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31/08/2016

A truly circular economy will massively reduce Europe’s climate impact

Sustainable Dev.

A truly circular economy will massively reduce Europe’s climate impact

Recycling is central to the Circular Economy.

[Steve Snodgrass/Flickr]

The climate conference in Paris is only weeks away but the emissions reductions pledges made by countries are far from sufficient. We now know that the meeting in Paris will at best provide a platform for further action, writes Anders Wijkman.

Anders Wijkman is a Swedish Christian Democrat politician and a former Member of the European Parliament.

The challenge is complex, something made abundantly clear by the recently adopted sustainability goals.  More than three billion people live in poverty today. By 2050 another two to three billion people are likely to be born. To lift billions of people out of poverty will require significant investments in health and education, and related infrastructure and housing. For that to happen – without destabilising the climate and eroding our most important ecosystems – we need a revolution in the way we use energy and materials.

The focus so far has mainly been on energy use. But the material flows in society are just as important, and the two are intimately related. Industrial society was essentially built on linear resource flows. Energy and materials used to be cheap and companies did not have to pay for pollution. The logic of business was built around turning over consumer goods as rapidly as possible.

But there are two serious problems: pollution and wastefulness. Emissions into the air and water are directly proportional to the energy and material throughput in society. Moreover, most of the products and components that are thrown away today represent significant value and could be used again – and again.

Electronics waste – currently more than 60 million tonnes per year worldwide – is a case in point. Only a small percentage of the materials is recycled; mainly gold and copper.  A recent study by the Ellen Mac Arthur Foundation has shown that less than 10 % of the value of residue materials in the EU today is utilised.

We need a new business logic. More circular business models must replace the linear economy, featuring the following practices: multi-storey buildings built of wood; electronics designed for longer life and for components to be used again; car plants following the example of Renault, and taking back old engines, renovating them and using them in new vehicles; tyre manufacturers, like Michelin, offering tyres for lease, charging per km of use; clothing companies, like Mud Jeans and Houdini offering clothing for rent and lighting companies, like Philips, providing lighting as a service.

The circular economy benefits for companies are obvious in the form of lower costs for energy and materials. But the benefits for society are just as important. A new report from the Club of Rome has studied the likely macro-economic effects by moving towards a more circular economy. Five countries – Finland, France, the Netherlands, Spain and Sweden – were analysed using a traditional input/output model. This question posed was: how would the economies have performed today if they were 25% more energy efficient, had reduced the use of fossil fuels by 50% in favour of renewable energy and achieved a far more efficient use of materials?

The result is very promising. If the countries studied were to introduce all the three actions in parallel, the effects would be substantial: CO2 emissions would be between 65 and 70% lower. The impact on jobs would be highly positive as well, with an estimated 75,000 additional jobs in Finland, 100,000 in Sweden, 200,000 in Holland, 400,000 in Spain and half a million in France.

The result should not come as a surprise. An economy giving priority to caring for what has already been produced – through repair, maintenance, upgrading and remanufacturing – is more labour intensive than both mining and manufacturing (often in highly automated and robotised facilities).

A circular economy will not happen by itself. Policy measures – as well as targeted investments – will be needed. The European Commission is currently in the process of preparing a policy package in support of a more circular economy. I can only hope the Commission will use the opportunity well and propose actions that will make a difference.

Let me conclude by suggesting a number of policy measures that ought to be part of the Commission´s policy package for it to be successful:

  • Make material efficiency a priority in climate change mitigation strategies. So far climate policy has been sector-based, with a focus on energy use. Material use in society has not been taken into account, although the climate benefits from using products for longer and from enhanced rates of recycling and reuse ought to be obvious.
  • Adoption of resource efficiency targets – like a 30-40% improvement in GDP/material consumption by 2030.
  • Activate policies in areas like renewable energy support schemes, emissions trading, the eco-design directive – broadening the scope to include product design requirements – energy efficiency standards and targets for the recycling of materials.
  • Make proactive use of public procurement so as to encourage the development of products and services based on enhanced material efficiency as well as new business models (turning products into services).
  • Set aside a significant proportion of EU funding schemes for circular economy investments.
  • Rethink taxation. This policy area is not an EU competence at present. But the European Commission should take the lead in encouraging member states to embark on a necessary tax shift – reducing taxes on labour and increasing taxes on pollution and the use of natural resources.
  • Let secondary materials be exempt from VAT. Such a reform would promote the use of secondary materials – through reuse and recycling – and help correct a situation where it is often less expensive to use virgin materials than recycled ones.