From trash to energy gains: How zero-waste policies are changing cities

Urban circular economy policies can improve energy efficiency and deliver wider economic and environmental benefits when cities link waste reduction, recycling, industrial upgrading and green innovation, according to a study published in Energies by researchers from Jimei University.

The study, titled "Urban Circular Economy and Energy Efficiency Improvement: Evidence from China's 'Zero-Waste City' Pilot Program," uses China as an example to analyze panel data from 282 prefecture-level cities from 2006 to 2023 and finds that zero-waste city policies significantly improve urban energy efficiency through resource circulation, structural optimization and innovation-led gains.

Circular economy policy is becoming an energy strategy

Cities are under growing pressure to manage waste, reduce emissions and improve energy use as climate change, resource scarcity and urban growth strain public systems. Circular economy policies are often portrayed as waste-management tools, but the study shows they can also function as energy-efficiency strategies when they reduce reliance on virgin materials, improve recycling systems and push industries toward cleaner production.

The circular economy moves away from the traditional model of extracting resources, using them and discarding waste. Instead, it seeks to keep materials in use through recycling, reuse, redesign and recovery. In urban settings, that shift can affect energy systems because material production, waste disposal, transport and industrial processing all consume energy.

China's Zero-Waste City pilot program offers one of the clearest large-scale examples of this link. Launched in 2018, the program aims to reduce landfill disposal, improve resource utilization and build circular management systems across industrial waste, agricultural waste, municipal waste and hazardous waste. The policy does not mean eliminating all waste, but reducing waste generation, strengthening recycling and making waste treatment less harmful.

The researchers treat the program as a quasi-natural experiment to examine whether a circular economy policy can raise energy efficiency at the city level. Their analysis uses staggered difference-in-differences and double machine learning methods, allowing them to compare pilot and non-pilot cities while accounting for economic development, population density, government spending and foreign investment.

Cities included in the zero-waste pilot improved energy efficiency compared with non-pilot cities. The result remained stable after multiple checks, including tests for pre-policy trends, placebo analysis, propensity score matching, synthetic difference-in-differences, alternative energy-efficiency measures and double machine learning models.

This is important because many circular economy studies focus on recycling, landfill reduction or emissions. The new evidence shows that waste policy can also reshape urban energy use. When cities recover more materials, reduce waste generation and optimize industrial systems, they can lower energy demand across production chains.

The study also places circular economy policy within a wider sustainability challenge. Waste, energy, industry and environmental protection are often handled through separate policy systems. The findings suggest that better results may come from treating them as connected parts of the same urban transition.

Recycling, industrial upgrading and green innovation explain the gains

The study identifies three major pathways through which zero-waste policies improve energy efficiency.

Resource circulation

By expanding waste sorting, recycling and recovery, cities can turn waste into usable inputs and reduce the need for energy-intensive extraction and processing of raw materials. The study finds that the zero-waste policy significantly increased the comprehensive utilization rate of industrial solid waste. That means more discarded material was being brought back into production rather than being buried, burned or left unused.

This mechanism is central to the energy effect. Recycled materials often require less energy than virgin resources. In industrial systems, using recovered inputs can reduce energy use in mining, refining, manufacturing and waste treatment. When cities make these systems more efficient, the benefits extend beyond the waste sector.

Structural optimization

Zero-waste policies can pressure high-waste and high-energy industries to upgrade production processes, improve resource efficiency or exit inefficient operations. At the same time, they can support cleaner industries and resource-efficient production. The study finds evidence that the policy improved the rationalization of industrial structure, suggesting a shift toward a more efficient economic mix.

This matters because urban energy efficiency is shaped by what cities produce and how they produce it. A city dominated by heavy, energy-intensive industries will face greater energy pressure than one with cleaner manufacturing and service-oriented sectors. Circular economy governance can push this transition by raising waste-management standards and encouraging more efficient production models.

Green technological innovation

The study finds that zero-waste policy significantly increased green invention patent applications. Firms facing waste-reduction and resource-use requirements may respond by developing cleaner technologies, better recycling systems, lower-energy equipment and smarter waste-management processes.

This supports the idea that environmental policy can trigger innovation rather than simply impose costs. If firms invest in new processes that reduce waste and energy consumption, they can improve efficiency while meeting regulatory goals. At the city level, these innovations can spread across sectors and strengthen overall performance.

The double machine learning approach adds credibility to the findings. Across several model types, including random forest, decision tree, XGBoost, LightGBM and neural networks, the estimated policy effect remained positive and significant. This suggests the results are not driven by one narrow statistical specification.

The research also controls for other policy influences, including low-carbon city pilots, ecological civilization initiatives, circular economy demonstration programs and fiscal support for energy conservation. Even after accounting for these factors, the zero-waste policy continued to show a significant energy-efficiency effect.

Larger, regulated and digitally advanced cities gain more

The study finds that circular economy policy does not work equally everywhere. The effect is stronger in environmentally regulated cities, large cities and cities with higher levels of artificial intelligence development.

Environmentally regulated cities benefited more because they often have stronger enforcement, better governance systems and more developed environmental infrastructure. These conditions make it easier to implement waste sorting, recycling, industrial upgrading and resource recovery. In cities with weaker regulation, the same policy may face slower implementation and weaker results.

Large cities also showed stronger energy-efficiency gains. They tend to have larger fiscal capacity, better recycling infrastructure, more advanced industrial systems and stronger innovation networks. They can coordinate waste systems, industrial resource flows and energy systems at a scale that smaller cities may struggle to match.

The AI finding is especially relevant for future urban policy. The study finds stronger effects in cities with higher AI development, measured through AI-related patents. This suggests that digital capacity can amplify circular economy outcomes. AI can support waste classification, recycling logistics, environmental monitoring, energy scheduling and industrial process optimization. In practice, smart technologies can help cities track resources more accurately and reduce energy waste.

China's experience offers a useful example for other countries, but the broader lesson is not limited to China. Cities seeking to improve energy efficiency may need to treat zero-waste programs as part of a wider resource and energy strategy. Recycling bins and landfill reduction targets are not enough. Effective circular economy policy also requires industrial coordination, green technology, data systems and enforcement capacity.

Improvements linked to the zero-waste policy were associated with higher fiscal revenue, increased environmental protection spending, GDP growth, lower carbon intensity and reduced PM2.5 concentration. The rise in fiscal revenue exceeded the increase in fiscal expenditure, suggesting that circular economy policy can support fiscal sustainability when it improves efficiency and economic activity.

These findings challenge the view that environmental programs mainly create costs. In this case, zero-waste governance appears to generate economic and environmental co-benefits. By raising energy efficiency, cities can improve productivity, reduce pollution and strengthen public finances.

Policy implications

Governments should connect waste-management policy with energy-transition goals. Urban circular economy plans should include targets for resource recovery, industrial energy efficiency, green innovation and pollution reduction. Cities should also invest in recycling infrastructure, digital monitoring, smart waste systems and green technology development.

Additionally, policy design should reflect local conditions. Large and environmentally regulated cities may be ready for integrated circular economy and smart energy systems. Smaller cities may first need stronger waste classification, basic recycling networks, technical support and investment in cleaner production capacity.

The study is based on city-level data from China, therefore, the findings may not automatically apply to every national or local context. More research is needed on firm-level behavior, household participation and long-term effects in other regions. But the evidence provides a clear message for urban sustainability planning.

Zero-waste policy can do more than reduce landfill pressure. When designed as part of a circular economy strategy, it can improve energy efficiency, support cleaner industry, encourage green innovation and cut pollution.