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Circular Economy: Key to Europe’s Future Economic Growth

What would Europe’s economy look like if it underwent a paradigm shift and transitioned to a circular economy? How would it impact growth, jobs, resource, energy use and CO2 emissions? What does it mean for ordinary households? Those questions have been addressed in a new report, “Growth Within: a circular economy vision for a competitive Europe”, released Thursday June 25 alongside the European Commission’s circular economy conference in Brussels.

IMG_0760
Credit: Joss Bleriot

The study, which was authored by the Ellen MacArthur Foundation and the McKinsey Center for Business and Environment [1], finds that European economic prosperity could be enhanced by transitioning to a circular economy. Among many positive impacts, the report found that moving from a linear to a circular model could lead to an 11% growth in GDP and €1.8 trillion annual overall benefit by 2030. It could also reduce CO2 emissions by 48% by 2030.

A $1 trillion business opportunity was previously identified in the Towards the circular economy report series, also authored by the Ellen MacArthur Foundation with analysis provided by McKinsey & co. However, the concept has now been mapped out with analysis focusing on three key sectors; mobility, built environment and food, which account for 80% of Europe-wide resource use and around 60% of total European household spend. The report also integrates a consideration of the policy opportunities and their potential impacts.

A circular economy vision for a competitive Europe

Europe’s economies face significant questions over the next 10-20 years, dealing with issues like slow growth, unemployment and fiscal insecurity (to name just a few).

The report “Growth Within” offers a fresh development vision for Europe, where circular economy initiatives are implemented at business and policy levels and growth is decoupled from the use of finite resources.

Credit: Joss Bleriot
Credit: Joss Bleriot

A number of the statistical conclusions stick out as clear advantages for a circular economy driven developmental path compared with the current trajectory. The GDP growth opportunity in Europe is calculated at 11% in a circular scenario compared against 4% on the current developmental path, carbon emissions could be reduced by 84% by 2050, and an extensive review of academic literature found that positive employment effects are broadly expected by implementing the circular economy model.

The findings suggest that establishing independence from the consumption of raw, finite resources will be crucial for enhancing European economic competitiveness. At the core of the research is the concept of growth being generated from “within”, or put another way, European economic prosperity being created by getting much more value from the existing stock of products and materials.

Europe currently imports 60% of its fossil fuel and metal resources and the cost of materials and components is a competitive disadvantage, particularly in the context of volatile resource prices, for what is currently a stagnant manufacturing sector, where materials and components currently constitute 40-60% of the industry’s total costs.

Additionally, the report found that in 2012, Europe lost 95% of the material and energy value it created, while the ‘average’ European used 16 tonnes of materials with 60% of those materials being either landfilled or incinerated. Overall, the study reinforced the notion of the need for a system where products, components and materials are designed to be reused, refurbished and recycled, highlighting the reality that even ‘recycling success stories’ like steel, PET and paper lose 30-75% of the material value after the first use cycle.

“The GDP growth opportunity in Europe is calculated at 11% in a circular scenario compared against 4% on the current developmental path, carbon emissions could be reduced by 84% by 2050.”

The “Growth Within” report presents a scenario where circular economy principles are implemented, which shows that primary material consumption could be reduced by 53% by 2050. That consumption reduction translates into significant economic value saving 32% annually in net European resource expenditure by 2030, or €0.6 trillion compared with today.

European households would also benefit in a circular economy scenario, according to the “Growth Within” report, it found that the circular economy could deliver an 18% increase in disposable income for households by 2030 compared with a 7% increase on the current developmental path.

An in-depth look at the circular economy in mobility, built environment and food

Credit: Joss Bleriot
Credit: Joss Bleriot

Mobility, built environment and food are looked at in detail with individual outcomes and scenarios created for each. In each case, the possibilities of taking circular economy models to scale and further incentivising with policy initiatives are explored.

In mobility, the possibilities of an automated, multi-modal, on-demand mobility system are explored. In this scenario, mobility service providers would offer multiple mobility options that best suit user needs delivering a just-in time service. This model leverages current trends including car-sharing schemes, the technological development of electric cars and autonomous vehicles, also known as self-driving cars. The findings suggests that average cost per passenger-kilometre could be reduced by up to 60-80% if these trends were leveraged effectively.

The food system occupies 40% of European land providing the vital need of nutrition and ecosystems such as pollination and energy. However, overall it is still wasteful, causes environmental externalities and fails to produce a balanced and healthy option for the entire population. The report “Growth within” presents the opportunities for reinventing a regenerative food system. It is envisioned as a less wasteful, more resilient system, where nutrient and material loops are reconnected to provide valuable nutrient input, where the true prices of natural capital are reflected and where greater water efficiency and value recovery from food waste is achieved.

The built environment is a crucial issue for Europe. Housing is the largest direct experience for European households and construction is one of the continent’s largest sectors, representing around 8.8% of Europe’s GDP. The possibilities for circular economy innovation build towards smart, modular and productive homes in a liveable urban system. The picture depicted in this research is one where homes produce energy and water, rather than consume it. Buildings would be developed with flexibility and modularity in mind, while sharing models and new construction techniques, like 3D-printing, could all help to reduce costs, reportedly around 25-35% per square metre.

“Growth Within” explores some of the significant questions that relate more broadly to the circular economy. One of these questions is around the challenges and opportunities related to the development of the “technology revolution”. It concludes that while technology can act as an enabler of the circular economy model, and result in cost savings as above, it must be leveraged in a guided way to take advantage of its benefits and avoid a negative rebound effect, which could amount to as much as 20% of the potential benefits across the three sectors investigated.

“Growth Within” is simultaneously aspirational, scoping out scenarios and opportunities in shifting models, and practical, providing a fact base for decision makers contemplating policy and business transitions to a more circular economy.

Download the full report: “Growth within: a circular economy vision for a competitive Europe”.

Notes:

[1] “Growth within: a circular economy vision for a competitive Europe” was sponsored by SUN (Stiftungsfonds für Umweltökonomie und Nachhaltigkeit)

The entire ‘Closing the Loop’ event at which this report was launched is available to watch online here.

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The Author

Seb Egerton-Read

Seb Egerton-Read

Seb writes daily content for Circulate across the full spectrum of the website's topics. Previously he has spent five years as a freelance writer for a number of websites and blogs. You can e-mail Seb at seb[at]circulatenews.org

5 Comments

  1. Silvia Leahu-Aluas
    July 7, 2015 at 2:58 pm — Reply

    Good review, Seb, thank you for it. Sorry to be negative, but I have to. All my comments refer to EC exclusively, not to your article and the foundation’s great work.

    EC has no credibility whatsoever while it is destroying Greece, which is ironic besides tragic, since Europe was born in Greece.

    Why is this relevant? Because no economic model should be an abstract concept that does not target first and foremost people, all people and their welfare, happiness and dignity. We need economics “as if people mattered”, all people, all the time.

    If I understand correctly, EC considers mobility, food and the built environment to be Europe’s largest basic needs. I don’t think this assumption would pass a survey of actual people living in Europe today, it would be helpful to find out. I would say meaningful work, equality, fairness (particularly in a time of extensive fiscal fraud by “non-ordinary” people, corporations included since in the US they are considered people), a good life for them and future generations are the largest basic needs.

    While releasing the report, the EC and others are imposing an austerity and debt-prison economic policy in the EU that is contrary to the principles of prosperity, sustainability and goodness of the circular economy.

    I see the following as major issues with this report:

    1. Slow growth is not a problem, it is a desirable goal. If we need to biomimic anything first it is the slow pace of nature. Nothing else would allow for a sustainable future. To quote Tim Jackson, we can have “Prosperity without Growth”.

    2. GDP is the wrong measure of economic performance. The circular economy model has a duty to create alternatives. We need a maintenance, not a growth economy. Isn’t the circular economy based on maintenance at its core: maintenance of assets and resources (natural and man-made), of value, of life for all species?

    3. Growth cannot be decoupled from finite sources, it is a physical impossibility. EC should hire physicists and biologists to explain to them what a closed system, such as Earth, means.

    4. EC’s current politicians, technocrats, clerks and economists just cannot conceive of an alternative to growth because they are stuck in the past, in their own disconnected world and they have zero imagination. And there are alternatives:

    http://www.theguardian.com/sustainable-business/2015/jul/07/this-endless-quest-for-growth-will-see-greece-self-destruct?CMP=share_btn_gp

    • Seb Egerton-Read
      July 8, 2015 at 8:09 pm — Reply

      Hi Silvia,

      Thank you for your comment. Just a couple of points – though this report was released at an EC event, it was written, researched and published by the Ellen MacArthur Foundation and McKinsey and co.

      I’d also mention that the report itself does have some comment on issues around effective measures of prosperity and I do think that that is an important conversation, however, it doesn’t have to exclude highlighting benefits like GDP growth and household expenditure etc as well.

    • Seb Egerton-Read
      July 8, 2015 at 8:20 pm — Reply

      Sorry pushed reply to quickly. The growth question is also an interesting one broadly, but the findings from this report suggest that between now and 2030, Europe can reduce its reliance on finite resources while growing more – that’s the circular economy scenario that is sketched out.

      • Silvia Leahu-Aluas
        July 10, 2015 at 9:10 pm — Reply

        Hi Seb,
        Thank you for the clarification, I’ll read the report.

        Maybe economic growth will become one of your next topics. I find it very important to know what should drive our economic activities and our lives, especially when we want to switch to a new framework, such as the circular economy. It is also important to preempt or answer the criticisms of this model, one of it being that it does not take into consideration the laws of thermodynamics, a weakness inherited from the C2C model. Here is an excellent example I concur with:

        http://www.paecon.net/PAEReview/issue68/RammeltCrisp68.pdf

        I do not count on EC in this transition for all the reasons I already mentioned.

  2. Mats
    July 14, 2015 at 8:50 am — Reply

    Hi guys, mind if I step into the conversation? (for the record, I’m Seb’s colleague)

    Growth is indeed a debated metric, and one that does not by definition hold a merit as the best measure of prosperity. On the other hand it is the metric that has stood the test of time, a metric everybody recognises and understands (in broad terms). It was therefore natural to use this metric to indicate the decoupling of prosperity from resource use. And would you not agree that all things equal, more growth is better than no growth if if comes at a sustainable level of resource consumption?

    There is probably a theoretical limit to growth, but it’s at best theoretical. I’d say the only way of having a zero growth global society is that either every individual has exactly the same amount of prosperity and remains on that level, or that people below average get better of while people below average get worse off. Both scenarios appear unlikely.

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