The increasing demand for new housing and infrastructure is causing more pressure on open natural landscapes and adding to land scarcity and habitat fragmentation. The significant increase in development of settlements and infrastructure is affecting biodiversity more than ever. Israel is making progress in expanding protected areas: it has protected about a quarter of its land area but only 4% of its territorial waters. However, most vulnerable ecosystems are under significant stress outside protected areas. Invasive alien plant and animal species have a significant negative effect on biodiversity and ecosystems, which requires regulatory action.

Israel intends to adopt a new national biodiversity strategy and set measurable biodiversity targets. It should pursue better mainstreaming of biodiversity protection into sectoral, particularly agricultural, policies and further integrate ecological corridors into spatial plans. The country should also intensify efforts to protect terrestrial ecosystems outside national parks and nature reserves by minimising urban sprawl. In addition, it should expand the size of marine protected areas.

Israel is one of the most water-stressed countries in the world, with agriculture accounting for over half of water consumption. To address water scarcity, it has invested massively in large-scale reuse of wastewater and desalination of seawater. Israel is the largest user of recycled effluent water for agriculture across OECD member countries; desalination secures the country’s supply of potable water. Israel has also made significant progress in improving water allocation among sectors and to nature by developing and implementing river plans and providing incentives to farmers to minimise upstream water abstraction. However, both surface water and groundwater remain polluted. Israel needs to continue to reduce freshwater consumption in agriculture through better water allocation planning and price signals, reduce nutrient loading from agriculture and complete upgrades of its wastewater treatment infrastructure.

Israel’s environmental regulatory framework is fragmented and partly outdated. Environmental assessment does not yet cover all projects, policies, plans and programmes with a potentially significant environmental impact. The country’s environmental permitting system is governed by several disparate issue-specific laws. Adopting the draft Environmental Licensing Law approved by the government in 2022 would be an important step towards substantive integration of environmental permit conditions across environmental media on the basis of best available techniques.

The country’s environmental compliance monitoring and enforcement capacity has increased over the last decade but remains insufficient. Inspections are mostly prompted by incidents or complaints. Compliance data are patchy and inconsistent. Israel should strengthen risk-based targeting of compliance monitoring and engage in more active compliance promotion with a particular focus on small and medium-sized enterprises. It also needs to improve compliance-related reporting and data management.

Israel’s excise taxes on motor fuels are among the highest among OECD countries. However, other fossil fuels have so far been taxed at very low rates. Israel is planning to gradually increase excise taxes on other fossil fuels so that carbon pricing would cover about 80% of its GHG emissions. In doing so, it needs to ensure the increased tax rates are commensurate with the fuels’ carbon content.

Israel’s fossil fuel subsidies increased over the past decade. They include consumer subsidies through excise tax rebates on diesel fuel for buses, taxis and several other vehicle categories, as well as support for natural gas producers. These subsidies should be phased out. At the same time, Israel should consider and address the impact of the energy tax and subsidy reforms on low-income households.

Most of the government’s environmental expenditure consists of subsidies to local authorities for waste collection, transport and treatment. Subsidies for, and investments in, wastewater treatment and recycling constitute the bulk of public wastewater-related expenditure. Israel has made significant investments in solar power generation, including in the residential sector. It has also had some success in increasing the use of public transportation, including railways, light rail and buses.

The low-carbon transition requires the country to ramp up investments in renewable energy and clean transport. Israel should develop and implement a medium-term investment plan for the production, storage and transmission infrastructure for solar-based electricity. It should also accelerate public and private investment in electric vehicle-charging infrastructure.

Israel aspires to “zero waste” by 2050. However, Israel’s sustained economic and population growth over the past decade and the absence of robust waste management policies have contributed to growing municipal solid waste (MSW) levels, while the shares of both landfilling (80%) and recovery (20%) have remained stable. The Sustainable Waste Economy Strategy (2021-2030) aims to reduce the share of total MSW landfilled to 20% and increase MSW recycling to 54%, while reducing GHG emissions from the waste sector by 47% compared to 2015 levels. However, Israel does not yet have a clear legislative framework for waste management.

Israel has taken a number of key steps to advance its zero waste and circular economy agenda. These include establishing a tax on certain single-use items, broadening the deposit-refund scheme, adopting a Packaging Law, and setting up a Cleanliness Fund to bridge the waste treatment infrastructure gap. The government has made progress in fighting illegal waste dumping. However, illegal open burning of waste persists in certain areas of the country.

Israel’s policies lack a life-cycle perspective. The country should start to develop higher-value material loops whereby materials are recovered, reclaimed, recycled or biodegraded through natural or technological processes. It should also foster eco-design, repair and reuse.

Strengthening the role of municipalities will be key to achieving recycling targets and applying circular economy principles in areas such as built environment. Municipalities are legally obliged to collect packaging and electrical waste separately but have discretion on sorting other types of waste. Separate waste collection is not widely practised, largely due to insufficient economic incentives and a lack of recycling infrastructure. The role of local authorities in transitioning from a linear to a circular economy must be enhanced. The central government should provide them with regulatory and technical support to strengthen regional waste management schemes and build their capacity to reduce waste generation and increase resource efficiency. Other tools, such as pilot programmes for circularity in the food system and built environment, as well as exchange of good practices among municipalities, should also be employed.

Israel should leverage the full potential of a circular economy across all sectors, from preventing waste generation to keeping materials in use as long as possible, to transforming waste into resources. The government has launched several circular economy initiatives, including a 2019 National Programme for a Circular Economy in Industry, guidelines for designing sustainable industrial zones and a centre for resource efficiency. Israel’s climate mitigation policy considers the circular economy key to reducing GHG emissions from industry. However, there is no consolidated national circular economy plan. The current focus on industry misses opportunities to move towards a producer- and consumer-driven circular economy across sectors.

A roadmap towards a circular economy with clear objectives and targets could introduce a life-cycle perspective to policies and projects and foster eco-design and reuse. Bridging the data gap on material flows, resource efficiency, material exports and imports would help identify most resource-intensive sectors and take targeted actions to promote circularity.

Existing economic instruments for waste management do not provide sufficient incentives for behavioural change. The total cost of landfilling in Israel, which includes the landfill levy, is lower than that of more sustainable treatment methods such as incineration with energy recovery and organic waste treatment. Israel has not yet implemented the pay-as-you-throw mechanism foreseen by the Sustainable Waste Economy Strategy (2021-2030). Such a mechanism would increase the costs of waste disposal and make waste prevention and recycling more attractive. Israel should introduce deposit-refund schemes and separate waste collection fees from municipal taxes to incentivise waste reduction and separation of recyclables by households.

The government has progressively introduced environment-related criteria into its procurement tenders and recently set a target of 20% of government spending for green public procurement. However, the voluntary nature of these criteria combined with conservative habits, lack of dialogue between suppliers and buyers, and poor knowledge of purchasing practices limit the introduction of green public procurement. Although Israel is a fertile territory for innovation, start-ups in environmental technology (“cleantech”) face challenges in responding to green tenders. Israel should implement circularity criteria in green public procurement, incorporate different business models in tenders and build capacity in contract management and tender definition.

Education and awareness initiatives such as the AMCHAM Circular Economy Forum and those led by the Manufacturers Association of Israel have largely been voluntary and targeted at the private sector. However, the transition to a circular economy requires engaging stakeholders beyond the private sector, such as civil society, community-based organisations and knowledge institutions. Israel should promote a bottom-up approach to a circular economy by establishing a formal stakeholder engagement mechanism, such as an advisory group. This could inform circular economy policies and create incentives to reward cities and businesses that achieve pre-defined zero waste targets.