Circular Economy: the silver bullet for emissions?

18 November 2017

The world needs to unhook prosperity from the extraction of resources if countries are to succeed in curbing carbon emissions, and that means keeping materials in the economy for longer.

What’s known as the circular economy was in focus at the COP23 climate summit, which has just wrapped up in Bonn, Germany. UNCTAD and its partners rallied support for an idea that could make the difference for the Paris Agreement on climate change and the Sustainable Development Goals.

“A linear economy is what we have always known. We extract resources. We transform them into goods and services. We sell them. We use them. And then, we scrap them. This is how we’ve done things since the Industrial Revolution. But by doing so, we connected prosperity to the extraction of resources,” said UNCTAD’s Deputy Secretary-General Isabelle Durant.

“As population and incomes increase, demand for goods and services will only grow. To sustain this, we must change how we do things. We have to disconnect prosperity from resource extraction,” Ms Durant told a COP23 session on the circular economy.

“We need markets that give incentives to reusing rather than wasting. Most things, such as used clothes, metal scrap and obsolete electronics, could be sent back into the economy via recycling and remanufacturing. Unused spaces and empty seats can be rented. This not only protects the environment by reducing CO2 emissions, it also develops new sectors, creates jobs, and generates income.”

The figures speak for themselves.

Manufacturing – much of it for international markets – uses 54% of the world’s total delivered energy, especially in industries such as petrochemicals, metals and paper. For an idea of quantities involved, every year 322 million tons of plastic, 59 million tons of aluminum and 240 million tons of paper and paperboard are produced in the world. The result is 1.2 billion tons of garbage produced by 3 billion people living in cities every year.

“This pattern doesn’t make economic sense,” said Ms Durant.

“We are losing €48 billion a year in e-waste alone. Food waste could be cut by half via food-sharing and food discounting models. Washing machines – which use less water and energy – could be used by most people if they were leased instead of sold. Organic waste can be recovered and reused. And we know how to do this now. At a fundamental level, we need to consider shifting tax bases from labor to resources, differentiated treatment for reused, remanufactured and repairable products, and help educate consumers about the benefits of changing a mentality of product ownership to one of access to services.”

UNCTAD, the UN’s voice on trade and development issues, is dedicated to ensuring prosperity for all, and has a strong focus on developing countries.

“A circular economy benefits both developed and developing countries,” said Ms Durant. “Keeping materials longer in the economy could reduce by 33% the CO2 emissions embedded in products, mitigating emissions at lower costs than other strategies, and helping countries in their Paris and SDGs commitments.”

COP23 offered an opportunity to showcase circular economy strategies in countries such as Laos, India and China, as well as in the European Union.

“In China we’ve been developing a circular economy for a really long time. The central government treats it as an effective way to make use of resource efficiency, take advantage of natural resources and achieve environmental protection targets,” said Yu Xiang, Associate Professor at the Institute for Urban and Environmental Studies, Beijing.

“In recent years, I think the circular economy has worked very well in China and we’ve collected some experience, and we’d like to share this experience with other developing countries, through the One Belt One Road project and South-South cooperation,” she added.

The global implications are important, underlined Felix Preston of the British-based Chatham House think-tank.

“This isn’t going to be a one-way conversation,” he said, contrasting it with past trends where the shift started in developed economies and then developing countries caught up. “This really has to involve both sides at the same time,” he added.

Circular strategies mean that international value chains are set to change. Recycling and remanufacturing centres are likely to appear closer to where products are used. This could mean less transport-related losses, quicker turnaround between orders and deliveries, and creation of jobs that cannot be offshored.

Multiple challenges are likely.

A recent curb on imports of used clothes implemented by various East African countries exemplifies this, on the basis that used textiles prevent local industry development and negatively impacts dignity. Another example is China’s notification to the World Trade Organization this year, showing an intention to restrict imports of low-quality and contaminated scrap and waste materials for recycling.

Countries trading recyclable materials need to enable policies to stimulate high-quality sorting, recycling and remanufacturing. “This should be done in a way that is safe for workers and the environment. It is also important to differentiate between waste, used and remanufactured goods, creating clear protocols for their acceptability,” said Ms Durant.

“With the proper alignment of enablers in various countries, as well as shifting consumer preferences, a circular economy can be an important contributor to goals set in the Paris Agreement and the SDGs,” she said.

“Its potential cannot be realised without the facilitation of international trade. As a global economy, we need to move from a mercantilist model of resource trade – where some nations accumulate materials which are costly to reprocess in their territories – to a model in which resources flow back to regions with comparative advantages for their recycling. Negotiating agreeable conditions for all countries to do so is essential to make the circular economy the core of our growth strategies.”