Earlier this summer the Cabinet approved the Circular Economy Bill. The headline that caught most people’s attention was the potential rise in the price of a takeaway coffee to discourage and prevent unnecessary waste from cups, compostable, recyclable or not.
The circular economy is a complex ambition that goes far beyond single-use coffee cups.
It is not a new idea. As far back as 2008 it was identified by the European Commission as a solution to the problems created by climate change. Its influence is evident in policies such as the European Union Waste Framework Directive and the moves towards ending landfill.
The circular economy is best understood as a way to mitigate the flaws in the linear economic model that has been dominant since the postwar period; driven by easy credit and global access to resources including relatively cheap fossil fuels. It is a conveyor belt: make, use and dispose.
The circular economy mitigates the negative consequences of this model including: climate change, competition for scarce resource security and an economic system plagued by boom or bust.
The reality of climate change is widely accepted. The 2008 financial crash is the most recent demonstration of the linear model’s inherent instability and the pandemic has shone a light on the flaws in its reliance on global supply chains.
Essential metals
To understand how the circular economy works and can address these issues, it is instructive to look at European manufacturing’s need for a secure supply of essential metals.
The complex electronics that underpin the digital world require metals with names as difficult to spell as they are to find. They are rare, they are expensive, and very few of them occur in Europe in significant amounts.
The only way to reduce Europe’s dependency on external sources of these metals is to keep these metals in Europe once they arrived here – either in raw from or as components in goods manufactured elsewhere.
This means using the products containing these metals for as long as possible – through maintenance and repair – and then extracting the metal from them once the product reaches the end of its life. Achieving this on a meaningful scale requires not only changes in product design but also business models.
This is the complex challenge of the circular economy. It is also opportunity for innovation, investment and well-paid jobs.
Car manufacturers such as Volvo and Daimler Benz have already started to incorporate elements of the circular economy into their manufacturing processes. They are seeking to secure their businesses against supply-chain shocks and address the issue of access to raw materials such as essential metals as they pivot to a future as manufacturers of electric vehicles in a world where car ownership is low and mobility is a service.
Mobility as a service, or MaaS, is more than a concept. It is already here in form of taxi services such Uber and self-drive short-term rental services such GoCar. The user does not own the asset but subscribes to a service to access it.
Faced with this new paradigm, car manufacturers are starting to envisage their supply chains as a loop in which the value of each component of the vehicle is retrieved at the end of its useful life.
No one owns the vehicle – neither the MaaS provider nor the car manufacturer.
Instead the suppliers of the various components retain ownership. The steel refinery still owns the steel, the battery is still owned by the battery manufacturer, the electronics by someone else, etc. The suppliers all receive a share of the fees paid by consumers to the MaaS provider. When the vehicle reaches the end of its life they all get their components back to recycle into new components.
Knowledge
The vehicle is designed to be efficiently disassembled so parts can be refurbished, remanufactured or recycled with minimal energy input. Upon retrieval of the parts and associated data, their robustness and application to purpose is assessed by the component manufacturers. This allows for improvements to match the proven needs of society. The value creation goes beyond financial and environmental; for the manufacturer it includes knowledge.
To become a reality the circular economy will require behavioural change by consumers on scale far greater than remembering to bring a reusable coffee cup around with us. It will confront issues of status. In an economy where we share cars people will still want something bigger, shinier and newer than their neighbour.
But the consequences for the wider economy of the shift by manufacturers from being straightforward producers of products to providers of services are profound. The economy becomes fuelled by use, not consumption.
This the circular economy; our income is spent relative to our need for a car. It is not wasted on a car sitting in the driveway.
Niall McManus is a geologist and mineral economist. He is an expert advisor to the European Union’s EIT Raw Materials on mineral value chains and the circular economy