As the EU Buys into Circular Economy, Many Worry It May be Impossible

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The “circular economy” is a concept attracting a lot of attention in the European Union at the moment. It is not only being proposed for the second time as an economic strategy package by the European Commission; it was also the theme for this year’s World Resources Forum (WRF) in Davos, Switzerland.

Put briefly, a circular economy aims to move from a traditional linear economic system of production and consumption toward a closed-loop (circular) system. A traditional linear system of production sees the extraction of a resource, such as aluminum, to create a valuable good, such as a soda can. In a linear economy, the used can would be thrown away as waste; in a circular economy, the used can materials are recycled into a new can. Recycling is combined with composting, repairing and reusing materials in a closed-loop system. The idea is to eventually have economic growth without environmental degradation, which is referred to as “decoupling.”

For many environmentalists, policy-makers and, increasingly, even some businesses, the circular economy is being hailed as a practical way to save the planet without killing the economy. Quite simply, for many, including those gathered in Davos at the WRF, it’s the future.

However, despite the many optimistic workshops focusing on the how to implement “circular economy” policies, dissent among many sitting in the audience was prolific, with a large number of participants expressing unease about the concept. For many, the circular economy seems to be unfeasible within a world of globalized trade and free market policy, and maybe even unattainable within the very laws of physics.

“We have to be vigilant and not sing ‘Kumbaya’ with our feet in the sand, saying all of the circular economy is great, because we know that’s not true,” said Elmer Rietveld. A spatial economics researcher at the Netherlands Organisation for Applied Scientific Research, he applies his knowledge of modeling transport systems, civil engineering and database management to work on circular economics.

An often recognized problem with the circular economy in practice is its position in a globalized world—no country is an island entirely of itself in the context of modern globalization. Circular economies work on the assumption that supply chain materials can be recycled and reused.

Trade globalization makes the circular economy difficult to enforce, as materials and products circle the world. How do you move toward a closed loop of no new material inputs or outputs when your average consumer has the option to buy a cheaper product imported from China? Someone in the EU could very well be keeping someone in China employed.

“If I substitute raw materials from Morocco for recycled goods from Europe, it’s very well for the person in Europe who might get a job out of it, but people in Africa will suffer,” Rietveld said.

These concerns surrounding global trade and the circular economy could be exacerbated in light of a major impending trade deal, the Transatlantic Trade and Investment Partnership (TTIP). A proposal for a free trade agreement between the European Union and the United States, the TTIP would allow, among other things, corporations to sue countries for interfering with free trade (under the Investor State Dispute Settlement clause). This clause would, for example, allow a company in China that is exporting its goods to someone in Sweden to sue the Swedish government for tariffs on international imports it might put in place to support its own local circular economy.

It’s a worry that echoed throughout the WRF. Some regard the TTIP as dangerous, and other critics even say it has the potential to kill the circular economy project as a whole.

“I think that if the TTIP [were] installed, we’ll be stopped with this circular economy project. It will probably be illegal,” said Arthur ten Wolde, manager of public affairs for De Groene Zaak, a Dutch sustainable-business association. He spends most of his time lobbying the Dutch government to implement policies that favor the circular economy, efforts that may be for naught if the TTIP comes into existence.

Ashok Khosla of Development Alternatives likewise opposes the TTIP. “Any treaty that puts the corporate interests above those of the public is unacceptable. The TTIP is criminal. It is a very one-sided and dangerous treaty, it’s got the seeds of its own destruction built into it. How long can you go on destroying the world without at some point destroying yourself?” Khosla, who is co-chair of the United Nations Environment Programme’s (UNEP) International Resource Panel and former co-president of the Club of Rome, was very clear that this was his personal opinion and not that of his constituents.

Aside from the complications of enforcing a local circular economy in a globalized, free trade world, the technical feasibility of a circular economy is being contested. When the idea of a circular economy is deconstructed, its fundamental ideal boasts continued economic growth without environmental degradation, something the physical laws of science do not allow.

“There cannot be a circular economy if we are looking at the total of [the world’s] material flows,” said Michael Lettenmeier of the Wuppertal Institute for Climate, Environment and Energy. “This picture of the circle will always be a small part of the truth. There will never be a perfect circle where nothing is going in and out. That’s not possible in a thermodynamic point of view—energy needs material flows and so on.”

Lettenmeier presented a case study of the circular economy in Germany, which showed limitations to the idea of decoupling economic growth from environmental degradation. According to his study, when you take imports into account, there are still negative environmental effects. This is always going to be the case in a globalized world.

“It’s still not absolute decoupling. It’s not absolute reduction in natural resource use, which we need,” he said.

But some suggest there is a solution: changing the parameters of measuring healthy economic growth. Human welfare is, by a huge margin, gauged by gross domestic product, the monetary value of goods and services within a country. Although there are other wellness indicators, the usual driver for policy and decision-making in a nation is the amount of money that can be made.

“We need to decouple ourselves from the idea of material growth. That’s what GDP is. Though other indicators of well-being exist, they are rarely taken into account,” said Thomas Wright of Sustainable Bizness Practices. These indicators include the Human Development Index, the Human Poverty Index and the Happy Planet Index, which include, in various combinations, the statistics of life expectancy, human education, standard of living and ecological footprint.

Despite these many concerns, there may still be promise in the circular economy package. Rietveld reminds us of the bigger picture: the sustainability incentive behind the circular economy.

“It’s the planet—less erosion, less toxicity, less greenhouse gas emissions. It is always a win, almost. Almost every modeling exercise shows it. Anyone not supporting the transition to a circular economy is jeopardizing the future of one’s business and society,” he said.

While absolute decoupling of economic growth and environmental degradation may not be possible, the circular economy could still jump-start a paradigm shift toward an economy that doesn’t harm the environment.

“I think the concept of it is that we can keep materials for as long as possible in the [closed] loop, from the beginning of the supply chain,” said Vasileios Rizos of the Centre for European Policy Studies. “This is really a step forward, and it’s a positive thing. It’s a way of changing our thinking.”

Whether the circular economy is a good idea or not, the European Commission has just announced its own circular economy package, including legislative proposals for how European countries can achieve it. How the package is received will have an impact on not only European economies but on communities and businesses globally.

As Ligia Noronha, director of the UNEP’s Division of Technology, noted, “The EU does have a catalytic role in these things. When they come up with an idea, people do pick it up.”

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