Circular economy under the microscope

18th August 2017 Posted by

Big Ideas tend to trace a similar life cycle – great excitement leading to an avalanche of high-level studies making Big Claims, followed by a flurry of policymaking activity building on said studies. Then, a period of introspection sets in. Is the Big Idea all it is cracked up to be? Are the claims overblown? Are the benefits as easy to realise as some would suggest?

The Big Idea of the circular economy is no exception. Although not particularly new (commentators often hark back to the war years, when re-purposing and frugality were the norm) it has been touted as a win-win for both business and the environment. Some Big Claims have been made;

  • Net material savings of $340-630 billion across the EU
  • $1 trillion annual growth for the global economy by 2025
  • 3 million extra jobs and unemployment reduction by 520,000 across the EU by 2030.

Environmental claims (resource conservation, waste reduction, carbon savings) have been equally impressive. The EU’s Circular Economy Package, China’s Circular Economy Promotion Law, and initiatives in Scotland and Wales testify to its “intuitive appeal” to policymakers, as one commentator puts it.

But the voices of a few naysayers have begun to surface. For example, Julian Allwood in the Handbook of Recycling (2014) questions whether a 1 to 1 substitution of secondary materials for primary raw materials or goods actually occurs in practice to the extent that is typically assumed by circular economy proponents.  If not, environmental impacts from the secondary economy will add to the impacts of primary production, rather than displace/reduce these latter impacts. Trevor Zink and Roland Geyer expand on this theme in A Market-Based Framework for Quantifying Displaced Production from Recycling or Reuse (2016) and in Circular Economy Rebound (2017), claiming that as with energy systems, improving resource efficiency and reducing raw material costs might lead to an increase in production that wipes out some of the environmental gains, or even to “backfire”, where the increase in use is proportionally greater than the efficiency increase, leading to higher net environmental impacts. Decreasing aggregate demand – less production and less consumption – is recommended as one way of avoiding circular economy rebound.

This theme is picked up by Carina Millstone in Frugal Value: Designing Business for a Crowded Planet (2017) but with a twist.  Millstone favours replacing global private sector companies with local community-based structures.  Millstone claims that “the purpose and structure of the private sector have created conditions of unsustainability” by fuelling consumption for the profit motive, and advocates “de-growth”, supporting local business offering “frugal” products and services.

But paradoxically, while these commentators fret about the circular economy and some of its business models encouraging the wrong sort of economic growth, Defra Minister Dr Thérèse Coffey’s opposition to the circular economy is that “there are no opportunities for growth outside of a closed loop system”, according to evidence given before the Environmental Audit Committee in 2016.

Should we worry about circular economy rebound increasing consumption or should we purposefully design a policy framework for more economic growth?

Perhaps the answer is both. Arguing for de-growth or anti-growth is essentially taking a privileged first world perspective.  There remain huge swathes of population who have a right to economic betterment, and for whom consumption and economic growth is the difference between squalor and dignity.  Indeed Zink and Geyer acknowledge in a footnote that “there may be significant welfare benefits to increased connectivity in the developing world”.  For all its potential limitations, the circular economy offers a better way of achieving sustainable growth than the linear economy.  Rather than discarding the concept, it should be properly designed and applied.

But, for a Big Idea that has gained so much political traction, the paucity of academic research, especially the input of academic research to inform policymaking, is striking. For example, we still lack a robust macroeconomic model.  Many of the Big Claims made by circular economy proponents have not been rigorously analysed or tested; some are based on over-optimistic assumptions. We badly need a solid body of academic inquiry into the circular economy, to ground truth circular economy policy and not over-promise on what it can achieve.

A degree of circular economy fatigue has begun to creep in – enough rhetoric, now walk the walk. But what we are finding in the real world is that walking the walk is proving more difficult than we have been led to believe.  Nirvana is not round the corner, but a hard slog away.

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