Paving the way for a 'circular economy' in Europe

In a speech at the European Parliament plenary debate on Monday 6^th July, First Vice-President of the European Commission, Frans Timmermans, said that the Commission “remains strongly committed” to present a circular economy package towards the end of this year.  The reasons are quite simple: Vice-President Katainen, Commissioner Vella, Commissioner Bienkowska, and others, essentially believe that the new circular economy package can bring:

• better eco-design and waste prevention, which can save EU businesses up to EUR 600 billion;
• a reduction of total annual greenhouse gas emissions; and
• an increase in resource productivity by 30% by 2030, which could boost GDP by nearly 1%, whilst creating 2 million additional jobs.

The European Union refers to the circular economy as “re-using, repairing, refurbishing, and recycling existing materials and products.” Other organisations, such as the Ellen MacArthur Foundation, define the concept of the circular economy as one that “seeks to rebuild capital, whether this is financial, manufactured, human, social or natural. This ensures enhanced flows of goods and services.”

Big multinational corporations, such as KingFisher, Unilever, Cisco, Renault, or Philips, are already leading on this, and have implemented new business processes to take advantage of the ‘circular economy,’ as they acknowledge the positive impact it can have on their supply chains. Many of them advocate through the Ellen MacArthur Foundation, which in February 2013 created the world’s first dedicated circular economy innovation programme.

This analysis piece will examine the upcoming EU Circular Economy Strategy and will also explore the approach that the UK is taking.

THE EU CIRCULAR ECONOMY STRATEGY

Finnish MEP Sirpa Pietikäinen is the rapporteur and author of the report called "Resource efficiency: moving towards a circular economy" from the Committee on the Environment, Public Health and Food Safety (ENVI). At the plenary debate earlier this week, she argued that a review of existing legislation, including financial legislation, was needed to incorporate the value of ecosystem services. She called on the European Commission to broaden the scope and revision of the Ecodesign Directive, starting with sustainable buildings. In addition, the report advocates for an overall EU resource efficiency target of 30 per cent by 2030 and a 50 per cent reduction in marine litter by 2025. Frans Timmermans, First Vice-President of the European Commission, has openly agreed with the report, as sees it as an opportunity for European businesses, economy, and jobs.

In a vote in the European Parliament yesterday (9^th July), 394 MEPs backed Pietikäinen's Circular Economy report, and called on the European Commission to push forward with plans for new recycling targets for 2030. 197 MEPs voted against the report and there were 82 abstentions.

In July 2014, the Commission had already adopted a Circular Economy Package and issued a Communication entitled "Towards a circular economy: a zero waste programme for Europe." However, the Package – which included a 70% recycling or reuse target for municipal waste by 2030, and to ban recyclable materials such as plastics, paper, metals, glass and biodegradable waste to landfill by 2025 – was axed in January this year. This comprehensive package consisted of six bills on waste, packaging, landfill, end of life vehicles, batteries and accumulators, and electronic equipment waste. Timmermans then promised to present a more ambitious package in 2015.

As a result, in April 2015, the Commission presented its Circular Economy Roadmap, and it is now aiming to present a new Circular Economy Strategy later this year. The Strategy, for which DG Environment (ENV) and DG or Internal Market, Industry, Entrepreneurship and SMEs (GROW) are co-responsible, is expected to encompass a range of economic sectors, including waste, and will be "fully compatible with the jobs and growth agenda." The Commission has also announced that the Strategy will include a new legislative proposal on waste targets and a Communication setting out an action plan for the rest of the Commission's term of office. To this end, the Commission has opened a Consultation for all interested stakeholders, who can submit their contributions until August 20^th.

The upcoming strategy will affect a vast majority of businesses in Europe which source raw materials, operate at any stage of the value chain, or in the waste sector, to name a few. It is therefore no surprise that many of them, as well as non-profit organisations and others, want to get involved. On June 25^th, around 700 delegates participated in the Stakeholder Conference on the Circular Economy. Commissioner Katainen closed the Conference by stressing "the three wins - environment, economic, and social - deriving from the circular economy."

THE UK’S CIRCULAR ECONOMY STRATEGY

The Department for Environment, Food and Rural Affairs (Defra) calculates that UK businesses could benefit by up to £23 billion per year through low cost or no cost improvements in the efficient use of resources.However, UK politicians have not always been as supportive as those in other Member States.In fact, earlier this week it emerged that the UK has been calling for a weakening of the original plans and lobbying in favour of voluntary goals which are less burdensome for businesses.

At the plenary debate earlier this week, Conservative MEP Julie Girling argued that "we should carefully examine the impact of setting absolute numbers in our targets." She also claimed for an "impact assessment before targets can be considered."

Nevertheless, the House of Commons Environmental Audit Committee published in July 2014 a report entitled "Growing a circular economy: Ending the throwaway society," which broadly supported the European Commission's plans and set out the recommendations summarised below:

• to introduce differential VAT rates based on life-cycle analysis, and tax allowances for business that repair goods or promote re-use;
• to reform the PRN scheme to include an 'offset' or lower charge for products that have higher recycled content;
• local authorities should tailor their household recycling services to local needs, and the Government should give clear guidance that directs local authorities in England towards a more standard approach;
• the Green Investment Bank should finance innovative technologies to support a circular economy;
• the Government, working closely with the EU, should establish eco-design standards across a range of products;
• the Government should take steps to remove trade barriers for remanufactured goods through trade negotiations;
• the Government should extend buying standards to include a greater emphasis on the recyclability of materials and recycled or re-used content;
• the Government should embrace the EU's ambitious targets for improving resource productivity, and support business in achieving the economic and environmental benefits;
• the Government should also support the European Commission's proposals for recycling and the accompanying proposed targets;
• the Government needs to ensure that there is sufficient funding available for agencies such as WRAP and the Technology Strategy Board to support this transition;
• Local Enterprise Plans should identify steps to mitigate resource risks. It should also be mainstreamed into departmental business plans, with clear responsibilities for driving this forward in both BIS and Defra and across Government.

Despite MPs’ interest, in the Conservative Manifesto prior to the UK General Election, there was no mention about recycling or the move towards a circular economy.

In fact, media reports earlier this week leaked a paper which states that the UK opposes the new EU waste recycling targets. The leaked paper reportedly states that the UK is in favour of voluntary acts and incentives, over strict targets. According to figures released by Defra, England recycled 44.2% of its household waste in 2013, just 0.1% more than the previous year. However, EU laws require that all Member States recycle half of all household waste by 2020. Commissioner Vella has acknowledged that the EU's 28 Member States are recycling waste at varying speeds. He said: "we have to identify those states that are lagging behind, the reasons why, and we have to be more ambitious by supporting them to achieve the targets, by channelling more funds not projects that will achieve them."

The EU's upcoming Circular Economy package still has a long way to go before it becomes law. It remains to be seen whether the European institutions, Member States such as the UK, and the various stakeholders affected, will support it or not. Either way, its benefits cannot be ignored: according to a recent report by the Ellen MacArthur Foundation, the McKinsey Centre for Business and Environment, and Stiftungsfonds fur Umweltökonomie und Nachhaltigkeit NGO, a circular economy would halve carbon emissions, create €1.8tn (£1.3tn) in net benefits and a €3,000 increase in household income.