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Symposium 2015

Solution for Re-assessing Waste Management and the Circular Economy

The Challenge

Environmental degradation and resource depletion threaten the sustainability of economic growth in the developed world, and build enormous pressures in the developing world as it strives to match th ...

Environmental degradation and resource depletion threaten the sustainability of economic growth in the developed world, and build enormous pressures in the developing world as it strives to match the West’s prodigal lifestyle. Both issues can be addressed by the Circular Economy (CE): if we stop generating waste, and re-use and recycle resources, we avoid environmental degradation and stave off resource depletion. But, the financial realities of (mostly) capitalist societies make so many recycling initiatives unattractive.

Strengthen Circular Economy Package with Economic Incentives

Background

The current regulatory framework overall favors business-as-usual over circular products and services. Accelerating and mainstreaming the circular economy to generate more prosperity and new jobs, therefore, requires an improved regulatory framework including economic incentives for circular business models.

Solution

The proposed solution consists of 3 pillars that are outlined in greater detail in a business manifesto jointly prepared with a large coalition of business associations throughout the EU representing thousands of forward-looking companies (see link below):

  1. Strong government policies:
  2. The manifesto calls for the EU and member states to act as launching customers by widespread implementation of green public procurement. In order to do so, it needs to set binding targets for maintenance, repair, reuse, refurbishment and cascading next to the existing ones for landfill and recycling, as well as flexible competition policy and the foundation of a European Institute for Circular Economy. In order to motivate businesses to move forward with zero waste and circular economy policies, these strong measures will have to include new approaches to enforce existing waste regulations and fight corruption throughout the EU. Also, we ask the EU to launch three programs. One for Circular Frontrunners to remove the generic obstacles they encounter and invest in new infrastructure enabling closing value chains, such as a voluntary “facebook”-like materials information system. These measures will also speed up fast followers. Second, a program for sectoral approaches to address sector-specific issues. Third, a cross-sectoral program to enable material flows from one sector to another for repurpose, reuse and recycling.

  3. Economic incentives:
  4. The manifesto calls for the EU to introduce economic incentives to create framework conditions for companies to implement circular business models. First, we ask the EU to adjust European VAT regulations in order to allow member states to choose for VAT rate differentiation on the basis of circularity. This is important to stimulate consumers to buy circular products and services. Second, the manifesto calls for the introduction of a tax shift from labor to resources following the proposal of the Dutch Ex’tax Foundation. The report of Ex’Tax and the “Big Four” accountancy firms Deloitte, WwC, EY and KPMG and presented in December 2015 (http://ex-tax.com/files/4314/1693/7138/The_Extax_Project_New_Era_New_Plan_report.pdf). Third, the manifesto calls for improvement and extension of Extended Producer Responsibility (EPR) schemes. This will reward producers of circular products with lower costs, while at the same time providing considerable funds for investing in improved waste management. It should apply “Golden Rules” and guiding principles for EPR as proposed by a business coalition led by Unilever (2012) (http://blogs.ec.europa.eu/orep/extended-producer-responsibility-10-proposed-eu-golden-rules/) and an European Commission report “Development of Guidance on Extended Producer Responsibility” (2014) (http://ec.europa.eu/environment/archives/waste/eu_guidance/pdf/Guidance on EPR - Final Report.pdf) to improve and harmonize the dozens of existing schemes. The rules and principles proposed include a robust and systematic cost-benefit analysis and impact assessment, an explicit national legal framework and strong public control by Member States, a level-playing field to ensure fair competition and clarification of EPR and the roles of actors. The manifesto also calls for further research and pilots to develop the concept of “precycling” as a direction for the development of EPR 2.0 in the coming years. Precycling is a concept developed by the UK based Blind Spot Think Tank (http://blindspot.org.uk/making-circular-economy-scale/). It replaces the basis of the EPR levy from the waste management costs to a mandatory insurance premium for the risk that a product leads to waste in the environment. Also, it creates the obligation for EPR funds to be invested in circular economy measures.

  5. Expand existing measures:
  6. The Manifesto calls for expansion of the Ecodesign Directive to include resource efficiency and circular economy requirements besides the current regulations. While the notion of resource efficiency is included in the Directive, the current focus has been restricted to energy efficiency. It is time to broaden the focus now that the importance of resource efficiency has become clear. Continue calls for proposals in the field of circular economy in Horizon 2020 and the Eco-Innovation Program, including calls for economic mechanism design to develop new measures.

For green tax reform and other issues for which unanimity may not yet be found, we ask the EU to take the lead with forward-looking member states and businesses, e.g., by creating a “Green Deal.” This is a new instrument to be worked out further, based on the experience with over 200 Green Deals from the Dutch government with businesses and partner organizations to remove obstacles for introducing green products and services.

These proposals will be effective because companies respond strongly to demand backed by general government legislation while everyone responds to price incentives. They will avoid red tape for companies from top-down over-detailed legislation. As the main challenge we see organizing political leadership at the level of the EU Council and member states to implement these measures. The measures proposed will change the system in which all companies operate. Other main challenges will be to define circularity, to assist municipalities and regional authorities to really implement green public procurement, to set the right price incentives and to create a circular design directive that will be effective while avoiding red tape.

Targets, economic incentives, a directive and innovation subsidies are proven instruments. It is the circular implementation that is entirely novel.
The circular economy holds the promise of 2 million new jobs, estimated net savings EU-wide for businesses up to 600 billions of euros, and hundreds of millions of tonnes of avoided waste. The proposed measures will increase the market pull for circular products and services and, thereby, speed up the introduction for circular business models. They will save governments considerable cost-of-use for their procurement. As long as government procurement and the price incentives throughout our economy are favoring linear solutions, the market cannot do its proper job to create a circular economy. That is why a redesign of the system is needed to reap these benefits.

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