CIRCULAR ECONOMY AND RESOURCE EFFICIENCY

By Janez Potočnik


We need to realize that at the basis of economic viability lies the availability of natural resources. We might talk about the "hard laws of economics", but those laws are pretty soft when they come up against the hard laws of physics. For the previous decades and centuries our economic activities have been insignificant enough – in planetary terms – to feel the constraints of those hard laws. But that is beginning to change, it will continue to change, and we should better get ready.

For those previous decades and centuries of abundance, environmental policy was mostly aimed at punishing polluters and dealing with localised problems. And when it came to periods of economic downturns or crisis it was sometimes considered as something of a luxury: nice to have if the margins of growth allow for it.

 

But in a world where we are starting to hit physical boundaries, in a world where natural resources are under pressure, we will be obliged to take another approach. Environmental policy must become an enabling factor of a sustainable economy and not a luxury or a constraint on growth. This approach has been called "new environmentalism" – the integration of environment into upstream thinking and the policies that affect our economic behaviour and the way our societies work.

For Europe new environmentalism makes perfect economic sense – on a continent that is relatively poor in energy sources and raw materials – it is logical to transform our economies to a more resource‑efficient structure, where we get more value added and more benefit from each tonne of materials, each joule of energy and each hectare of land.

 

But efficiency alone is not enough. We must also make sure that once we have used our products, our food and our buildings, we take the materials within them and use them again… and again. Each year, in Europe, we use on average 16 tons of materials per person to run our economy. And out of that, about 6 tons per person becomes waste. Almost half of that waste ends up in a landfill.

So an integral part of our approach to resource efficiency must be moving away from the linear economy – where we extract materials from the ground, manufacture products, use them and then throw them away - towards a circular economy – where waste and by-products are pumped back into the production cycle as secondary raw materials.

 

Using waste as a major, reliable source of raw material for the Union is essential. In this regard, both the European Commission's Resource Efficiency Roadmap, and the 7th Environmental Action Programme adopted by the European Parliament and Member States in Council, call for a stronger EU waste policy to ensure by 2020:

• that we generate less waste in absolute terms and per capita;
• that incineration is limited to non-recyclable materials and
• that landfilling is limited to residual – non-recyclable and non-recoverable – waste.

This means full implementation of the existing waste legislative body in all Member States (which would, by the way, create 400,000 new jobs in Europe according to our studies - jobs which would definitely stay in Europe). It also means revising the targets in that waste legislation to make it fit for the purpose of putting Europe on course for resource efficiency and circular economy.

 

For sure, the objectives set out by the 7th Environmental Action Programme seem ambitious. But they are realistic and achievable. Already today 6 EU Member States, including Germany, have effectively ended landfilling. And 3 Member States, again including Germany, are recycling or composting more than 60 % of their municipal waste with some regions going as far as 85 %.

We are seeing more and more success stories when it comes to prevention of waste. And even if they often remain at local level, they show the way forward and open new perspectives. This is where scientists, innovators, designers and investors come in.

 

If we want to reduce the amount of waste generated we must improve the design of our products to include more recycled materials, to reduce the use of toxic substances and to increase their recyclability by making them easy to dismantle.

 

This will be the principle innovation challenge for our industries in the coming decades, and I have every faith in the creativity of European companies in responding to this challenge. Where we can, as policy makers, we will need to help through sustainable product policies, such as Ecodesign. The Ecodesign Framework Directive helps create the conditions for these changes by setting legally‑binding minimum environmental and energy performance requirements for products across the EU.

 

I know that in Germany there was substantial criticism of the approach to eco-light bulbs, but eco-design is not a blunt instrument and it must be used, not only to enhance energy efficiency, but also to address emission of pollutants in air and water, the amount of water consumption in production as well as material resource efficiency.

 

Over the last few months we have started introducing eco-design measures that will translate into innovative products that last longer, are more easily and efficiently dismantled and recycled, for example on "Vacuum Cleaners", "Computers", "Boilers" and "Water Heaters". European companies should be the last to fear such measures, as they will be the best at providing these products for the markets.

 

To transform Europe into a resource‑efficient economy requires market pull, as well as "push" approaches. We have some tools of excellence in Europe, like the European Ecolabel, probably the most ambitious and comprehensive ecolabel anywhere in the world. Such credible tools are essential to combat consumer cynicism of green claims and labels, so that we reward the leading companies who have invested and continue investing to improve their products and production processes, and we get rid of the free-riders.

 

Also our Green Public Procurement Policy (GPP) aims to reward companies that provide greener products and services. With almost 20 % of GDP in Europe being spent by public authorities, the public sector can make a significant difference in the market if creates demand for resource‑efficient products.

 

Virtually all public authorities in the EU have implementing measures in the field of CO2 reductions, renewables energy sources, clean air and fresh-water quality. It would be a missed opportunity if they did not use their own spending to achieve these objectives. Green Public Procurement is a voluntary policy at EU level. The Commission is supporting public authorities throughout Europe in their work for a reduction of the impact on the environment of public spending, specifically with our EU GPP criteria, but also with legal guidance and best practice examples.

 

A fundamental underlying issue in all of these policies is how to measure what products and organisations are more or less resource efficient. It is already difficult for public authorities to process and compare all the information in their purchasing decisions; so how can we expect the average consumer in a supermarket or high street shop to deal with it? We need to start defining credible environmental benchmarks for product groups and sectors and allow stakeholders along the value chain to make choices based on reliable information. The Environmental Footprint methods now being developed for various product groups by the Commission are a valuable instrument to do so.

 

We can also make the business-to-business markets for materials work better. For example industrial symbiosis – or as somebody called it "the e-bay of waste" - connects traditionally unconnected industries, using wastes and by-products from one industry as inputs for the other. Using secondary materials instead of wasting them has significant environmental and economic potential: the UK National Industrial Symbiosis Programme is already diverting 8 millions of tonnes away from landfill every year, achieving 11 million tonnes of raw material savings and 196 million Euros of cost savings. Part of this benefit comes from triggering markets for secondary materials and keep them circulating in the economy.

 

I hope it is already clear that there is a strong economic and business case for the circular economy and resource efficiency. As Environment Commissioner people often presume that I am making these arguments for green reasons. I sometimes feel a bit like Shrek (a green monster) – the only thing that people notice about me when I walk into a room is that I'm green, and they maybe also assume I'm a bit dangerous. But if I were Commissioner for Industry or for Transport or for Agriculture I would be making the same points, and indeed, the European Commission, as a College, has adopted resource efficiency as a central pillar of its structural economic strategy – Europe 2020.

 

Some months ago I visited VDI, the Association of German Engineers, who are advising German companies on their resource efficiency. Their data showed that material costs represent more than 40 % of the costs of manufacturing, compared to 18% for labour costs. It is no wonder that we see the opportunity for European industry to improve its annual turnover by between 3 and 8 % by using their resources more efficiently. Research indicates that efficiency improvement could meet 13 to 29 % of resource demand. In a world of resource scarcity, this cannot be ignored.

 

This means that investors will increasingly wake up to the importance of resource efficiency in industry; both in view of cost controls and competitiveness, but also resilience to potential future supply shocks and other risks.

 

Much of the transformation will be achieved by investment and innovation in the right direction. But our job as policy-makers is to provide clear signals of the direction of the travel and to help break out of some of the locked-in systems, policies and behaviour patterns that have built up over many years of resource-intensive production.

 

As you see, much has been achieved through the use of economic incentives such as pay-as-you-throw schemes, or landfill and incineration taxes including partial bans like in Germany, as well as extended producer responsibility. All these measures have helped create jobs and encourage innovation. They have helped change behaviour and create opportunities for producers, retailers, consumers, local authorities, public and private waste management operators.

 

Next year I will present a review of the Commission's waste policies and targets. My broad objective is to open up more opportunities in the sector and make the transition to a systemic sustainable circular economy happen.

 

The relationship of good waste management to the circular economy will be my central theme for next year. Because waste is just one stage in the life cycle of our products, I will be including my waste proposals in a much wider package on resource efficiency and the circular economy. This will draw inspiration from the recommendations made by the European Resource Efficiency Platform, and identify what still needs to be done, by the European Commission, by Member States, by Federal Regions, by industry, and by financial bodies. And it will address all stages in the cycles of our products: from design to manufacture, and on to use and disposal.

 

One of the challenges that we have is how to create a wider debate and awareness. That is why I have thrown down the challenge of "Let's Clean Up Europe" and I would like you to help me. I believe that by confronting the issue of waste in our own neighbourhoods, by getting people out to pick it up, we can start to challenge people's views on our throw-away society, to create a debate, and to make the case that economic growth and jobs based on better management of our resources.

 

There can be no growth without abolishing huge regulation, huge taxation, and huge political corruption.  Basil Venitis, venitis@gmail.com, http://themostsearched.blogspot.com, @Venitis