The EU recovery fund can be used to unlock an estimated €1.8 trillion opportunity by 2030 by making better use of materials and reducing waste, write Patrick Schröder and David McGinty.
Patrick Schröder is senior research fellow at Chatham House, a leading UK think-tank. David McGinty is Global Director of the Platform for Accelerating the Circular Economy (PACE), a platform for global leaders and their organisations to accelerate the transition to a circular economy.
European countries have set out competing visions for the region’s COVID-19 recovery plans in the last week.
France and Germany first proposed a €500 billion recovery fund to help eurozone economies affected by the coronavirus, followed by a separate proposal from the so-called ‘frugal four’ – the Netherlands, Austria, Denmark and Sweden.
While there are some significant differences between the plans, they both refer to the need for a green transition. This unprecedented economic stimulus provides the EU with the opportunity to go even further, and accelerate the shift to a circular economy.
In a circular economy, goods are designed to last, consumption and waste is reduced, and resources are maximised. Putting the circular economy at the core of the EU economic recovery will help to build more resilient economies and societies, produce new economic opportunities and help to meet climate targets.
The EU recovery fund can be used to unlock an estimated €1.8 trillion opportunity by 2030 that the circular economy offers, by making better use of materials and reducing waste. In addition, a more circular economy can reduce carbon dioxide emissions by about 3.6 billion tonnes per year globally, and take EU industry halfway towards net-zero emissions.
Three elements will be crucial for the EU’s shift to a more circular economy.
- First, use the green stimulus to ensure progress on the circular economy is not further reversed by the COVID-19 crisis.
- Second, promote more resilience to safeguard against resource shortages and supply chain risks.
- Third, promote the EU’s global leadership on the circular economy through international cross-sector cooperation to support a recovery, which is also just and inclusive.
1) Ensure previous progress on the circular economy is not further reversed
Recent months had seen some progress towards a circular economy in Europe. The publication of the European Green Deal with a Circular Economy Action Plan as one of its main blocks was a major moment, setting out a clear plan for Europe to become the first climate-neutral continent. Following through on this plan will be key; for instance, introducing total cost procurement so that sustainability becomes a requirement to win tenders.
Due to COVID-19, some progress on the circular economy has been reversed, with a return to single-use packaging, breakdown of recycling services and markets and reduced supplies of secondary resources such as cardboard and scrap metals.
It is important to protect the gains that were made before the crisis. The recovery stimulus is an opportunity to invest in and provide loan guarantees to circular economy businesses and start-ups that typically have difficulties accessing credit. These include local repair businesses, and rental and sharing models which have been impacted by the COVID-19 crisis.
2) Mitigating resource and supply chain risks
COVID-19 has exposed the risks of our existing production and consumption patterns with impacts felt all the way up and down global value chains. For example, in textile supply chains for fast fashion, where consumer demand collapsed, international brands cancelled orders from manufacturers and the vulnerable workforce in developing countries were laid off. The economic recovery will need to build more resilience into the economic system to reduce the risk of this type of scenario.
A circular economy focus within the economic recovery can enhance resilience through on-shoring and geographically shortening value chains. The idea of ‘glocalised’ economies, with stronger consideration of local conditions while engaging constructively at the global level, is gaining momentum.
In this context, localised manufacturing technologies such as 3D printing have received new attention during the crisis. The recovery plans can boost these innovative solutions and associated business models.
A circular economy focus can also reduce the demand for non-renewable resources and further degradation of ecosystems. Economic stimulus packages can be used to encourage urban mining and improved infrastructure for efficient recycling of electronics and other waste, contributing to more stable secondary resource supplies.
The circular economy reduces vulnerability and promotes a shift towards using more secondary materials, for instance by focusing on upgrades, repair and remanufacturing of products. This can make supply chains more resilient by reducing reliance on import and availability of raw materials, and shifting away from politically-vulnerable ‘just in time’ supply chains.
3) The way forward must be together
The circular economy can only work if the transition is inclusive and socially just. Strengthening and involving the citizen networks which have emerged during the crisis can lead to more inclusive urban planning and the redesign of cities. Furthermore, empowering communities with resources and opportunities to buy more sustainable products will enable an inclusive transition. The EU’s Just Transition Mechanism to support EU member states and regions will be crucial in ensuring that no one is left behind.
Looking beyond the EU, redesigning value chains and establishing a resilient circular economy requires an internationalist approach and cooperation between key countries and along value chains. A strong economic recovery requires cooperation and coordination through international bodies such as the G20, OECD and World Trade Organization.
Furthermore, it requires strengthening multilateral organisations of the United Nations which have expertise on the circular economy – notably UNEP, UNDP and UNIDO. International development finance organisations, foremost the World Bank and the European Investment Bank, need to include circular economy practices into the recovery plans. For the EU, the recovery phase is the right moment to support a global circular economy alliance, as announced in the recently published Circular Economy Action Plan.
The emerging consensus on the need for a green recovery must be welcomed; now, we must bring together the forces of business, government and civil society to focus our investment and speed up our transition to a circular economy.
This piece was written in collaboration with Jan Raes, ABN AMRO, Hatty Cooper, Circle Economy, Ashish Chaturvedi, GIZ India, Holger Schmidt, Fondation MAVA.