Europe is approaching a critical deadline in its effort to build a circular textile economy, but the cost of developing the infrastructure needed to recycle discarded clothing into new materials could run into billions of euros.
European Union member states are preparing to establish mandatory extended producer responsibility, or EPR, schemes for textiles, placing greater responsibility on companies for the collection, sorting, reuse and recycling of products after they are discarded.
However, the recycling infrastructure needed to support the transition remains far from the scale required, creating a significant investment challenge for one of the world’s largest textile and apparel markets.
An analysis by Boston Consulting Group and ReHubs estimates that achieving around 5% textile-to-textile recycling in Europe by 2035 could require between €8 billion and €11 billion in additional capital expenditure. The system could also require between €5 billion and €6.5 billion in annual operating expenditure.
The scale of the investment requirement stands in contrast to the size of Europe’s textile trade. Nearly $63 billion worth of apparel and home textiles entered the EU27 from non-EU suppliers during the first five months of 2026, highlighting the volume of products entering a market that is now being asked to take greater responsibility for textile waste.
The European Union has already established the regulatory direction.
Under the revised Waste Framework Directive, EU member states are required to introduce extended producer responsibility schemes for textiles and footwear within 30 months of the legislation entering into force. The deadline is expected to place textile waste management at the centre of business and policy planning across the bloc.
Under EPR, companies placing textiles on the European market will contribute to the costs associated with managing products once they reach the end of their usable life. The funding is expected to support separate collection, sorting, reuse and recycling systems.
The legislation could also create stronger incentives for companies to design products that are more durable, reusable and recyclable.
But building such a system presents significant technical and economic challenges.
Unlike materials such as glass or aluminium, textiles are often made from complex blends of fibres. A single garment may contain cotton, polyester, elastane, nylon and other materials, making separation and recycling difficult. Clothing can also contain buttons, zippers, coatings, dyes and other components that complicate the recycling process.
As a result, collecting used textiles does not necessarily mean they can be recycled into new fibres.
The BCG and ReHubs analysis points to challenges throughout the value chain, including collection, sorting, pre-processing and recycling. Large volumes of textile waste need to be accurately identified and separated before they can enter advanced recycling processes.
The economics remain another major obstacle.
Recycling technologies require substantial investment, while recycled fibres often have to compete with virgin materials that can be cheaper and more readily available. Investors also need confidence that there will be sufficient supplies of textile waste and stable demand for recycled materials before committing capital to new facilities.
This is where the new EPR systems could play an important role.
Producer fees could provide a more predictable source of financing for collection and recycling infrastructure. Governments may also use eco-modulated fee systems, where companies placing more sustainable and recyclable products on the market could pay lower fees.
Such mechanisms could encourage brands and manufacturers to reconsider product design, fibre selection and sourcing practices.
However, the effectiveness of the transition will depend heavily on how individual EU countries implement the rules.
While the directive provides a common European framework, member states will establish their own national EPR systems. Differences in fee structures, reporting requirements and operational models could create additional complexity for companies selling products across multiple EU markets.
For major textile-exporting countries, the changes could gradually reshape access to the European market.
Suppliers in Bangladesh and other major manufacturing hubs are likely to face increasing demand from European buyers for greater transparency on fibre composition, recycled content, durability and recyclability. Better product-level data could become increasingly important as brands seek to manage their future EPR obligations and comply with wider European sustainability requirements.
The transition also comes at a difficult time for Europe’s textile and clothing industry, which continues to face pressure from weak consumer demand, rising production costs and intense competition from global suppliers.
Adding billions of euros in recycling infrastructure investment could therefore require a combination of producer contributions, private capital, public funding and long-term purchasing commitments from brands.
Without guaranteed demand for recycled fibres, however, recycling companies may struggle to justify the investment needed to build commercial-scale facilities.
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The challenge for Europe is becoming increasingly clear: the region has created the regulatory framework, but the industrial and financial systems required to deliver circularity are still developing.
With less than 20 months remaining before the deadline for EU member states to establish textile EPR schemes, policymakers and industry are under growing pressure to determine how the transition will be financed.
For a market that imported nearly $63 billion worth of apparel and home textiles in just five months, the question is no longer whether textile waste needs to be addressed.
It is whether Europe can mobilise the estimated €11 billion needed to build a recycling system capable of turning a meaningful share of its discarded textiles into new materials — and whether the economics of circular fashion can work at industrial scale.