Financing the Circular Transition Under Compound Risk: Public Capital Allocation Between Civil Protection and the Digital Circular Economy in Lithuania

Industry 5.0 frames digital and circular investment as a capital-allocation problem under risk. This study examines how a small open economy allocates limited public capital between two demands. The first is civil protection against hybrid and military threats. The second is the transition to a digital circular economy. Lithuania serves as the case. The study combines doctrinal analysis of EU and national law with documentary analysis of budgetary and program data. It assesses three hypotheses on displacement, funding composition, and the early identification of dual-benefit investment. The data combine state budget allocations for 2021–2024 with planned needs and allocations up to 2030. All figures from 2025 onward are planning commitments, not outturns. Civil protection funding rose from EUR 12.7 million in 2021 to EUR 43.0 million in 2023. It stood at EUR 39.7 million in 2024. A further EUR 284.7 million is required for 2025–2030. Circular economy measures are planned at EUR 4.27 billion against an assessed need of EUR 4.44 billion (96.0% coverage). The displacement hypothesis is not supported. On a like-for-like annual basis, the circular program remains eight to thirteen times larger. The main constraint is composition. The circular industry receives 32.8% of its assessed need and accounts for 90.8% of the program’s funding gap. The horizontal line for digitalization, research, and coordination receives only 0.3% of planned funds. The findings have three policy implications. Project appraisal should include a dual-benefit test. Civil protection procurement should apply lifecycle criteria. Digital traceability infrastructure needs dedicated funding because both circular finance and supply-chain security depend on it.