A working group of the International Solid Waste Association reviews the industry’s options to respond to Europe’s Circular Economy targets.
A recent event of the International Solid Waste Association (ISWA) and its European group organised in Brussels, titled “Circular Economy: from concepts to projects,” provided useful insights into the real challenges involved in the effort to shift toward a Circular Economy, and triggered very thoughtful discussions. The event consisted of two separate sessions and discussed the policies and measures required to boost the development of proper secondary materials’ markets in the EU and the role of residual waste treatment in the Circular Economy Package. The event was based on ISWA’s ground-breaking reports on Resource Management.
From linear to circular – the concept of the circular economy
Every year the Organisation for Economic Cooperation and Development (OECD) estimates the equivalent of about one-fifth of global material extraction becomes waste. ISWA estimates 70% of this is disposed in landfills. Not only do materials follow this linear approach, but also the surrounding health, safety and environmental legislation and market conditions in place generally support this model. In such an economy, OECD estimates suggest that municipal solid waste will rise by 0.69% for every 1% increase in national income. Economic development generates more waste and produces more pressure on virgin supplies, i.e. the earth’s stock of natural resources.
Björn Appelqvist, coordinator of ISWA’s Task Force on Resource Management and chair of the Working Group on Recycling and Waste Minimization, says, “The emergence of the concept of the circular economy in its present form is mainly driven by three factors; price signals in commodity markets, environmental legislation and green taxation.”
Price signals for raw materials are a key driver in any change to the circular economy. The linear economy has been fuelled by falling prices since 1900. However, a change to this situation emerged in 2000. Growth in demand for raw materials between 2000 and 2010 reversed that trend and in 10 years all the price reduction gains of the last 100 years were wiped out. Environmental legislation has and continues to drive major change in all business activity. It is a major risk factor for many international companies.
The third major driver of change is green taxation. According to Appelqvist, who also serves as department manager of site solutions and waste management at the Denmark-based firm Ramboll, “Across OECD countries it is increasingly being seen as a tool for policy makers to drive environmental change and support the flows of secondary raw materials into the market place. As green taxation has been applied to landfill and incineration, gate fees have also risen to offset higher costs associated with effective environmental management of emissions. For waste producers, inactivity results in higher disposal costs, particularly in countries where tax escalator principles are used and the tax rises each year. Doing nothing becomes the most expensive option and over time such policies drive rapid change”.
Fad or reality?
The circular economy challenges the status quo, is disruptive and contains major business risks. Unless the economic drivers for that change are clear companies will not adopt it. Commodity prices are, however, unpredictable and although the price spike between 2000 and 2010 is clear, whether or not we have reached a genuine tipping point, caused by global demand is still challenged.
The unexpected fall in oil, copper, gold and iron ore prices late in 2014 has fuelled this debate. Oil prices in December 2014 had fallen by 40%, gold by 30%. In this light, it is fair to ask whether the idea of the circular economy was no more than an environmental fad and a political spin or if there is real and long-term substance behind the circular economy approach?
Antonis Mavropoulos, ISWA’s Scientific and Technical Committee chair, is more than sure that “despite the recent fall in commodity prices, we will experience a real and ongoing rise in demand for resources and commodities. The present low prices will not last. The reasons for change are primarily the growth in demand for primary raw materials.”
This growth in demand is driven in turn by population growth and the increasing prosperity of people across the globe. The United Nations (UN) projects global population to grow by more than 2.5 billion by 2050, and others predict the middle class aspiring to the same standards of living as western economies will grow by 3 billion people. If these trends continue, the UN predicts annual resource extraction would need to triple by 2050 compared to extraction in 2000 with extra pressure on land, water and energy usage as a consequence.
What opportunities does the circular economy bring?
However, Mavropoulos considers the recent fluctuations in recycling markets are not only connected to the commodities markets volatility, but to something more important. In a recent post in his blog he writes, “I think the challenges related to recycling markets are more systemic. What really happens is that the global recycling markets are disrupted by the combination of two major trends of our era: the Fourth Industrial Revolution and the Circular Economy.”
Still, the transition to a circular economy approach provides a major business opportunity. The UN Global Compact study by Accenture on the views of CEOs on Sustainability in the Mining and Metals sector, covering 1,000 CEOs in 103 countries and across 27 industries says there is a potential $1 trillion opportunity in transitioning to the circular economy, and that companies are recognizing that preservation makes as much economic sense as it does environmental.
The current market for secondary raw materials is already worth $200 billion and estimated at 700-800 million tonnes. It is dominated by recovered metals (nearly 50% by value) and paper (recovered paper now makes up 50% of the global paper market). Appelqvist identifies opportunities in the recovery of plastics, raw materials from electronic scrap and textiles.
The potential amount of organic waste that could be processed in the OECD is double what is currently produced. The resources contained within this increased amount are substantial: between up to 3 million tonnes of nitrogen and 4 to 41 million tonnes of carbon. That is equal to about 14% of the nitrogen that was applied across 23 OECD countries in 2009.
According to ISWA’s reports, the potential municipal solid waste available for waste-to-energy (WtE) and anaerobic digestion (AD) with biogas collection across the OECD is significantly greater than what is currently processed. Energy production could more than double from WtE and the potential from household biological waste is estimated to be 0.3% of current natural gas consumption.
Leaders in the waste industry say the circular economy gives the industry an opportunity to extend its journey beyond recycling and engage with forward thinkers in design and manufacturing. During the recent ISWA event in Brussels there was a common approach and agreement regarding the role of waste management industry.
As Mavropoulos comments, “Waste companies have the opportunity to engage in the design of products and services and show designers how they can recover and reuse secondary materials to improve the profitability of new business models as they emerge. By taking such action they believe the waste industry will be better positioned to advise on best practices for cascading materials through cycles of re-use; to identify the optimum opportunities to extract energy from these materials; and to design in strategic safe final sinks for unusable materials.”
We are not there yet
Appelqvist is clear on the real challenges for the waste management sector. “The challenge for the waste management sector is to make secondary raw materials the priority raw materials for the future. This can be achieved by targeting the production of secondary raw materials that are required by manufacturers to a price, quality and quantity unsurpassed by conventional markets. By working together, we can raise the quality and quantity levels of recycled materials reprocessed in our industries. We need to ensure products are recyclable, reduce their recovery costs and eliminate, where possible, non-recyclables from the product chain.”
However, until the environmental and climate impact of the usage of virgin raw materials are internalized into production costs and subsidies on production and consumption of fossil fuels are removed, commodity markets will be biased toward the use of virgin raw materials and fossil fuels, he adds.