Business and Economy
A stronger Canadian economy starts with a circular economy in cities and regions
According to a 2021 federal government study, circular economic activities in the remanufacturing sector already contribute $56 billion annually to the economy and support 380,000 jobs. (Pexels Photo)
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One overlooked solution to the threat posed by President Donald Trump’s trade war and our continued economic dependence on the U.S. is accelerating the transition to a circular economy – where materials, products and resources remain in circulation for as long as possible, generating continuous value rather than being discarded.
This will require the investment of substantial money and time, but failing to do it through smarter planning by cities and regions will cost even more in the long run because of missed opportunities, inefficiencies and perpetual short-term fixes.
Federal and provincial governments need to understand this imperative and provide greater funding for it. Regional and municipal governments need to make dramatic changes in how they plan to make it happen.
According to a 2021 federal government study, circular economic activities in the remanufacturing sector already contribute $56 billion annually to the economy and support 380,000 jobs. Expanding these practices could nearly double the sector’s value by 2030, adding up to 72,000 new jobs, strengthening domestic supply chains and reducing dependence on the U.S. and other external markets.
Beyond manufacturing, circular economy practices also unlock further opportunities for service-oriented businesses such as rental, resale, sharing platforms and redistribution networks.
These businesses not only extend product lifespans but also reinforce community resilience by ensuring continued local access to essential goods, especially during economic downturns or supply chain disruptions such as what occurred during COVID-19 and what might happen again because of Trump’s tariffs.
Despite this potential, only 6.1 per cent of the Canadian economy operates on circular principles. Why? Primarily because the linear “take-make-dispose” model remains easier and is often more immediately profitable.
Extractive activities and disposal remain inexpensive at scale, while circular business models face high infrastructure and logistical costs that often require substantial initial investment or subsidies.
Strategic shift needed
Federal and provincial efforts over the past decade – subsidies, industrial partnerships and investment programs – have been fragmented and primarily framed as environmental initiatives rather than as a strategic economic shift and thus have failed to drive a systemic transition.
To break away from the linear economic model, Canada must reshape how its economic activities are structured and incentivized.
Our research at the department of urban studies and tourism at Université du Québec à Montréal, funded by the Social Sciences and Humanities Research Council, highlights that scaling the circular economy must begin at the city and regional levels, where local governments directly influence two critical levers: land-use planning and procurement.
Land-use planning determines how efficiently resources circulate, how industries cluster and infrastructure supports circularity. Thus, local governments must co-ordinate planning and infrastructure decisions on multiple fronts.
A multi-scale strategy is needed to make circularity cost-effective
At the regional level, current policies mean that discarding resources is easier and cheaper than recirculating them.
To shift this, cross-municipal infrastructure should be developed to lower the cost of reverse logistics and the conversion of waste into valuable products or resources, ensuring that materials can be efficiently sorted, processed and reintegrated into production to maximize their value.
Just as landfills are strategically located for cost-effective waste management, new circular infrastructures – such as material recovery, reuse and bioenergy production facilities – must be placed where recirculating resources can become more economical than disposal.
Because optimal locations vary by material (e.g., textiles, organics and plastics), each requires different logistics tailored to their specific needs.
At the municipal level, zoning must be updated to co-locate industries and businesses that can generate value by exchanging materials and resources, thus ensuring circular principles are integrated into urban planning rather than confined to designated hubs and industrial parks.
Municipalities can also further advance circularity by providing specialized services for businesses and institutions, such as targeted collection, sorting and storage of reusable industrial and commercial materials. Strategically locating these services can reduce costs, improve logistics and enhance the profitability of circular business models.
At the neighbourhood level, fiscal measures such as tax adjustments and targeted subsidies can help businesses such as repair, sharing and resale establish themselves in high-demand, accessible areas that they would otherwise be priced out of or where zoning restricts commercial activity.
Public procurement changes essential
Public procurement is another key driver for systemic transition, particularly in infrastructure and waste management.
In 2022, local and regional governments owned 83 per cent of culture, recreation and sports facilities, with a total replacement value of $154.1 billion. Similarly, solid waste infrastructure had a replacement value of $12.9 billion, with waste disposal assets accounting for the largest share in most provinces.
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Procurement policies should prioritize local entrepreneurs and Canadian businesses that offer remanufactured office equipment, refurbished furniture and recycled construction materials, ensuring that public spending supports circular innovation.
Outdated disposal policies now often force municipalities to discard still-functional equipment rather than repurpose or resell it. Regulations must be revised to allow, and even encourage, their reuse and repair, thus extending product lifespans and reducing unnecessary waste.
To drive systemic change and accelerate the circular economy, federal and provincial governments, along with the Federation of Canadian Municipalities and its provincial counterparts, must shift from managing project-based grants to investing in infrastructure to truly support communities in this transition.
Governments need to be more active
The current model often forces municipalities to compete for limited funding, diverting time and resources into applications, data collection and reporting, and leaving little room for meaningful implementation. This approach traps cities in perpetual pilot projects rather than enabling scalable transformation.
Instead, governments should become active providers of mutual planning intelligence, equipping municipalities with real-time data and analytical tools that streamline decision-making. Making this accessible to all municipalities, regardless of size or capacity, enables cities and regions to focus on execution rather than bureaucracy, ensuring long-term impact instead of isolated interventions.
A national digital twin platform represents one such strategic investment. Digital Twin Ontario, for example, showcases how digital twins can provide real-time insights into resource flows and infrastructure, enabling smarter decision-making.
Platforms like those developed by Dassault Systèmes for cities and public services further demonstrate the potential of advanced tools that can be delivered affordably through shared “as-a-service” models.
Shared digital twin infrastructure can be leveraged beyond the circular economy, helping municipalities tackle diverse planning challenges such as mobility, housing, climate adaptation and economic development – all within a single, cost-effective platform.
In an uncertain economy, the movement to a circular economy approach to policymaking is the bold, pragmatic shift Canada needs to build a stronger, more resilient economy not only to combat current threats but also to weather future crises and take advantage of new opportunities.
That starts with rethinking how we design infrastructure, zoning and incentives in cities and regions to favour reuse over disposal.
This article first appeared on Policy Options and is republished here under a Creative Commons license.
