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It's time for circular economy to take hold

By Andrew Sheng/Xiao Geng | China Daily Global | Updated: 2021-08-04 09:06
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Every year, 400 million metric tons of heavy metal, toxic sludge and industrial waste are dumped into our waterways. At least 8 million tons of plastic ends up in our oceans. Some 1.3 billion tons of food-about one-third of all that is produced-is lost or wasted, while hundreds of millions of people go hungry.

Our oceans are being overfished and our lands degraded, and biodiversity is rapidly being eroded. Meanwhile, devastating natural disasters-flash floods in Europe and China, forest fires in the United States, and locust infestations in Africa and the Middle East-are becoming more frequent.

The unsustainability of our linear "take-make-waste" pattern of global production and consumption has never been more obvious. In fact, if we do not abandon it by 2050, we will need the equivalent of almost three Earths to provide enough natural resources to sustain current lifestyles, and annual waste generation will increase by 70 percent. But there is a better way: We can embrace the circular economy.

The circular economy would decouple growth from the consumption of finite resources, keep products and materials in use and regenerate natural systems.

The European Union is embracing this approach. Its Circular Economy Action Plan-a pillar of the European Green Deal-introduces legislative and non-legislative measures that would affect the entire life cycle of products, with a view not only to saving on materials, but also to creating jobs, improving human well-being and protecting nature.

The manufacturing sector is a case in point. As the plan notes, up to 80 percent of a product's environmental impact is determined at the design phase, yet manufacturers do not have sufficient incentives to design sustainable (or circular) products. The EU plans to strengthen these incentives through legislation.

Ultimately, this will help manufacturers. Given that raw materials currently account for about 40 percent of manufacturers' costs, on average, closed-loop models can significantly increase their profitability and protect them from resource-price fluctuations. This latter point highlights the circular economy's geopolitical dimension: As the Dutch plan for developing a circular economy by 2050 notes, "of the 54 materials that are critical for Europe, 90 percent must be imported, primarily from China."

The EU estimates that applying circular-economy principles comprehensively could increase its total GDP by an additional 0.5 percent by 2030, and create around 700,000 new jobs. Crucially, measures aimed at implementing the circular economy in the EU would be introduced in a broad-based manner, including initiatives by communities and local and regional governments.

Given that the EU is a manufacturing powerhouse, it can help to set global standards for product sustainability and influence product design and value-chain management worldwide. But Europe is also taking a more direct approach to driving forward global progress toward a circular economy. In February, it launched the Global Alliance on Circular Economy and Resource Efficiency. It is also pushing circular-economy principles through global trade negotiations and in its partnerships with African countries.

However, if this effort is to succeed, we must first understand why it has taken so long for the circular-economy concept to take root. Part of the answer lies in how mainstream economic ideology regards nature.

More broadly, the prevailing economic models have been an approach that is out of step with cyclical natural systems.

But there are promising developments. In March, the United Nations Statistical Commission adopted the System of Environmental Economic Accounting for ecosystem accounting, a framework for organizing data about habitats and landscapes, measuring ecosystem services, tracking changes in ecosystem assets, and linking this information to economic and other human activity. And both Japan's G20 presidency in 2019 and the current Italian presidency have pushed for global action on the circular economy.

China has also taken important steps in this direction. In August 2008, it became one of the first countries to pass a law aimed at promoting the circular economy.

More economies should follow suit, with targeted multilateral aid and technical assistance provided to emerging economies.

The circular economy is our only hope of achieving the 17 UN Sustainable Development Goals and ensuring humanity's long-term survival. If great powers must compete, it is here that they should be doing it.

Andrew Sheng is a distinguished fellow at the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance. Xiao Geng, chairman of the Hong Kong Institution for International Finance, is a professor and director of the Institute of Policy and Practice at the Shenzhen Finance Institute of The Chinese University of Hong Kong, Shenzhen. The views do not necessarily reflect those of China Daily. 

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