Who Pays, Who Gains? Financing the Bio-Circular Transition
Every conversation about the bio-circular economy eventually arrives at the same question: who pays for it? The transition from a linear to a circular model of agriculture and food production is not simply a matter of changing practices. It requires investment: in infrastructure, in technology, in knowledge, and in the time it takes for new approaches to generate returns. And investment requires capital.
The honest answer to who pays is: many actors, through many mechanisms, over different timescales. Public funding sets direction and absorbs early risk. Private investment follows where commercial viability is demonstrated. Farmers and enterprises access support through grant programmes, cascade funding, and blended finance instruments. The architecture of funding for the bio-circular transition is more complex than it might appear, and more substantial than many of those working within it realise.
This essay maps that architecture. Its aim is not to catalogue every funding instrument, but to give a clear picture of where the money is, who can access it, and what the logic of the whole system means for farms, SMEs, and regional ecosystems working to make the bio-circular transition real.
The Scale of Public Investment
The volume of public funding currently directed at the bio-circular economy in Europe is considerable, though it flows through instruments that are not always visible to those working at farm and community level.
Horizon Europe, the EU’s flagship research and innovation programme, dedicates its Cluster 6 to food, bioeconomy, natural resources, agriculture, and environment. The indicative budget for Cluster 6 calls in 2026 alone stands at 959 million euros across seven thematic areas, including circular economy and bioeconomy as a dedicated destination. The 2026 call for proposals under this cluster opened in April 2026 and covers eleven topics ranging from bio-based innovation and critical raw material recovery to plastic food packaging improvements and textile recycling.
EUR 959 million indicative budget for Horizon Europe Cluster 6 calls in 2026, covering food, bioeconomy, agriculture and circular economy (European Commission, 2026)
Alongside Horizon Europe sits the Circular Bio-based Europe Joint Undertaking (CBE JU), a two-billion-euro public-private partnership between the European Commission and the Bio-based Industries Consortium. CBE JU’s 2026 work programme makes 170.7 million euros available for new project proposals across thirteen targeted topics, from industrial flagship biorefineries to biotech routes for residual biomass valorisation. Its predecessor, the Bio-based Industries Joint Undertaking (BBI JU), demonstrated the leverage effect of coordinated European investment: with 822 million euros of EU funding, BBI JU mobilised more than 2.6 billion euros in total investment across 138 projects, engaging over 1,100 organisations in 35 countries and establishing 156 new bio-based value chains.
EUR 2.6 billion total investment mobilised by BBI JU from EUR 822 million EU funding, establishing 156 new bio-based value chains across 35 countries
The LIFE Programme, the EU’s dedicated environment and climate action fund, provides a complementary instrument. Beyond direct project grants, LIFE in 2026 offers advisory services specifically designed to help SMEs develop and accelerate bankable green investment projects in circular economy, bioeconomy, and climate adaptation, connecting eligible enterprises with expert guidance on business modelling, financing strategy, and regulatory compliance. Ukraine, as an associated country, is explicitly eligible for these instruments alongside EU member states.
Beyond these dedicated programmes, the CAP rural development pillar allocates 66 billion euros for 2023-2027, with funding streams specifically designed to support cooperation, innovation, and knowledge transfer in rural areas. The 25% eco-scheme allocation within CAP direct payments, discussed in Essay No. 5, creates a recurring income stream for farms that adopt bio-circular practices, effectively turning the CAP into a financing mechanism for the transition as much as a support mechanism for production.
Private Investment: Following the Signal
Public funding is not the whole story, and for the bio-circular transition to reach the scale that the evidence suggests is needed, private capital must play a central role. The question is whether the conditions that attract private investment are in place.
In the biomethane sector, the answer is already yes. As discussed in Essay No. 3, private investment committed to biomethane development in Europe ahead of 2030 already stands at 28.4 billion euros. This is not grant funding. It is commercial capital responding to a combination of regulatory certainty, growing demand, and demonstrated returns. The sector provides a template for what private investment in bio-circular infrastructure can look like when the conditions are right.
The EU Bioeconomy Strategy 2025 explicitly addresses the financing gap that holds back bio-circular development, particularly at the scale-up stage between proven prototype and commercial deployment. To fill this gap, the Commission foresees enhanced funding under the next Multiannual Financial Framework, including continued blended-finance mechanisms through InvestEU and the European Circular Bioeconomy Fund (ECBF). From 2026, new instruments include the Scale-up Europe Fund and new European Innovation Council mechanisms to improve access to finance for startups and scale-ups working in the bio-circular space. The Bio-based Europe Alliance, a new collective offtake initiative, is targeting 10 billion euros of aggregate demand for bio-based products by 2030, creating the market signal that commercial investors need to commit capital at scale.
EUR 10 billion collective offtake target set by the Bio-based Europe Alliance for bio-based products by 2030, designed to attract private investment at scale (Bioeconomy Strategy 2025)
Carbon markets represent an emerging but increasingly important private financing stream. Farmers who can demonstrate verified soil carbon sequestration, through regenerative practices, reduced tillage, and cover cropping, are gaining access to voluntary carbon markets as a revenue stream independent of commodity prices. As the Carbon Removal and Carbon Farming Certification Framework (CRCF) develops, this mechanism will become more standardised and accessible. Early movers who build soil carbon data now will be positioned to monetise that asset as market infrastructure matures.
Cascade Funding: Reaching the SME
Large public programmes and institutional investment instruments are necessary but not sufficient. The bio-circular economy at the regional and farm level is shaped primarily by SMEs, cooperatives, and individual farm operations, not by large enterprises with dedicated grant offices and legal teams. The question of how funding reaches these actors is therefore critical.
Cascade funding, sometimes called sub-granting, is the mechanism designed to bridge this gap. Under the cascade funding model, a lead organisation, typically a university, research institute, or consortium coordinator, receives a large grant and is authorised to redistribute a portion of it to smaller enterprises and innovators through a competitive internal process. The recipients benefit from substantially reduced administrative burden compared to applying directly to the European Commission, while the lead organisation provides mentoring, network access, and technical support alongside the financial transfer.
Within AGRI-BIOCIRCULAR-HUB, cascade funding is one of the project’s core instruments for engaging SMEs. Entrepreneurs and small enterprises working on bio-circular innovations in Poland, Latvia, and Ukraine can apply for support through the project’s open innovation and entrepreneurial mentoring programme, accessing both financial resources and the expertise, networks, and market connections that allow small-scale innovations to find their commercial footing. This mechanism is particularly significant for Ukraine, where the bio-circular SME ecosystem is developing rapidly but access to EU funding instruments has historically been limited by administrative distance and capacity.
The CBE JU data confirms the structural importance of SMEs in bio-based innovation: approximately 35% of all CBE JU project beneficiaries are SMEs, and SMEs coordinate almost half of all Innovation Actions within the programme. The cascade model is how these actors are reached when direct applications to major programmes are beyond their administrative capacity.
35% of all CBE JU project beneficiaries are SMEs, who coordinate nearly half of all Innovation Actions in Europe’s bio-based sector (CBE JU, 2025)
Who Gains: The Distribution of Returns
Understanding who pays for the bio-circular transition also requires understanding who benefits from it, and on what timescale. The returns are distributed unevenly across time and across actors, and this distributional pattern shapes who has the incentive to invest and who requires support.
Farmers who adopt circular practices bear upfront costs: new equipment, new management approaches, learning time, and in some cases yield dips during transition periods. Their returns come gradually: lower input costs as synthetic fertilisers are replaced by digestate or compost, new revenue from biogas or compost sales, eco-scheme payments from CAP, and over time, improved soil health that reduces vulnerability to weather extremes. These returns are real and measurable, but they often accrue on a different timescale than the costs.
SMEs and entrepreneurs working in bio-circular technology development face the classic innovation financing challenge: the valley of death between proof of concept and commercial scale. Cascade funding, public grants, and blended finance instruments from programmes like CBE JU and Horizon Europe are designed specifically to bridge this gap. The returns for successful innovators can be substantial, since bio-based alternatives to fossil-derived products are entering markets that have structural growth embedded in EU policy direction.
Regional economies gain from the decentralising tendency of bio-circular value chains. Unlike fossil fuel or synthetic fertiliser supply chains, which concentrate value in a small number of large industrial facilities, bio-circular chains generate economic activity close to where biological resources originate. Rural communities that build bio-circular infrastructure retain more of the value created from their land, creating local employment and income diversification that does not depend on commodity price cycles.
The gains that accrue to society, cleaner water, healthier soils, reduced greenhouse gas emissions, lower dependence on imported synthetic inputs, and greater food system resilience, are not captured in any single enterprise’s balance sheet. This is why public investment in the bio-circular transition is not a subsidy to uncompetitive industries but a mechanism for internalising externalities that market prices do not reflect: the value of soil carbon, the cost of nitrate pollution, the strategic risk of fertiliser import dependence.
Barriers and How to Address Them
The funding landscape for the bio-circular transition is more generous than many practitioners realise, but it is not without significant barriers. Three are worth naming directly.
Administrative complexity. Large EU funding programmes are designed for organisations with significant administrative capacity. The documentation requirements, co-financing obligations, and reporting frameworks of Horizon Europe or CBE JU are manageable for a research university or a mid-sized enterprise with a dedicated project office, but they are often prohibitive for a family farm or a small biogas startup. Cascade funding and national intermediary programmes are the structural response to this barrier, but they only work when lead organisations actively invest in reaching smaller partners.
Time horizons. Most public funding instruments operate on project timescales of three to five years. Many bio-circular investments, particularly soil-building practices and long-term infrastructure, generate their most significant returns over ten to twenty years. Closing this gap requires instruments that provide longer-term revenue certainty, whether through carbon market access, long-term off-take agreements for bio-based products, or CAP payment frameworks that reward multi-year practice commitments rather than annual compliance.
Information gaps. A significant share of the SMEs, farms, and municipalities that could access bio-circular funding do not know that it exists, or do not have the network connections to navigate it effectively. This is not a marginal problem. The European Bioeconomy Strategy 2025 identified this information gap explicitly, and the creation of the Bioeconomy Investment Deployment Group and the European Bioeconomy Regulators and Innovators’ Forum in 2026 reflects a Commission-level acknowledgement that connecting available funding to potential recipients requires dedicated infrastructure.
The Connective Tissue
The funding exists. The commercial opportunities are growing. The policy direction is consistent. What the bio-circular transition often still lacks is the connective tissue that links available capital to the farms, enterprises, and communities that can deploy it effectively.
This is the role that projects like AGRI-BIOCIRCULAR-HUB are designed to play. Not as funders themselves, but as network builders: connecting SMEs to cascade funding mechanisms, connecting farmers to eco-scheme advisors, connecting regional biogas developers to the policy and market intelligence that allows investment decisions to be made with confidence. In Poland, this means linking Poznan University’s research capacity to the farms and enterprises of Wielkopolska. In Latvia, it means connecting the Egg Energy biogas model to the commercialisation infrastructure of the Commercialization Reactor. In Ukraine, it means building the ecosystem of knowledge, partnerships, and funding pathways that allow the country’s vast bio-circular potential to be unlocked.
Who pays for the bio-circular transition? In the end, the honest answer is: those who understand where the value lies, and who have the connections to access the instruments that have been built to support them. The funding architecture is in place. The knowledge of how to navigate it is what makes the difference.
This essay is part of the series Field of the Future: Essays on Biocircular Economy, published within the AGRI-BIOCIRCULAR-HUB project. Funded by the European Union under Horizon Europe (Grant Agreement No. 101186869). Data sources: CBE JU 2025 Annual Review; CBE JU 2026 Work Programme; Horizon Europe Cluster 6 Work Programme 2026-2027; European Commission Bioeconomy Strategy 2025; European Biogas Association Statistical Report 2025; EU CAP 2023-2027 framework.