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Will Europe seize the opportunity of the circular economy?

Submitted by on 30 Sep 2015 – 09:46

A Circular economy could increase european competitiveness and deliver better societal outcomes. It could result in twice the benifits seen on the current development path. By adopting the principles of a circular economy, Europe can take advantage of the technology revolution, could create more jobs, increase average disposable incomes, halve carbon emissions, and do much more. Jocelyn Blériot, Executive Officer, Lead, Communications and Policy, Ellen MacArthur Foundation, presents the findings of their nine-month study and explains how the circular thinking might persuade companies to seek ways of retaining the value of their production costs

JossBlériotThe European Commission’s much anticipated circular economy package is due at the end of the year, and the European Parliament continues to push for ambitious legislation on the topic. As discussions bring together advocates for a regenerative European growth and competitiveness, converging signals seem to indicate that a transition to a circular economy could be the next major political project for Europe.
Industrialised economies are at crossroads.

There is a need for a system which can decouple growth from the consumption of finite resources. Conventional “reductionist” strategies based on doing less and chasing gradual efficiency gains won’t provide a long-term solution – only buy us a bit of time. Europe’s economy remains very dependent on resources it largely sources outside of its borders and, despite having reached a high level of sophistication, it is still surprisingly wasteful in its model of value creation.

According to our research carried out with the McKinsey Center for Business and Environment and supported by SUN (Stiftungsfonds für Umweltökonomie und Nachhaltigkeit) in 2012, only 40 percent of discarded materials were recycled or reused, while the European economy only captured 5 percent of the original raw material value through recycling or waste to energy processes.

In a context characterised by volatility on commodity markets, and bearing in mind that the European Union is the world’s biggest importer of raw materials, looking at decoupling economic growth from the consumption of finite resources seems to be the way forward in order to build resilience and gradually design out negative externalities. Powerful trends are starting to shape a new economic landscape, but can these be harnessed and guided by a clear framework in order to achieve the systemic shift called upon by a growing number of corporate and government leaders?

Our “Growth Within” report reveals that by adopting circular economy principles, Europe can take advantage of the impending technology revolution to create a net benefit of €1.8 trillion by 2030, or twice the benefits seen on the current development path (€0.9 trillion). This would be accompanied by better societal outcomes including an increase of €3,000 in income for EU households. This would further translate into an 11 percent GDP increase by 2030 versus today, compared with 4 percent in the current development path.

Foundation_circular economy diagram_Feb2015

The circular economy would also have significant impacts on the European environment

Carbon dioxide emissions would halve by 2030, relative to today’s levels (48% by 2030 across the three basic needs studied, or 83 percent by 2050). Primary material consumption measured by car and construction materials, real estate land, synthetic fertiliser, pesticides, agricultural water use, fuels, and non-renewable electricity could drop 32 percent by 2030 and 53 percent by 2050, compared with today.

In the last few months, it has been evident that the European Commission has made the circular economy a priority.

First Vice President Frans Timmermans, Vice President Jyrki Katainen, and Commissioner Karmenu Vella were all present, and engaged in discussions, at the stakeholder conference in June, with Frans Timmermans indicating that he “passionately believes in the opportunities of the circular economy.”Over 800 stakeholders were present on the day, and the room remained full until Vice President Jyrki Katainen closed proceedings by clearly stating that he is “convinced that the circular economy can enable a triple win: economic, environmental and social.”

The momentum engendered at the stakeholder conference in Brussels has continued throughout the summer. On July 9th, the European Parliament passed an important resolution on the circular economy that called for a 30 percent increase in resource productivity by 2030. The resolution was voted 394 to 197 in favour of a report that formalised the Parliament’s expectations for the revised Commission package.

As Danish MP and former Environment Minister Ida Auken puts it, “The circular economy should be a central political project for Europe, as it offers the potential to set a strong perspective on renewed competitiveness, positive economic development and jobs creation.” Redefining value creation mechanisms by basing them upon use rather than consumption constitutes a change of economic paradigm: we can maximise the utilisation of existing assets, start to design restorative and regenerative processes to reap economic as well as societal benefits. There are already companies out there taking advantage of the shift, it is now time to scale up and create the right enabling conditions – which requires all stakeholders to enter a constructive dialogue.

Sending positive signals

Rather than making circularity a regulatory hoop through which to jump, policy can send positive signals to producers that see the economic advantage of circular business models: the time has come for innovative models of collaboration to emerge and create a new wave of positive economic development. The need of the hour is a genuine 21st century industrial enlightenment, reliant on systems thinking, steeped in cross-disciplinarity and based on what New Scientist editor Roger Highfield refers to as the “snuggle for existence” – a creative cooperation on which most long-lasting and resilient systems are built and rely.