Box 3-1: Framework and practical implementation opportunities of the circular economy

a hard environmental limit.

Sustainable de-growth is a state where following a transitional period, economic

output – at much lower energy and commodity consumption needs than at present – stabilises at a lower equilibrium level. At the same time, the de-growth dynamics appear not only in the lower investment activity and lower emissions of greenhouse gases, but also in the decline in global inequalities. At the same time, the intro

duction of a carbon tax is also essential in the de-growth framework, the rate of which is so high that it fully elimi

nates harmful economic production. However, compared to the green growth reforms, this is not accompanied by a large increase in public spending, and thus it also yields no new types of innovations.

continuous economic growth to such a degree that according to Kallis et al. (2012) a de-growth period may

even lead to the collapse of societies. Hence, ecological economics must provide answers to questions such as how the social equilibrium of the world can be achieved without growth. In their analyses, the damages entailing decreasing production and consumption are offset by the social relations resulting from the increased free time and welfare, i.e. growth in social capital. However, due to its design, the welfare measurement system used today, i.e. the System of National Accounts, is unable to reflect the benefit of those (Bilancini and D’Alessandro, 2012).

The macro ecological theories use a radical approach to

stop climate change: shifting toward an environmentally aware, sustainable world entails restrictions on the use of resources and CO 2 emissions, the introduction of limits on exploitation, the elimination of harmful investments and licensing only green investments, the reform of work organisation and income distribution, as well as revision of the role of trade and the financial system (Kallis et al., 2012).

All in all, the economic approaches analysing the relation of sustainable growth and climate change vary on a wide

scale: Nordhaus’ optimistic approach is now already obsolete, while the radical approach of the latest de-growth concepts cannot for the time being be regarded as a sufficiently elaborated framework.

However, the present societies focus on the objective of

Stern’s much more pessimistic green growth framework – assuming major environmental losses, but supporting clean growth and government intervention to stimulate

innovation – has become widely accepted. According to their analysis, the new green industrial revolution, correcting the market failures, may only be realised in conjunction with permanent government presence: the state can support long-term sustainable growth by tax policy, large-scale investments of low CO 2 emissions and fostering proper green innovations. Green growth thus achievable, in addition to making the absorption of resources more efficient, and can be realised in a new, innovative business world.

Box 3-1: Framework and practical implementation opportunities of the circular economy

One way to realise the new de-growth concepts in practical terms is the development of a circular economy. It hinders long-term sustainability that economic activities are dominated by competition, instead of cooperation. Furthermore, in the current social, economic and conceptual framework, the linear economic model fails to recognise the high economic, social and environmental costs of the exploitation, transformation and removal of resources. However, the circular

economy is neither the denial of market operation nor a “green” system that will never pay, but rather a new, novel

economic and business model. The purpose of the circular economy is to ensure that through conscious and precise planning the circle displaying the life cycle of the consumed products closes “seamlessly”, without generating any waste during the manufacture and consumption of the products.

The advantages of the circular economy are summarised well by the European Environment Agency (EEA, 2016). Due to the decline in demand for imports and for primary raw materials, a circular economy results in improving resource safety, while in parallel with this environmental load and emissions of greenhouse gases decrease. The circular economy provides new opportunities for growth and innovation, and due to better resource efficiency, it also exerts a positive effect on financial savings, while the new employment opportunities also have social benefits.

The circular economy approach also necessitates innovative solutions by the government in order to operate the

economy. In the circular approach more sustainable, resilient and open systems are created at the local level, while the local authorities play a dominant role in each phase of the functioning of the economy. Local governments can foster new forms of cooperation between certain economic sectors and disciplines. The objective of the circulation is to transform the attitude of economic agents at each point in economic production. In the development of products, it is not only aesthetics and ergonomics that matter, but also the possibility of repairing, transforming and recycling the products in the future, since in addition to being economical, they should also be recyclable and environmentally friendly. The government can encourage the market to develop resource-efficient and permanent, local solutions. On the other hand, during the manufacturing of the product it can cooperate with the other stakeholders in the sustainable procurement of raw materials and also in the various methods of the circulation of resources (industrial symbiosis, chemical industry borrowing procedure, re-manufacturing). Regulators have the opportunity to influence the consumption habits of households, companies and other organisations, through training, education, awareness, supporting the sharing economic concept, reuse and repair. Finally, during recycling, the local government plays a critical role in developing the waste collection scheme, increasing manufacturers’ environmental responsibility and spreading the need for bio refining and composting.

Chart 3-4: Circular economy

Source: MNB.

Certain large companies have identified major business opportunities in the circular economy. For instance, one century ago the Belgian company Umicore was still the largest copper mining company of the Belgian colonies, while by now it has become one of the world’s largest secondary raw material user. The “pay per lux” lighting offer of Philips, the Dutch light engineering and electronics company, relieves large companies of the procurement, maintenance, repair, quality control and waste management burdens: they only need to pay for the used volume of light (lux), everything else takes place in the global company’s closed, “circular” system. Caterpillar, one of the largest US machine manufacturers, now deliberately designs its products in such a way that permits modernisation of them after a while instead of scrapping. The French firm Schneider Electric only uses recycled materials and more than 12 percent of its revenue now come from circular operation. Adidas uses recycled plastic fished from the oceans in an increasing volume of its products, while Coca Cola announced recently that it would sell several of its products solely in recycled PET bottles.