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Monday / March 27.

The Wheels of European Economy Spin a Full Circle

With the growing use of natural resources in the economy, there is a need for adoption of circular economy.

By Igor Taranic

Foreword

The unprecedented economic development of the past 150 years has improved the living standards of most of the world’s population. But, it has also caused unprecedented environmental pressures on the planet—climate change induced by man and depletion of natural resources. While climate change is addressed by the international community on a global scale (e.g. Kyoto protocol, the recent Paris Agreement, etc.), the depletion of resources is dealt with mainly by national approaches. This article will address the challenge of resource depletion and explain how circular economy can address this challenge.

What is the Problem?

According to Global Footprint Network, people today use resources that are the equivalent of more than 1.5 planets. This means that the Earth needs 1.5 years to regenerate what we use in one year. Moreover, if everyone lived the lifestyle of the average American we would need five planets. The trend of ongoing urbanisation in China and India, and the globally rising middle class, are likely to further increase worldwide material consumption.

The trend of ongoing urbanisation in China and India, and the globally rising middle class, are likely to further increase worldwide material consumption.

The newly adopted UN Sustainable Development Goals aim at reducing material consumption per capita to 10.5 tonnes per annum by 2030. This is a very ambitious goal, taking into account that the material consumption per capita in countries belonging to the Organisation for Economic Co-operation and Development (OECD) was 34 tonnes in 2010.

What Are the Solutions?

Some countries have introduced policies to improve their resource efficiency. Japan has the 3R initiative (reduce, re-use & recycle); the United States has a five year Sustainable Materials Management Program Strategic Plan; China has included Circular Economy in its five year plan. Although these initiatives are steps in the right direction, their major focus is on improving recycling, while reduce & re-use practices gain less attention.

In this sense, the European Union’s (EU) circular economy action plan is probably the most ambitious programme to address the challenge of resource depletion.

What Is Circular Economy in Europe?

Circular economy started developing in the 1970s as a low environmental impact framework, challenging the traditional linear industrial economy. Linear economy is based on a linear process, made of a series of base steps—resource extraction, manufacturing, consuming and disposing products at the end of their life cycle, or the take-make-consume-dispose model. Circular economy on the other hand aims at minimising waste and resource use by turning goods at the end of their lifespan into resources for others. This can be done through re-use, re-manufacture, re-cycle, waste reduction and other practices; in other words, circular economy is restorative by design and intention.

Circular economy aims at minimising wastage & optimum utilization of natural resources.

There is an urgent need for transformation of traditional linear industrial economy to circular economy. | Photo Courtesy: Unsplash

For example, the average lifetime of a mobile phone in the UK is less than two years. Fairphone, a start-up and social enterprise, developed the first modular, circular economy-centred smart phone. It is designed for upgrade, reparability and easy reuse and recycling at the end of the phone’s five years lifespan. Based on a similar approach, Google is developing its first modular phone, Ara, with replaceable modules. It enables consumers to enjoy the latest technology, and eliminates the need to change smartphones every year.

Besides saving resources and preventing excessive electronic waste, extending the average lifetime of a phone from two years to five can save 6.6 million tonnes of carbon dioxide per year in the UK alone.

How Did It Become the European Union’s Policy?

In the last few years, interest in the concept of circular economy amongst environmentalists and policy makers has been growing. In addition to the previously mentioned environmental pressures, the main economic reasons to mainstream the concept were high commodity prices and potential multi-billion euro economic benefits.

In addition to the previously mentioned environmental pressures, the main economic reasons to mainstream the concept were high commodity prices and potential multi-billion euro economic benefits.

This would be advantageous to new markets for circular economy business models. These have been popularised by the World Economic Forum, and highlighted in the reports of the Ellen MacArthur Foundation.

In December 2015, the European Commission published the circular economy Action Plan. This put circular economy at the core of the new mainstream sustainable development policy. The European Commission’s plan suggests rethinking our economy by changing the five stages of the lifecycle of products and services. 

Challenges Ahead

In theory, circular economy leads to both environmental and economic benefits. Hence, it should drive the replacement of the linear economy rapidly. In practice, however, the linear model is still dominating the economy. There are two reasons as to why this is happening.

Firstly, circular economy became one of the European policy priorities, partly as a response to high commodity prices and resource scarcity.

Today’s commodity prices are about twice as low as the average commodity price in 2010-2014.

It significantly weakens one of the three foundations on which circular economy stands, the cost saving from reduced resource use.

Secondly, circular economy as a policy is still a work in progress and has different meanings for different industry sectors. For example, what does it mean for the construction industry? How is it different from circular economy for car producers? What is the difference between circular economy for a city and for a multi-sectoral corporation, or a start-up? Decision makers in private enterprises and policy makers at different levels need more clarity on how it is relevant for each type of economic sector.

Two Main Tasks of Policy Makers in Europe

The first task of policy makers in Europe is to facilitate the transition to circular economy and provide the business community with more clarity on the concept. The Centre for European Policy Studies (CEPS) released a special report on circular economy, developing the concept of RESTORE.

The Centre for European Policy Studies (CEPS) released a special report on circular economy, developing the concept of RESTORE.

“CiRcular Economy STakehOlders – PRocess NExus”, or RESTORE, is a framework constructed according to circular economy’s relevance to the different types of stakeholders – classic industries, emerging industries, SMEs, multi-sectoral corporations, and cities and regions.

The second task is strengthening circular economy via an assortment of regulatory interventions at national levels (taxation, financing, public procurement, environmental indicators, public-private partnerships, etc.), thereby overcoming the challenges of diverse practices, impacting various stakeholders in different ways.


Igor Taranic works at the Centre for European Policy Studies (CEPS), a Brussels based leading European think tank. He is also a Member of the Executive Board of the College of Europe Alumni Association. Previously Igor worked at the Israeli Prime Minister’s Office and as a consultant on the business development in Eastern Europe. He studied in Israel, Germany and Belgium.

Featured Image Credits: Dikaseva via Unsplash