The Circular Economy
Pushing back against the throw-away economy, the EU is designing an industrial policy around garbage.
September 30, 2021
Sep 30, 2021
15 Min read time
Pushing back against the throw-away economy, the EU is designing an industrial policy around garbage.
While hundreds of thousands of pedestrians walk across Berlin’s chic glass-and-steel Potsdamer Platz every day, few realize that fifty feet below them lies a vast subterranean warren for recycling and waste management. A private company called ALBA Facility Solutions processes 2,866 U.S. tons of waste here a year. Though this is a modest feat among the 2,400 similar centers across Europe—the newest of which move more than twenty times that volume—it is noteworthy for its hideaway location under the center of a major metropolis. While the city and its inhabitants move through their days, the organic waste from the city’s eateries and cafes is funneled to heat-generating biogas plants. Meanwhile, other “waste” is sorted into dozens of categories, such as plastic, metal, paper, and glass, that are then sent to treatment sites or incinerated for energy.
Europe’s transition to a circular economy is not an environmental fairytale. It is a dynamic strategy to retool Europe’s economy.
Facilities like the ALBA center have been popping up across Europe and around the world for years, with each generation becoming larger and more automated. The European Union hopes that once they reach full industrial scale, they will be a cornerstone of Europe’s circular economy: a regenerative economic system in which products and their components are used and reused indefinitely. In this system, “waste”—or “resources” as they are called here—is returned into the product cycle through recycling, repair, redesign, and reuse. This circular economy is a “closed loop,” in which as little material as possible lands in a garbage heap.
Europe’s transition to a circular economy, a pillar of the European Green Deal, is neither an environmental fairytale nor a lonely Brussels policy paper—Europe’s heaviest hitters, including top national politicos and industrialists, have made sure of that. Rather it is a dynamic strategy to retool Europe’s economy, and it is currently upshifting gears. Though to most Europeans, who strongly favor recycling and vigorous climate protection, this undertaking remains as imperceptible as the Potsdamer Platz recycling center, its lofty and sound pro-business goals are being etched into Europe’s DNA. The system separates human well-being and economic activity from environmental damage in a sustainable cycle that smartly uses resources, radically reduces greenhouse gas emissions, and simultaneously enhances Europe’s global competitiveness. Its core logic: to preserve the value of products, materials, and resources.
But the circular economy has merit beyond its environmental virtue. The director of circular economy at the Wuppertal Institute for Climate, Environment, and Energy in Germany, Dr. Henning Wilts, states that, “in the EU today, the circular economy is not environmental policy, foremost, but it’s industrial policy.” Moreover, the EU’s recent flurry of circular initiatives underscores its urgency: “The EU has become the driving force in the circular economy,” states Dr. Siegfried Behrendt, research director of the Resources, Economies & Resilience project at the Institute for Futures Studies and Technology Assessment (IZT) in Berlin.
This system separates human well-being and economic activity from environmental damage.
Indeed, the EU has long been central to European industrial policy, which it impacts largely through legislation that shapes the regulatory environment—its chief aim being to make the industrial sector more competitive. (In the EU, industry accounts for approximately 85 percent of exports, and over 30 million jobs.) Its circular economy measures come largely in the form of directives and regulations that the national states must fulfill or apply, such as those hailing from the two circular economy action plans. In addition, there are non-binding white papers, working groups, targets, and sector-specific platforms that guide the EU’s industry strategy. Moreover, there are diverse kinds of loans, equity, and aid culled from pots such as the European Investment Bank, the LIFE program, the structural and investment funds, the Just Transition framework, and the Horizon programs, among others. These funds go toward research and development, digitalization, infrastructure, innovation promotion, and seed capital for startups.
This process ideally starts at the beginning of a product’s lifecycle. Through smart design and intelligent production—promoted by EU guidelines and requirements, such as the recycled plastic content measures and sustainable product initiatives—these processes can conserve resources, circumvent waste, and create new openings for the private sector. In contrast to the throw-away economy, a circular economy can benefit both business and the climate, say its advocates. And a broad coalition of stakeholders agree.
The circular economy’s European proponents include major manufacturing lobbies, such as European Round Table of Industrialists, PlasticsEurope, and Germany’s powerful Federation of German Industries (BDI). Moreover, major companies such as IKEA, Coca Cola, Adidas, and Burger King are also on board, as are impressive ranks of economists and national leaders. “The availability of raw materials is the basis for industrial value creation,” argues the BDI in one report. It concludes: “Against the background of ever increasing demand for raw materials around the world, there is no escaping the need for sustainable use of raw materials.”
• • •
Europe has set the goal of hitting carbon neutrality—among other benchmarks—by 2050 at the latest. The circular economy is indispensable to getting there. Indeed, EU Commission executive vice-president Frans Timmermans, a tenacious Dutchman and the executive’s point person for the European Green Deal, proclaimed that the “circular economy is the model of the future, for Europe and the world.” Timmermans, a social democrat, is indefatigable in pushing the envelope on climate protection. For example, in July he introduced the “Fit for 55” package, calling it “the biggest transformational operation in living memory.” The package focuses on transitioning the continent’s entire energy supply to renewables to meet its goal of reducing greenhouse gas emissions by 55 percent in 2030, compared to 1990 levels. This is an epic feat in circularity, in contrast to the one-way fossil-fuel and nuclear industries.
The plan gained traction and lifted off when many sectors began to benefit.
When the EU first attempted to introduce circularity into the economy in 2014, the initiative was run by the Commission’s environment directorate, and it largely flopped. It primarily focused on resource efficiency, introducing resource reduction targets, a typically head-on green approach. “It had no money behind it, no clout, and it had no impact,” Wilts states. But then Timmermans took charge, in consultation from Europe’s leading industrial associations, consulting firms, and the Ellen MacArthur Foundation, a UK charity that promotes the circular economy. This changed everything.
In the new circular economy action plan, Timmermans shifted the initiative’s focus to center competitiveness, growth, and job generation. Once it became a plan for the economy that would benefit many sectors, not just the environment through CO2 reduction, it gained more traction and lifted off the ground. Wilts explains that “the business leaders felt that they’d gladly spend some money, make some changes, and use recycled materials as long as no one questioned their basic business models.” The result has been €10 billion of funding from the European Investment Bank, the EU’s development bank, and five other European banks and institutions. But still, a greener shading must be fought for as the legislation currently takes shape in Brussels and the national states.
Holger Bär, a research fellow working on circular economy at the progressive think tank Green Budget Germany, emphasizes the importance of having “Europe’s private sector firmly behind it, rather than against it.” Indeed, expansion of the circular economy could create up to 3 million new jobs in the EU by 2030—nearly three times more than the business-as-usual scenario. In addition, according to the Ellen MacArthur Foundation, a circular economy could increase GDP by one trillion dollars by 2030, grow household income by $4,500 a year, and halve current CO2 emissions. Bär believes that European businesses can become world market leaders in recycling and resource reprocessing technologies.
At the heart of the EU’s strategy is the new circular economy action plan (CEAP), which was adopted in March 2020 and is now being fleshed out with concrete measures. The plan builds on the 2015 strategy, aiming to “make sustainable products the norm in the EU.” This requires a vast range of initiatives implemented at different stages throughout the duration of products’ life cycles—targeting how products are designed, promoting circular economy processes, and encouraging sustainable consumption. These measures impact diverse sectors: plastics, textiles, e-waste, food, water and nutrients, packaging, batteries and vehicles, buildings and construction—and, of course, energy. Though the plan has not yet been turned into significant hard legislation, it sets a series of goals which will later be translated into legal requirements, such as cutting non-recyclable municipal waste in half by 2030.
This economic model could nearly triple job creation—and halve current CO2 emissions by 2030.
One centerpiece is the Sustainable Products Initiative, the main aspect of a European product policy that will affect the design of a wide range of products, making them more durable, reusable, repairable, recyclable, and energy efficient. But the EU isn’t starting from scratch: the 2009 Ecodesign Directive and subsequent measures dramatically upped the efficiency of energy-using goods—such as household appliances and information and communication technologies—through energy labels and even by removing some of the worst offenders from the market. Experts agree that product design is key to the circular economy. Justin Wilkes, executive director of Environmental Coalition on Standards (ECOS), reports that “80 percent of environmental challenges originate at the design phase.”
Groups like the European Environmental Bureau (EEB), a Brussels-based advocacy group, are fighting hard to give the initiative teeth. All products on the market, it argues, should come with a product passport and information detailing their degree of sustainability. The EEB is currently lobbying to ban practices such as premature obsolescence, the destruction of unsold goods, and single-use solutions. The group wants the EU to set minimum manufacturing requirements for smartphones that would compel companies such as Apple, Samsung, and Huawei to design phones that users can repair with household tools, making it much simpler, for example, to replace a broken screen or a weak battery.
Greening Value Streams
It is significant to note that Europe’s circular economy plans amount to more than just an advanced recycling program. Bär states that “the Commission. . . together with business leaders, examined every economic sector to determine how much of a given resource Europe needs and will need in the future, where these resources will come from, and how we can benefit from making them circular.”
Battery components, according to Bär, are a prime example. Europe envisions itself as a leader in battery production and export, but nearly all of the cobalt required for lithium-ion battery production hails from abroad. “What happens if suddenly the Democratic Republic of Congo makes a deal with China to export all of its cobalt there?” Bär asks, “Or if working conditions deteriorate yet further?” These are even more pressing questions given the fact that the world’s energy storage demand is expected to increase 14 times by 2030. Even with continuously growing demand for batteries, urban mining and rigorous battery recycling programs could cover 40 percent of demand for these resources in 2050. In the new action plan, battery circularity is the first priority.
The EU is effectively valorizing waste as a policy instrument in the plastics economy.
In fact, in a sweeping overhaul of the existing regulatory framework for batteries, the Commission will mandate that all batteries sold on the common market, regardless of their chemical nature, size, or design, are sustainable throughout their life cycle. The directive will fix targets and outline steps for high levels of collection and recycling. In addition, as of March 2021, companies that sell products such as refrigerators, washers, hairdryers, and TVs have to guarantee a ten-year window for repair. Moreover, as is already the case with plastics, producers of batteries—and producers of other products containing batteries—will now bear responsibility for the waste management of their goods. Europe is working on similar regulations for consumer electronics, preparing to implement right-to-repair rules for smartphones, tablets, and laptops.
Construction materials comprise another sector with enormous potential for recycling. Construction and demolition waste constitute 33 percent of the EU’s total waste. Concrete, doors, steel beams, cement, bricks, windows, and roof tiles all usually finish their life cycles in a refuse dump. But new EU-wide rules will incentivize and enforce better maintenance, repair, reuse, and recycling of construction products. The details of the Construction Products Regulation are currently being hammered out, with groups such as ECOS calling for minimum requirements for CO2 emissions on construction product manufacturing, as well as minimum requirements for use of recycled content and secondary raw material in all new construction products.
As for plastics, the EU is setting global best practice in tackling plastic pollution, which represents just the beginning of a resource-efficient plastics economy. Bans on some single-use plastics and renewed recycling incentives, for example, will ensure that all plastic packaging on the EU market will be recyclable by 2030. The EU is effectively valorizing waste—namely by putting a price on used resources—as a policy instrument in the plastics economy, and this will be similarly useful in other fields.
In this system, “waste” is returned into the product cycle through recycling, repair, redesign, and reuse.
The game-changing Single Use Plastics Directive of 2019 requires that, from 2025 onward, plastic-using companies include 25 percent of recycled clear plastic in new bottles—this will increase to 30 percent after 2030. This requirement, which is already fulfilled in countries such as Germany, Denmark, Norway, and Japan, renders recycled clear plastic valuable and thus dramatically boosts its percentage of recovery. “Recycled PET [clear plastic] is now becoming a very attractive commodity with much better prices,” explains Andreas Manhart, a plastics expert at the German thinktank Oeko-Institut. “Incentivizing recovery this way obviously works and could be expanded to nylon, polythene [plastic bags], and polypropene as well as for other product groups such as shampoo bottles and garments.”
The major obstacle to dramatically launching a new plastics economy in Europe—and other resource categories face the same issue—is the paucity of recycling and sorting infrastructure like the Potsdamer Platz center. Wilts argues:
This infrastructure is coming about too slowly. The market signals still aren’t right to make it take off. Eventually, the recycling industry is going to produce the basic materials for industrial manufacturing. But we’re not quite there yet. There’s going to be a doubling of sorting and recycling facilities in the next five years. When there’s demand for high-quality recycled material, there’ll be security for investment in recycling and sorting facilities.
• • •
Though the EU is orchestrating much of the transition to a circular economy from above, considerable innovation and how-to knowledge is coming from below, where entrepreneurs and activists know better than anyone how nuts-and-bolts circularity works. Several dozen municipalities across Europe—and beyond, as well, in Africa and Asia—are forging ahead in circular city programs to set a precedent that can be replicated elsewhere.
Amsterdam boasts a detailed, expert-drafted circular economy roadmap. Its pioneering projects in the construction value chain lead the way in the country’s goal to cut primary raw material use in half by 2030 and go completely circular by 2050. Amsterdam’s material reuse strategies should chop off $90 million in construction branch expenses and add 700 jobs in the building sector.
Another example of a circular city program is in the Kalasatama district of Helsinki, Finland, where an entire neighborhood—which includes schools, factories, energy generation, and a waste collection system—functions as an urban laboratory to design and test pilot programs, many of them circular. Those that eventually prove themselves on the marketplace remain in business and those that can’t fall out.
Public opinion polls show high support for the benefits of circularity: better energy efficiency, less waste, longer product life, and the right to repair.
According to C40 Cities, a worldwide coalition of megacities addressing the climate crisis, there are dozens of pilot projects that Kalasatama’s residents began with EU funds, such as state-of-the-art platforms that enable residents to offer or request the sharing of goods and services. Residents reduce food waste by making use of different technologies, such as a platform that reduces food waste in the supply chain by enabling real-time inventory, pricing, marketing, and tracking of expiring food. While this occurs, a peer rental service connects parking space providers with drivers, so that parking space owners can rent their spots to others when they’re not using them.
Meanwhile, in Vienna, Austria, city support helped bring to life Europe’s largest repair services network for electrical and electronic appliances, mainly for private households. Since its inception in 1999, the Repair Network Vienna’s eighty shops have carried out more than 50,000 repairs a year (it repairs approximately 440 U.S. tons of appliances annually), which corresponds to about 825 U.S. tons of waste prevented every year.
And to return to the example with which we started, Germany’s capital city of Berlin hosts a small universe of zero-waste and re-use initiatives, including hundreds of second-hand stores, sharing programs, repair cafés, upcycling platforms, and innovation labs. “A thriving, very diverse innovation ecosystem has emerged in just the last few years,” says Behrendt, lead author of the study Circular City Berlin. “It’s a chaotic jumble but taken together there’s a circular economy in Berlin that average people can benefit from.” Behrendt says that the technical infrastructure for an advanced recycling program has existed in Berlin, and all of Germany, for decades, but that a second generation of change must happen in products and consumption. “We’re talking about a circular culture and this can be supported from above, but it has to happen on the ground.”
Can Europe really revamp its brawny, manufacturing-based industrial policy through product design laws, plastic bottle recycling, and the proliferation of repair cafes? “It’s all about the interaction between the macro and the micro levels,” says Behrendt. “They need each other.”
Pavlina Pavlova, co-leader of Circular Economy Transition project in Zurich, Switzerland adds that “it’s as much about how people think about, and eventually accept, the whole process.” “It’s not part of our mentality that you don’t have to own everything or that almost everything can eventually find its way back into the production and use cycle,” she concludes.
But Europe is shifting gears and moving the European economy away from a traditional linear system, with powerful forces pushing from both above and below. The recent spike in raw material and transportation costs worldwide provides yet more impetus. People are excited about the benefits of circularity—such as better energy efficiency, less waste, longer product life, and the right to repair—public opinion polls show, even if they’re not yet understood as part of a much larger undertaking. Nevertheless, the consensus is growing and may one day include the shoppers on Potsdamer Platz.
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September 30, 2021
15 Min read time