The Bubble: 20 October 2025

Dear Bubble Readers,

The Brussels calendar might be packed with strategy papers and stakeholder dialogues, but the real story is in the undercurrent, a growing tension between Europe’s long-term ambition and its short-term constraints.

This week’s headlines all circle around the same challenge: how to stay open, green, and competitive in a world that is none of those things. From CBAM diplomacy to digital sovereignty, from innovation financing to tech security, the EU is fine-tuning its levers to preserve what it calls “strategic autonomy”. But scratch the surface, and these are also circular economy stories, about managing flows of materials, capital, and knowledge in smarter, fairer, and more resilient ways.

Because in the end, circularity is not only about recycling waste, it’s about recycling trust, value, and cooperation in a system that is showing signs of strain.

Here's what happened👇

1️⃣ EU plans support for countries affected by the Carbon Border Levy

What happened

Brussels is preparing to launch a new mechanism to help developing and emerging economies adapt to the Carbon Border Adjustment Mechanism (CBAM). The plan, discussed within the Commission and member states, would redirect part of the levy’s revenues to fund green industrial modernisation abroad, particularly in regions heavily dependent on carbon-intensive exports to Europe. This move follows growing criticism from Africa, Latin America, and parts of Asia that CBAM risks penalising their industries without providing real assistance to decarbonise. The EU hopes that targeted financial support and technology cooperation can calm trade tensions as CBAM transitions from reporting to full payment phase in 2026.

Circular Angle

If designed well, this could turn CBAM from a defensive climate tool into a cooperative industrial policy. Linking border carbon revenues to circular and low-carbon projects in partner countries would help decouple trade from emissions while strengthening global supply resilience. Imagine CBAM proceeds funding scrap-steel recycling in North Africa, cleaner fertiliser production in Eastern Europe, or data systems to trace carbon content along supply chains, this is how Europe could make “open strategic autonomy” tangible rather than rhetorical.

2️⃣ EU to bypass Washington and woo US states on the green agenda

What happened

Faced with a divided Congress and slow-moving federal policy, the European Commission is now working directly with individual US states to align on climate and energy policy. Brussels is developing state-level partnerships around clean hydrogen, electric mobility, and green procurement, using California and New York as early anchors. This “subnational diplomacy” aims to bridge the regulatory gap that has grown between the EU’s Green Deal and the US’s Inflation Reduction Act (IRA). It also signals a pragmatic shift: rather than waiting for Washington, Europe is building its own patchwork of alliances with those willing to move faster.

Circular Angle

This approach could open the door for practical cooperation on circularity, from secondary raw materials standards to repair and reuse regulations. Many US states are experimenting with right-to-repair laws and producer responsibility schemes; linking them with EU initiatives could create a de facto transatlantic market for circular products. In a world of geopolitical fragmentation, subnational diplomacy may become one of the few ways to scale sustainability beyond speeches.

3️⃣ EIB chief backs ‘bold’ European reform to bolster local startups

What happened

The European Investment Bank’s president has urged EU leaders to rethink how innovation is financed, arguing that Europe is too reliant on fragmented grant systems and risk-averse funding. He called for new instruments - equity guarantees, innovation bonds, and pan-European venture funds - to keep promising companies from migrating to the US or Asia. The comments come amid concerns that Europe’s startup ecosystem remains underpowered: while research funding is abundant, scaling and industrialisation remain bottlenecks. The EIB wants to plug that gap, focusing on clean tech, digital infrastructure, and circular manufacturing solutions.

Circular Angle

This is where circularity meets capital. Many of Europe’s most promising circular startups, from advanced recyclers to material tracking platforms, struggle to grow beyond the pilot stage. EIB-led reforms could bridge that “valley of death”, anchoring circular innovation within Europe’s industrial fabric. A bolder financing model would not just retain talent; it would give Europe ownership of the tools it needs to decouple growth from resource use.

4️⃣ Europe needs a better chip strategy

What happened

The Financial Times reports renewed debate around the EU’s semiconductor ambitions. Despite billions pledged under the Chips Act, experts warn that Europe still lacks a coherent industrial strategy, one that goes beyond subsidies to address design, testing, and recycling infrastructure. The concern: without a coordinated approach, the bloc will remain dependent on Asian suppliers and vulnerable to geopolitical shocks.

Circular Angle

Chips and circularity may seem worlds apart, but the connection is critical. The semiconductor supply chain is highly resource-intensive, consuming rare earths, water, and energy. A genuine European chip strategy would not only secure supply but close material loops, recovering critical metals from end-of-life electronics, investing in urban mining, and designing chips for reuse. Circular design could become a strategic differentiator: not just how Europe makes chips, but how it keeps them in circulation.

5️⃣ EU floats conditions such as tech transfers for China investments

What happened

The European Commission is reportedly drafting a framework to tighten scrutiny of Chinese investments in strategic sectors such as renewable energy, digital infrastructure, and advanced manufacturing. One option under discussion: conditioning access to EU markets on reciprocal technology sharing and compliance with environmental standards. The proposal fits into a broader pattern, i.e. Europe’s attempt to “de-risk” its relationship with China without sliding into full decoupling. The aim is to maintain trade flows while protecting strategic know-how and ensuring fair competition.

Circular Angle

Circular value chains depend on transparency and trust, two things often missing from global investment flows. By requiring sustainability disclosures and tech-sharing clauses, the EU could turn regulatory leverage into a driver of circular alignment. Imagine a future where Chinese EV battery firms investing in Europe must commit to local recycling partnerships and data-sharing on material traceability. That’s de-risking with circular dividends.

Europe’s policy debates this week all orbit the same idea: control. Control of carbon flows, capital, data, and design. But true control comes not from isolation, it comes from integration. The circular economy offers exactly that logic: resilience through interdependence, autonomy through collaboration.

As Brussels wrestles with its strategic dilemmas, the circular lens remains Europe’s quiet advantage. It’s the story behind every other story, a reminder that sustainability and competitiveness are not opposites, but two sides of the same loop.

Until next week in The Bubble!