Education Circular economy

A Joint Change of Course

 By Mari Pantsar
Circular economy

From the article “A joint change of course” by We World Energy magazine n.40

Cutting emissions by abandoning linear economy paradigms will require concerted action by markets and lawmakers, action that will provide increased benefits through a conversion to a circular economy…

The publication of the special report of the Intergovernmental Panel on Climate Change (IPCC), “Global Warming of 1.5°C”, has stoked intense debate about how to close the gap between current climate policy and the goal of limiting global warming to 1.5 degrees Celsius. Much of the debate is focused on how to achieve another long-term goal of the Paris Agreement: an economy with net zero emissions. There is an air of urgency about the debate, as investment decisions made globally within the next one to four years will be decisive for the mitigation of climate change.
Thus far the policy discussions and the various proposed “road maps” have focused on increasing energy efficiency and deploying low-carbon energy sources. Both are crucial, but when it comes to industry, a major source of emissions, these measures offer only a partial solution. Additional strategies are needed to address the substantial amount of emissions from the production of materials such as steel, cement, plastics and aluminium.

The transition from a linear to a circular model

Our current economic model is linear in that natural materials are extracted to produce more and more products which are disposed of after short lifespans. On a planet with 7.7 billion people, soon to be 10 billion, with ever-growing levels of mass consumption, the transition towards a circular economy is inevitable. In the circular economy, waste is eliminated as far as possible, and where waste can’t be avoided, it is converted into a valuable resource and raw material. The life cycles of products are extended and their usage rates are maximized with business models that focus on sharing and leasing with the help of digital platforms. Recycling and reuse of products will become mainstream. In fact, the circular economy is much more than recycling. It is a new, sustainable and vital economic model in which consumption is based on using more services—sharing, renting and recycling—instead of owning things. According to a study conducted by Sitra, Material Economics and the European Climate Foundation (2018), increased global circulation of just four main material streams—steel, plastics, aluminium and cement—would go a long way to meet the targets of the Paris climate agreement. Circular economy measures could reduce European Union (E.U.) industrial emissions by 56 percent (300 Mt) annually by 2050. That is more than half of what is necessary to achieve net zero emissions. Globally, the reductions could be as much as 3.6 billion tons annually over the same period. Industry accounts for 24 percent of global CO2 emissions, a total of 37 billion tons in 2017.

If we want to meet the Paris Agreement commitments, the future economy must include circular business models—increased recycling and recirculation of materials and far more material-efficient products. Globally, governments and businesses need to put the circularity, fuelled by advancements in digitized technology, at the heart of their industrial innovation strategies. And that with a clear goal of achieving net zero emissions by 2050.

How it can be achieved

To exploit the circular economy to its maximum potential, a smart regulatory framework is needed. This includes at least the four following steps.

1 | Plot a defined course of action and recognize the potential of the circular economy as a major contributor to climate targets.
The potential of circular economy measures to contribute to climate targets is far from recognized in current climate or industrial policy, and climate action plans at international, national or local levels currently make little reference to the overall agenda. Therefore, as a first step, focus needs to be on policymakers, civil society, researchers and business leaders. Those responsible for shaping policy at all governance levels can help make clear that it is necessary to incorporate circularity in all aspects of E.U. climate and industrial policy.

2 | Create an enabling framework that includes publicly funded research and infrastructure and regulatory guidelines. It is largely the private sector that will construct the circular economy. The companies producing mass-use materials, the manufacturers, construction firms and the consumer goods retailers, and, at the end of the line, the waste management and recycling firms. Nonetheless, the public sector has a crucial role to play by shaping the business environment, infrastructure, policy frameworks and incentives that help, encourage and facilitate private action. One essential thing is to stimulate innovation. Technological development is making circularity measures more viable and cost-efficient. Opportunities to increase revenue and add value abound. There are countless opportunities: platforms for car-sharing; autonomous vehicle schemes; sensor-based sorting of scrap metals; automated tracking of material flows in buildings; chemical marking of different types of plastics to allow for easier sorting and recycling; automation of construction processes; automated disassembly of complex products; chemical recycling technologies; methods for removing copper from steel—the list is long. Those companies that are smart and quick enough to seize these opportunities will position themselves as future global leaders.
While many companies may not be ready to make major investments in these innovations, the public sector can accelerate the process by funding research and development and encouraging through example early take-up. Legislation and regulations need to be adapted or introduced to enable circular economy opportunities. As always, all regulatory approaches must be analyzed carefully to ensure fair balance between the different objectives of  interested parties.
As an example, in waste management, there are many regulations to consider: the management of current and future incentives for the incineration of waste; the impact of additives and toxicity in plastics recycling; “end-of-waste” policies that can often prevent or hinder trade in secondary materials; and ensuring clarity about the ownership of and access to end-of-life materials. Efforts to create internationally recognzized standards for the ownership and use of secondary materials should also be encouraged.

The modern waste collection system in Ljubljana, one of the greenest cities in Europe (European Commission)

3 | Level the playing field to remove incentives for creating waste and to improve the profitability of investments in circular economy measures.
Market conditions today favor waste against material efficiency and reuse. To improve the profitability of circular business models, financial incentives need to change. The fact that so many negative-cost opportunities that make clear economic sense remain undone suggests that existing policy measures such as carbon pricing in the E.U. are not enough. Materials are internationally traded commodities making it difficult for the E.U.  alone to unilaterally introduce carbon prices at levels required to ensure significant cuts in emissions—both on the supply or the demand side. But even setting high carbon prices may not be enough, because many of the barriers that prevent reducing emissions are non-financial. Regulations steer key sectors such as the construction industry and waste management in ways that might encourage but in reality often discourage circularity. Thus, while setting carbon prices can help, policymakers need to do more to unleash the full potential of their actions. A major issue is how best to provide incentives to manufacturers to account for the impact of materials and design choices on the value of components and materials once products have reached the end of their lives. To date, the main approach has been to encourage “extended producer responsibility,” but in practice its implementation provides very little incentive for manufacturers to modify their product designs. As a result, numerous unhelpful externalities remain in place, and priority needs to be given on a global scale to how to implement creative approaches for addressing this anomaly.

4 | Take government action across a range of areas, especially where governments have the greatest role in shaping outcomes.
Governments can also be the principal influencers in enabling the transition to more circular mechanisms. For example, the public sector is a major provider and user of mobility services, it owns and manages much of the built environment, and it is a large consumer of a wide range of material-intensive products. This means governments, at all levels of administration, are well positioned to push the market towards a more circular economy through their own investments and purchases. Governments also decide how transport infrastructures and the built environment are designed, developed and managed. This is true particularly if one considers decisions taken at the level of individual towns and cities around the world. One priority is to ensure that public transport systems are integrated with car and bike sharing schemes. City planning also influences buildings—how they are constructed, what materials are used and how they are heated and cooled. Considering the vast potential for the reduced use of materials, it is vital that material efficiency and flexible use of the building stock of a town, city, county or nation are considered as an equal measure alongside more traditional concerns such as occupation density and social, employment or transport issues. Public procurement is another area open for consideration. Concerted efforts to incorporate recycled and recyclable materials and wider material-efficient strategies into purchasing decisions could help boost nascent markets. As with all other suggestions touched upon, further work and evaluation is required, but all are economically feasible and technologically easily within reach.

The circular economy needs a systemic change

It is often said that the transition to a circular economy requires “systemic” change, which seems difficult if not unfeasible. It is true that a recent IPCC report calls for fundamental change. But what is comforting and exciting is that there are smaller, manageable policy packages, which, when combined with a clear, ambitious vision for the future and strong political will, could unleash a wave of innovation and new investments that would pay off for generations to come. All this progress requires is a profound and yet very slight change of mindset, one that realises that the circular economy is not just an environmental issue or a means of reducing greenhouse gas emissions. It offers tremendous opportunity for business, government and the whole of society, providing companies with a significant competitive edge through more efficient use of materials by minimizing dependency on virgin raw materials, something which benefits us all. It is a winning strategy.

READ MORE: A circular world is possible by Mike Scott

about the author
Mari Pantsar
She is director of the Finnish innovation fund Sitra, leading the carbon-neutral circular economy theme. After working for forestry giant UPM, she moved to public and private positions in the cleantech sector. She led, among other things, the Finnish government’s cleantech strategy programme. She holds the title of docent at the University of Helsinki and at Lappeenranta University of Technology.