circular economy (CE) has gained global momentum as a systemic alternative to the conventional “take-make-dispose” linear model, offering a pathway toward long term sustainability and resilience (Kirchherr et al., 2017; European Commission, 2020) . While Funding details: This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. Declaration of interest statement: No potential conflict of interest was reported by the authors. Disclosure of interest: The authors report there are no competing interests to declare. Management of Environmental Quality: An International Journal Received 9 July 2025 Revised 17 September 2025 23 November 2025 26 January 2026 Accepted 9 March 2026 Management of Environmental Quality: An International Journal © Emerald Publishing Limited e-ISSN: 1758-6119 p-ISSN: 1477-7835 DOI 10.1108/MEQ-07-2025-0483 MEQ regulatory reforms and technological advances are key drivers of this transition, fiscal policy (particularly taxation) remains an underutilized lever for systemic change (Milios, 2021; Huttmanov and Mika, 2024)

FAQs

What problem does the LFG-CE model aim to solve in emerging economies?

It targets policy implementation delays caused by institutional fragmentation, limited fiscal capacity, and policy incoherence, especially when embedding circular economy principles into national tax policy.

How is the LFG-CE model developed and validated in the study?

The study uses an integrative design with a qualitative literature review, national policy documents, and evidence from expert interviews, triangulating inputs to ground the framework in Indonesia’s context.

What does the framework do with tax instruments across the circular economy lifecycle?

It organizes tax instruments across upstream, midstream, and downstream lifecycle stages, identifying and integrating solutions to address context-specific institutional barriers and advancing theoretical propositions.

Oct 21, 2026

Uploaded by Alex Sinclair