I am happy to see so many of you here today to debate, discuss and share your views on the Commission's new proposals on the Circular Economy. This is a topic that is very close to my heart.
A circular economy responds to the main challenges of our time. It will help our economy to become more competitive and resilient, relieve the pressure on our resources and the environment.
In other words, the circular economy agenda is an important step towards modernisation of the European economy. Only this approach can promote job creation, social cohesion and innovation.
There are many good reasons for moving away from our linear economic model. In a world where the population rises every day, with huge demand placed on land, water, food, feed, raw materials and energy, we cannot rely further on a 'take, make, use and throw away' approach.
We need to look at the circular economy in the wider context of our modern economies and how to ensure their long-term health as well as that of our planet.
Our possessions have become disposable in a way that our parents and grandparents could not have imagined. If we continue to just throw old products into landfill or incinerators, we are not only harming our environment but we are also missing the opportunity to benefit from usable resources. We need now to start designing products with recovery in mind.
Sustainability is no longer just a term used by NGOs or by those businesses that want to be seen to 'do the right thing'. There is clearly an economic case behind it.
Many industries have realised that doing the right thing actually saves them money in the short and long run, helps to create a more resilient business by being less reliant on primary materials and imports, and allows them to invest for the future and create new jobs and growth.
The supply of many raw materials is falling fast, while the price and security risks are going up. Accessing resources is increasingly costly and problematic, not least due to political and economic tensions in source countries.
It makes sense for companies to reflect on their reliance on external resources, and to future-proof their business.
The circular economy makes a lot of sense: if you can create a new revenue stream from materials you previously discarded, why not take advantage of this?
If you can lower production costs and bring down your carbon emissions by using recycled materials, why not do so?
If you can design products with recycling already in mind to encourage recovery, why not do so?
And if by doing all of that, you actually improve the competitiveness of European industry – there is really no good argument against a circular economy.
Of course, the challenge is huge. The circular economy involves a fundamental change. It really means re‑thinking the way we design, the way we produce, consume and dispose of products. We want to unlock the potential for more re‑use, re-manufacturing and recycling of products, and for that we need new solutions, sometimes unconventional business models, using modern communication tools.
It is about transforming the market economy in a more sustainable direction. It is about changing mind-sets and business models. It is about promoting competitiveness, growth and job creation.
This transition will also be a chance to modernise our industry, increase its material and energy efficiency and to put it back on track for growth. This requires creating new business opportunities, enabling innovation and stimulating investments.
The transition to the circular economy should build on the EU's strength in and eco-innovation. Employment in this sector continued to increase during the recession, from 3 to 4.2 million jobs (2002-2011), with 20% growth in the recession years (2007- 2011). The EU holds a third of a global market, which is worth a trillion euro and is expected to double by 2020. The EU should use its green technologies for its competitive advantage.
The Circular Economy Package
On 2 December, the EU took an important step in its progress towards a circular economy when the Commission adopted a comprehensive Action Plan accompanied by a set of legislative proposals on waste management.
We are creating a win‑win situation for EU's business, jobs and environment, including savings of up to EUR 600 billion for EU businesses (equivalent to 8% of annual turnover), the creation of many new jobs and the reduction of EU carbon emissions by 450 million tonnes per year.
By adopting the Circular Economy package, the Commission is creating the right conditions for this transition, encouraging investment in this direction, providing the right incentives to businesses and consumers and encouraging them to embrace these business models, products, services and techniques.
But the package itself is just a beginning. What we need now are the ambitious proposals as signalled in the Action Plan – and this is exactly what you can expect from the Commission.
Of course the Commission cannot act alone: the transition will require action from Member States, regions and the private sector. The package we put forward in December addresses all stages of the value chain.
First, the legislative package on waste will provide a very clear and stable policy framework, allowing public and private actors across the EU to develop long-term investment strategies focusing on prevention, re-use and recycling, taking into account different situations across EU Member States and tightening recycling targets for municipal waste and plastic packaging waste. Today, less than 25% of collected plastic waste is recycled, and about 50% still goes to landfill. The proposed amendments to EU packaging legislation allow Member States to ban plastic bags.
Our aim is also to phase out landfilling and to avoid overcapacity in residual waste management such as incineration and mechanical-biological treatment plants.
This will generate many direct jobs, most of them impossible to take outside the EU. The proposals will also reduce the administrative burden for small and medium-sized enterprises (SMEs) and public administrations, by improving definitions and simplifying reporting requirements.
Secondly, the proposal is complemented by an Action Plan containing a set of measures along the entire value chain - from production to consumption to waste management - which this Commission will carry out during its current term of office.
Moving to the circular economy requires switching to more durable, repairable, and resource-efficient products which do not become waste too soon. Therefore we will in the future take these aspects systematically into account during the development of new product requirements defined in the Ecodesign Directive.
A crucial step for circular economy is to empower consumers to make informed choices. The labelling of products is a tested tool here, but it should be complemented by more efficient protection of consumers against false green claims. We are currently pilot-testing an EU methodology to measure and communicate on the environmental performance of products from cradle to grave. We also want to boost Green Public Procurement and to act against planned obsolescence.
Secondary raw materials
Thirdly, we will further deepen the EU internal market for secondary raw materials to increase demand and supply. More robust quality standards should increase the trust in recovered materials and complement actions on demand through eco‑design and public procurement.
This matters as there are barriers that make it difficult for businesses to optimise their resource use. That is why creating a market for secondary raw materials and ensuring reliable quality standards is crucial: it is fundamentally about broadening our internal market.
We also propose targeted measures for those sectors of the economy where stakeholders see specific challenges, and where we can have the biggest impact. These areas include plastics, food waste, critical raw materials, construction and bio-based products.
Innovation and Investment
The fourth area of action relates to innovation and investments. Innovation is essential to overcome technological and systemic barriers and implement circular economy business models which can bring forward other innovative solutions.
Through the 2016-2017 call for proposals under Horizon 2020 on "Industry 2020 in the circular economy" the European Commission will invest over EUR 650 million in innovative demonstration projects. This investment is meant to support a systemic approach to innovation that helps realise the objectives of the circular economy and industrial competitiveness. In particular, funded projects will prove on the ground the feasibility of Circular Economy models by supporting large-scale demonstrations.
Under Horizon 2020, we will also start a pilot on 'Innovation Deals' within the scope of the circular economy. Innovation Deals aim to support innovators with the development and/or uptake of their innovative solutions when they face regulatory uncertainties at the EU level. In an Innovation Deal, the European Commission, in cooperation with national or regional authorities and innovators, can provide clarification of the relevant EU rules or, for example explore available flexibility within the existing legislative framework, fully complying with existing legal instruments. The objective is to address potential regulatory uncertainties to innovation and support a stable regulatory framework, increasing investor confidence in innovative solutions that help to better achieve policy objectives.
Investments are crucial in making the shift from a linear economic model. This relates to new technologies and innovative business models but also to reverse logistics and modern waste management infrastructure. The objective is to co-invest with business, public authorities and other stakeholders in new concepts and solutions that combine innovative technologies, business models, finance, and regulatory as well as social innovation.
The circular economy package specifically addresses financing as a horizontal measure in the Action Plan. And we can already identify different financing sources, including those relatively new, like the European Fund for Strategic Investment (EFSI).
Within the EU budget, cohesion policy has already been investing in waste management for two decades. Besides financial support, it provides Member States, their regions and cities with the instruments and conditions to benefit from the funds and reach the EU's targets. It will provide decisive support to the transition towards circular economy.
In the coming years, the European Regional Development Fund and the Cohesion Fund will invest EUR 5.5 billion in improved waste management in the regions where this is particularly needed. In addition, the funds will be used to develop new production processes, and to support resource efficiency and innovative technologies in SMEs.
It is now crucial that Member States, regions and other beneficiaries take advantage of the full opportunities of these available instruments, both in terms of funding as well as the policy assistance and administrative capacity-building. Outreach and implementation support activities will therefore be particularly important.
But public funds will not be enough. We need to work harder on ensuring that investors, engineers and risk managers are aware of circular economy-related opportunities and challenges. We will need to be directed towards the new opportunities created by the circular economy. At the moment, there is no shortage of liquidity in the financial system. The main problem is rather a lack of risk-taking capacity.We will address this from several angles.
The European Commission and the European Investment Bank have engaged in a partnership under the InnovFin Advisory programme to raise awareness in the business and financial communities and assess future financing needs. An amendment to the InnovFin Delegation Agreement signed in December will enable higher-risk, yet innovative sustainable business models and plans to access credit through InnovFin – this opens up EUR 24 billion of existing finance to circular economy businesses.
Projects can also receive support via the EFSI: together with the European Investment Bank, and the European Investment Advisory Hub, the Commission encourages applications for funding and support the development of projects. In this context we strongly encourage setting up of circular economy financing platforms to pool resources, disseminate knowledge and share expertise on existing funding possibilities. EFSI comes on top of already existing support for circular economy projects through EIB advisory and financing tools under the InnovFin programme.
All of these measures have an important role to play in increasing confidence by providing predictability for investors. The Commission is giving a very clear signal to businesses where to invest and where the future lies. We encourage them to make their investments in the circular economy, to invest in innovations and to make such investments in Europe which is the best place to grow a sustainable and environmentally-friendly business.
Ladies and Gentlemen, let me conclude. I know that I am preaching to the converted when I say that we need to make this transition to a circular economy. However, among you there are various views on how that is to be done. Therefore I want to underline that the package we presented in December is just the start of the work.
Today is about sharing your ideas and finding ways to redefine and modernise our economy in a sustainable way. Thank you very much for being here and providing your valuable contributions. The Commission alone cannot make this transition happen; therefore I count on continued good cooperation in making this a reality across Europe.
I wish you a productive and enlightening day. Thank you.