Circular economy could double benefits from eco-innovation, study finds

Circular economy could double benefits from eco-innovation, study finds

The European Union could be nearly a trillion euros per year better off by 2030 if a current surge of rapidly developing eco-innovations are put into practice within a circular economy framework, according to a study completed for the Ellen MacArthur Foundation.

New technologies and business models that are to some extent already being implemented include car-sharing and driver-less cars, electric vehicles, better materials such as graphene, precision agriculture, modular processes in construction and highly energy-efficient and passive housing.

According to the report, these technologies can in any case be expected to reduce costs across three broad sectors – mobility, food and the built environment – by €0.9 trillion per year by 2030. However, society has a choice of whether it wants to implement these improvements in the context of a linear or circular economy. If the circular economy route is chosen, the saving could be doubled to €1.8 trillion, the report calculated.

For example, a switch from petrol and diesel vehicles to electric cars powered by renewable energy will in principle have environmental benefits from reduced emissions of carbon dioxide and air pollutants. But if the electric cars are used in the same way that petrol or diesel cars are used in the linear economy, there will still be traffic congestion and cars will only actually be used 8% of the time. However, if the switch to electric vehicles is accompanied by a major shift to car-sharing or away from current ownership models, and if electric cars are designed according to circular economy principles so that they can easily be dismantled and their parts reused, the benefit will be much greater than that from simply switching to electric vehicles without other changes.

Dame Ellen MacArthur, the former round-the-world sailor who established the Ellen MacArthur Foundation, said that the report showed how application of circular economy principles could help “achieve a real system shift, and open a new era of growth and development, decoupled from resource constraints.”

Benefits for households

The report found that such an implementation of the circular economy would produce savings in the form of lower primary resource costs, lower costs related to the use of products (for example, lower costs for maintenance of vehicles, if vehicles are pooled) and lower costs related to externalities such as congestion or greenhouse gas emissions, which should fall.

The report also found that the savings would accrue substantially to households, which would have on average 11% more in disposable income arising from circular economy efficiencies. This would enable a spending boost which could be worth as much as 7% of GDP by 2030.

The report makes a series of broad recommendations in each of the three sectors of mobility, food and the built environment. For food, for example, policymakers could encourage local food supply chains that involve less waste, can work on “closing nutrient loops” through better recovery of animal and human waste and wastewater, and could use taxes and tax breaks to stimulate nutrient recovery while discouraging the unnecessary or excessive use of synthetic fertilisers.

The study also highlights that regional and municipal authorities have a major part to play, for example by promoting the emergence of new business models and clusters.

The report, Growth within: a circular economy vision for a competitive Europe, is the result of a project by the Ellen MacArthur Foundation, the McKinsey Center for Business and Environment, and Germany's Stiftungsfonds für Umweltökonomie und Nachhaltigkeit (SUN). It was presented at the European Commission’s stakeholder conference on the circular economy in Brussels on 25 June.

The report is available at http://www.ellenmacarthurfoundation.org/books-and-reports