Economic prosperity has brought improved productivity, diversified lifestyles, and the subsequent negative externalities, including air pollution, water pollution, the greenhouse effect, loss of biodiversity, and depletion of resources. Scientists have recognized the pitfalls of the linear economic growth mode of the past. They have also begun to ponder how to earn the synergy between economic growth and environmental protection to achieve everlasting development on the planet for human beings. In this context, the ideology of sustainable development was gradually enriched. Under the umbrella of sustainability science, the circular economy is regarded as a growth model that can reconcile the co-benefits of resource conservation, pollution mitigation, and economic growth. With the environmental crisis and resource scarcity becoming increasingly apparent, circular economy has been widely discussed and put into practice around the world, such as Germany’s circular economy roadmap, Japan’s construction of a circular society, and the development of China’s resource recycling industry. The 3R(Reduce, Reuse, Recycle) principle of circular economy is also adopted as the mainstream standard of circular economy practice, based on the life cycle assessment from the material flow perspective.

However, the development of the circular economy is undergoing a substantial challenge from carbon neutrality. The consensus to address the climate change crisis has become universal in the global community, and 80% of the countries have already pledged to achieve the carbon peak and carbon neutrality target. In essence, carbon neutrality is a shift that requires a decoupling of economic growth from carbon emissions—an increase in carbon productivity and profound decarbonization of various sectors. How to develop a circular economy in the context of carbon neutrality has therefore become a significant scientific and practical issue.

In view of this, this thesis seeks to take the municipal solid waste(MSW) management sector as an instance and, firstly, to elaborate on the challenges faced by circular economy practices amidst the decarbonization trend. Secondly, to address the problem of efficiency improvement in a carbon-neutral context, this thesis adopts an evolutionary game approach in conjunction with innovation ecosystem theory to investigate the behavioral evolution mechanisms of critical actors in the innovation ecosystem of the MSW management sector. In addition, this thesis examines whether a circular economy management guidepost proposed from a material flow perspective can deliver optimal carbon emission reduction to enhance our understanding about waste management paradigm’s applicability with the challenge of decarbonization, by combining a scenario analysis approach. Finally, this thesis employs the IPCC methodology to quantify the net carbon emissions from the MSW management sector of 185 countries worldwide by incorporating a life cycle assessment to develop carbon emission trajectories under different shared socioeconomic pathways (SSPs) from 2010 to 2100. And the impact mechanisms of different MSW management strategies(technological innovation and circular waste management) on carbon emission reduction are also discussed.

The findings indicate that circular economy practices under the carbon neutrality target confront the dual challenges of efficiency improvement and carbon emission reduction, requiring a rethinking of circular economy practices in technological innovation, management paradigm, etc. In order to strengthen the innovation capacity of the circular economy industry, an industrial innovation ecosystem should be constructed by involving upstream and downstream enterprises, government, research institutes, and consumers. Due to the uncertainty of the benefits and costs of innovation, policymakers should design an appropriate income allocation mechanism and cost-sharing mechanism to ensure the positive participation of innovation populations such as enterprises and research institutes. Additionally, government subsidy is a double-edged sword. Whilst reasonable government subsidy is conducive to the effective operation of the innovation ecosystem, the excessive subsidy will intensify the government’s financial burden and thus lead to negative participation of government subjects. Regarding the circular economy guidepost’s applicability, the waste hierarchy proposed from a material flow perspective cannot always yield optimal carbon reductions. Specifically, for high and upper-middle income groups, the ‘Reduce’ strategy provides the most insignificant net carbon emissions. Focusing on low and lower-middle income groups, however, the ‘Reduce’ strategy generates 3.01% and 1.32% more carbon emissions than the ‘Recycle’ strategy. Therefore, the circular economy framework under the carbon neutrality target should be revisited from the perspective of carbon flows. Concerning net carbon emissions from the global MSW management sector, maintaining the current management strategy would allow the carbon emission of the global MSW management sector to peak only under the SSP 1 and SSP 5, with peak values of 3227.85 MtCO₂e and 3,902.95 MtCO₂e in 2085 and 2095 respectively. However, under all SSPs, the global MSW management sector will not be carbon neutral by the end of this century. Furthermore, technological innovation and circular waste management transition will facilitate carbon emission reductions in the MSW management sector. However, technological innovation will experience failures in developing regions, such as South Asia, where technological innovation brings an average carbon reduction efficiency of 0.18% in all SSP pathways. Although the circular economy transition can remedy the failure of technological innovation in developing regions, the carbon reduction effectiveness of circular economy strategies will also be curbed in the SSP 3 and SSP 4. Therefore, the circular waste management transition should be underpinned by an environmentally friendly institutional environment to achieve decarbonization of the sector.

This thesis aims to clarify the interaction between the circular economy and carbon neutrality, indicating the transitional pressures on the circular economy under the external climate change challenges and how these challenges reshape the theoretical landscape of the circular economy, thus promoting the integration and development of the circular economy theory with the carbon neutrality context. The core findings have both theoretical and practical implications. Theoretically, this paper integrates innovation ecosystem theory with circular economy practice. Besides, this thesis employs game theory to quantitatively analyze the interaction mechanisms of agents within innovation ecosystems, developing the innovation ecosystem literature, which used to be dominated by qualitative analysis, and enriching the study of circular economy practice in terms of innovation modes. In addition, in terms of circular economy theory, this thesis examines the relationship between the current circular economy framework and carbon emission reduction, highlighting the limited effectiveness of waste hierarchy. It is proposed that the circular economy with a carbon-neutral context should embrace the carbon flow, which promotes the development of circular economy theory. The carbon-flow-based findings might enlighten the development of circular economy theory to circular carbon economy theory. Meanwhile, for waste management theory, this thesis fosters the convergence of waste management theory and carbon neutrality by analyzing the influence mechanisms of technological innovation and circular waste management transition on carbon emission reduction of waste management. This thesis also generates a national-scale long-time series carbon emission database of global MSW management to provide data support for follow-up studies. In terms of the practical implications, the research findings contribute to policy design at the industry level, such as setting thresholds for government subsidies, cost-sharing coefficients, income allocation coefficients, etc. With regard to circular economy practices, this thesis calls for the authorities to assess the carbon emissions in the MSW management process from a life cycle perspective taking into account the local waste components, generation, and differentiated disposal methods, to decarbonize the MSW management sector. And the decision-makers should adopt locally tailor-made management strategies rather than blindly following the waste hierarchy. Moreover, circular economy practices in other sectors, such as the industrial sector, should also be considered from a carbon flow perspective. Regarding policy formulation to combat global climate change, the MSW management sector should consider synergistic strategies for transforming circular waste management and upgrading technological efficiency. At the same time, with urbanization and economic expansion, the MSW management sector in the global South will emit large amounts of carbon emissions. International organizations should thus make an effort to heighten MSW management in the global South. As MSW management in the Global South is still rudimentary, circular waste management will be a more appropriate strategy than technological innovation. However, for regions that have already transitioned to circular waste management, technological innovation can still offer additional carbon reduction opportunities for the waste management sector in these regions.