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Europe’s Circular-Economy Opportunity

A circular economy is an alternative to a traditional linear economy that uses the model of make, use, dispose of in which we keep resources in use for as long as possible, extract the maximum value from them while in use, then recover and regenerate products and materials at the end of each service life. The economy of Europe’s has accumulated tremendous wealth over the past century. Partly, this success can be seen due to continuous improvements in resource productivity—a trend that has started to reduce Europe’s resource exposure. Nevertheless, resource productivity remains hugely under-utilized as a source of wealth, competitiveness, and renewal.

A new study “Growth within: A circular economy vision for a competitive Europe” has provided fresh evidence that a circular economy, made possible by the technology revolution, would make Europe to grow resource productivity by up to 3% annually translating into primary-resource benefit of as much as €0.6 trillion per year by 2030 in these economies.

Additionally, it would generate €1.2 trillion in non-resource and externality benefits, bringing the annual total benefits to around €1.8 trillion compared with today.

Circular economy is founded on the below principles:

Waste is food

Waste does not exist… the biological and technical components (nutrients) of a product are designed by intention to fit within a materials cycle, designed for disassembly and re-purposing. The biological nutrients are non-toxic and can be simply composted. Technical nutrients – polymers, alloys and other man-made materials are designed to be used again with minimal energy.

Diversity is strength

Modularity, versatility and adaptiveness are to be prioritised in an uncertain and fast evolving world. In working toward the circular economy, we should focus on longer-lasting products, developed for upgrade, ageing and repair by considering strategies like emotionally durable design. Diverse products, materials and systems, with many connections and scales are more resilient in the face of external shocks than systems built simply for efficiency.

Energy must come from renewable sources

As in life, any system should ultimately aim to run on ‘current sunshine’ and generate energy through renewable sources.

Systems thinking

This is the ability to understand how things influence one another in a network. Elements are considered as ‘fitting in’ their infrastructure, environment and social context. While a machine is also a system, systems thinking usually refers to non-linear systems: systems where through feedback and imprecise starting conditions the outcome is not necessarily proportional to the input and where the evolution of the system is possible: the system can display emergent properties.

With the circular economy, there’s an expected rise of around 7% in GDP points about the current development scenario, with an additional positive impact on employment. Looking at the systems for three human needs (mobility, food, and the built environment), the study concludes that rapid technology adoption is necessary but not sufficient to capture the circular opportunity. Instead, circular principles must guide the transition differently from those that govern today’s economy. Pursued consistently, the economic promise is significant, and the circular economy could qualify as the next major European political economy project.

circular economy

With European economies being heavily dependent on resources, different opinion do exist on how to address this against an economic backdrop of low and jobless growth as well as the struggle to reinvigorate competitiveness and absorb massive technological change. Those in support of this kind of economy argue that it offers Europe an important opportunity to increase resource productivity, decrease resource dependence and waste, and increase employment and growth. Further, they maintain that a circular system would boost competitiveness and unleash innovation, and they see abundant circular opportunities that are inherently profitable but remain uncaptured. Those against the circular economy, on the other hand, argue that European companies are already taking advantage of most of the economically attractive opportunities to recycle, remanufacture, and reuse. They maintain that reaching higher levels of circularity would involve an added economic cost that Europe cannot afford when companies are already struggling with high resource prices. They further point out the high economic and political cost of the transition.

However, in general, as well as creating new opportunities for growth, a more circular economy in Europe will:

• Reduce waste

• Drive greater resource productivity

• Deliver a more competitive UK economy.

• Position the UK to better address emerging resource security/scarcity issues in the future.

• Help reduce the environmental impacts of our production and consumption in both the UK and abroad.

The study sought to establish facts to decision makers contemplating the transition to a more circular economy. These include:

i. The European economy is surprisingly wasteful in its model of value creation and—for all practical purposes—continues to operate a take-make-dispose system.

ii. A wave of disruptive technologies and business models could help the European economy improve resource productivity and reduce total annual costs for the three sectors by €0.9 trillion in 2030. However, noncaptured system benefits and rebound effects could constrain the gain (with unclear employment implications).

iii. A wave of disruptive technologies and business models could help the European economy improve resource productivity and reduce total annual costs for the three sectors by €0.9 trillion in 2030. However, noncaptured system benefits and rebound effects could constrain the gain (with unclear employment implications).

iv. Shifting toward a growth within model would deliver better outcomes for the European economy and yield annual benefits of up to €1.8 trillion by 2030.

v. Equilibrium-modeling results and a comparative labor study suggest that for the European economy at large, the circular economy could produce better welfare, GDP, and employment outcomes than the current development path.

vi. A circular economy could greatly benefit the environment and boost competitiveness and resilience.

vii. A transition to the circular economy would involve considerable transition costs but if well managed could create an opportunity for economic and industrial renewal.

viii. If Europe wanted to accelerate the shift toward a circular economy, it could build a strong foundation by launching four efforts. These efforts are: Europe-wide quest for learning, research, and opportunity identification, development of a value-preserving materials backbone—a core requirement for strengthening European industrial competitiveness, initiatives at the European, national, and city levels to enable inherently profitable circular-business opportunities to materialize at scale and development of a new governance system to steer the economy toward greater resource productivity, employment, and competitiveness.

ix. The timing is opportune: Essential enabling technologies are maturing and scaling fast. Investments in transitioning to a circular economy could deliver a stimulus to the European economy. Europe is in the midst of a pervasive shift in consumer behavior.

The circular economy is restorative and regenerative by design, and which aims to keep products, components and materials at their highest utility and value at all times, distinguishing between technical and biological cycles.