Circular economy principles can lead to a series of opportunities to tackle climate change, particularly in cities of developing countries where the generation of waste, consumption and demand for energy is growing rapidly. This paper aims to advance the understanding of the expansion of circularity for tackling climate change using biomass for energy at the urban scale. In addition, little is known about how Circular Economy (CE) flows can be quantitatively integrated, what potential trade-offs exist in promoting Circular Economy using biomass, and how governance models can integrate these flows and contribute to a Circular Economy transition in cities. Based on an empirical study of a city in India, where the private sector participation through an innovative Public-Private Partnership (PPP) model enabled the use of urban wastewater in thermal power plants, the study presents the viability of Circular Economy models at the city scale. The feasibility of a further expansion of this circularity by co-firing biomass in local thermal power plants was analyzed, as a potential solution for reducing pollution and carbon emissions in a hard-to-abate sector. The result indicated an average 20.5 MJ kg−1 calorific value for torrefied mixed biomass pellets from crop residues, which, if applied to about 447 kt y−1 surplus biomass available in Nagpur would amount to 9.18 PJ of energy (per year). Overall, local power plants demanded about 19.85 Mt of coal in 2017–18, equivalent to 297.8 PJ in that fiscal year. Thus, the supply of torrefied pellets from peri-urban crop residues can meet between 2 and 3% of the demand from coal-fired power plants, resulting in a 0.3% decrease in the emissions from the power sector in India in 2017–18 (i.e., 922 MtCO2), benefiting different sectors and levels of government. The analysis provides a framework for understanding the technical and institutional possibilities for strengthening the relationship between circular economy and climate change in the cities of developing countries by connecting flows and systems within and beyond urban centers. Therefore, the expansion of Circular Economy in cities can occur by integrating urban sectors and policy coordination at different levels of governance. Partnerships between local governments, utilities, and civil society for co-managing energy, water, and waste in cities can reduce the financial burden on national governments, including meeting national emission targets.