21 percent of the resources we consume* are the fossil fuels that are used to extract, transport and process materials; as well as to deliver, use and dispose of products. As a result, 67 percent of global greenhouse gas emissions are related to material management**. Limiting global warming to well below 2°C or even 1.5°C by 2100 thus requires climate action to go far beyond incremental improvements to our economies. It requires profound changes in the way we produce, use, and consume products, materials and energy.
The circular economy provides an attractive mitigation opportunity as it steps away from the negative and often punitive narrative of reducing emissions, and defines a more positive and inspiring vision of a circular future. It does not shy away from the systemic changes that are requires, and addresses both excessive resource use and greenhouse gas emissions in parallel.
1. Tackling systemic issues rather than making incremental improvements
The circular economy responds to a direct call from the climate community to address the fundamental issues behind our greenhouse gas emissions by promoting the collaborative, cross-sectoral approach we need to reduce greenhouse gas emissions while making make more efficient use of available assets and resources.
Moving away from the traditional ‘take-make-waste’ economic model that has prevailed since the industrial revolution requires systemic change. The Green Climate Fund, for example – the main vehicle for climate investments into developing countries – urges for paradigm shift and calls for projects with transformational impact rather than the more incremental, single-installation investments that have been commonplace under current climate policy and project developments.
Current efforts, such as renewable energy and energy efficiency measures, tend to focus on improving or developing individual assets. While they are important and should be pursued, the UNEP gap report confirms that there are clear limits to decarbonising current production systems. These measures only buy us more time, when we should be focusing on designing a low-carbon future.
Therefore, identifying circular economy opportunities requires analysing the system or metabolism rather than individual units. It argues for tapping into the many cross-sectoral opportunities, which the complex metabolism of our economies, and the ecosystems on which they rely, have to offer.
2. Extending mitigation opportunities beyond geographic borders and across value chains
Around 20% to 30% of a nation’s carbon footprint lies in the emissions embedded in the products crossing its borders. Yet under the UNFCCC, national climate policies and voluntary commitments, governments account for greenhouse gas emissions demarcated by their geographic borders. With this approach, national governments are not encouraged to take action on the mitigation potential that lies outside their national borders, but which requires domestic action.
Effective climate action requires looking accross borders into the international value chains which responds to the needs of societies. This what the circular economy does, all the while advocating for effective material use: it encourages economic agents to coordinate efforts across global value chains and to reduce emissions in all parts of the chain.
Designing an economy that is smarter about materials use- an economy that looks beyond factory gates and country boundaries- extends our mitigation impact as far up as the mines, quarries, wells, fields, and forests where our products are born.
3. Combining material efficiency with low-carbon development
Addressing both greenhouse gas emissions and excessive resource use yields significantly deeper reductions in global emissions. Scientific models also indicate that the combination of resource efficiency and climate action delivers higher environmental and economic benefits.
Combining low-carbon development with improved use of material resources also makes economic sense: the long-term economic benefits of resource efficiency and low-carbon development exceed the short-term costs of shifting to a 2°C emissions pathway. For some sectors, effective decoupling of resource use from economic growth alone is enough to reach the 2°C benchmark.
4. Understanding the societal needs behind resource use
The focus of mitigation efforts has traditionally been on the physical sources of greenhouse gas emissions: from the energy efficiency of our boilers and engines, to capturing methane from landfills, coal mines and manure storages; mitigation efforts have often targeted the symptoms rather than the cause. However, many mitigation options do not require interventions at the emissions source at all, but rather an understanding of the societal need that underlying economic activities aim to address .
Only by understanding the needs that our products and materials satisfy, can we explore new ways to address them. Substituting carbon-intensive materials with low-carbon alternatives, improving the use of existing assets, and providing products-as-a-service then emerge as new mitigation options.
5. Tax shoft from labour to resources
Policy makers with a climate mandate often try to choose between introducing a carbon tax or relying on emission trading schemes that cap industrial emissions. Both options aim to correct markets for the negative externalities of greenhouse gas emissions by encouraging energy efficiency and renewable energy. Both options, however, also disregard the potential of resource efficiency.
Extraction taxation, on the other hand, aims to discourage resource extraction and encourage the use of a resource with less environmental externalities: labour. It proposes that we tax what we want less of, and reduce tax on what we want more of. As such, it encourages a circular economy where resources are effectively used and renewable energy sources are prioritised.
A tax reform where the added tax burden on resource-intensive products is immediately compensated with reduced taxes on labour also allows for public opinion to work in favour of the initiating government body.
* Own analysis based on UNEP IRP (2016) “Global material flows and resource productivity”.
** UNDP, “Circular economy strategies for Lao PDR – A metabolic approach to redefine resource efficient and low-carbon development” (unpublished draft), a project with Shifting Paradigms, FABRICations and Circle Economy.
Translating the circular economy into actionable, ambitious climate policies and strategies requires collaboration by governments across borders. This is also an opportunity for climate finance and the architecture of the Paris Agreement. We’ll dig deeper into these topics in our upcoming blogs in this series.