Renilde Becqué

A search for compelling sustainability narratives, transformative business models and pathways towards a circular & regenerative economy — www.linkedin.com/in/renildebecque

The Political Economy of the Circular Economy

In December 2016 ClimateWorks Foundation published a co-written paper on “The Political Economy of the Circular Economy”. The executive summary of the paper is provided here below.

cover_ce-political-economy

A circular economy (CE) is an economic system that is restorative by design. It is a system in which material flows, defined as consisting of biological and “technical” nutrients (both inorganic and synthetic), are designed to continue circulating at high quality, to re-enter the biosphere safely, or both, thereby delivering value against the least amount of energy and physical resources. The concept of the CE rests on three key principles: (a) to preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows; (b) to optimize resource yields by circulating products, components, and materials at the highest utility at all times; and (c) to foster system effectiveness by designing out negative externalities. Implicit within this is the use of renewable energy, as well as using energy in the most productive way. As such the CE has huge potential for reducing carbon emissions.

Studies, particularly those of the EU, point towards significant benefits from shifting to a CE and away from current development models, which are highly resource intensive and dependent. The benefits of a CE for developoing countries may be even greater, given their projected growth. Policy measures to enable, advance and guide the transition to a CE either address barriers by fixing market and regulatory failures, or aim to stimulate market activity. The 6 most common CE policies are: 1. public procurement policy; 2. creating collaboration platforms; 3. providing technical support to businesses; 4. fiscal policy; 5. education, information and awareness; and 6. regulatory frameworks, especially for materials.

In recent years, the CE has risen from an interesting idea to a concept that is widely studied, embraced by dozens of major corporations, and increasingly incorporated into the legislative and policy frameworks of many countries. This emergence requires major shifts in production and consumption which creates winners and losers. As such the transition to a CE is politically contested.

While new jobs and opportunities are created in many sectors of the economy during the transition to a CE, economic activity and employment also shrink in a few sectors. The sectors especially vulnerable are those tied to the current “linear” pattern of resource consumption, such as resource extraction, and manufacture and sale of products with low durability or those designed for rapid obsolescence. That said, commercial, political and ideological alliances, the capacity for innovation, competitive positioning, the commitment of CEOs and political leaders, the accuracy of analyses being presented, the conservatism or open-mindedness of trade associations, and other factors may lead companies or organizations which one may have assumed to be supportive of a CE to actually oppose it, or vice versa.

The term “political economy” is used in this paper to refer to the patterns of impact and behavior of the key players during the process of transitioning to a CE – i.e., who wins, who loses, who perceives themselves as on the winning or losing end (which may be different from the reality), and how they behave as a result. A better understanding of this behavior and its potential implications may help those who wish to accelerate the CE transition.

This paper discusses in brief:

  • The potential benefits of a CE;
  • Policy measures that have been proposed to advance a CE;
  • Attributes of organizations that support or oppose CE measures;
  • The recent CE debate in Europe;
  • The CE in India;
  • Conclusions; and
  • Recommendations for CE advocates.

The intention is to provide the reader with an introductory understanding of the political economy of the circular economy, and to highlight how to realize the potential of the CE. We conclude:

  1. The transition to a CE could hold many benefits, not the least of which is a sharp reduction of the economy’s virgin resource use and carbon footprint;
  2. The optimal package of CE policy interventions will likely combine mandatory measures to assure progress, with assistance and incentives for private and public stakeholders to adopt CE practices;
  3. Establishing the optimal CE policy package for developing countries will involve the additional challenge of ensuring fair treatment of current –albeit potentially informal- CE workers, many of whom reside at the bottom of the pyramid;
  4. Opposition to CE policies may arise not only as a result of economic interests, but also originate in commercial, political, and ideological alliances, or an inadequate understanding of the benefits of CE. Reducing this second source of opposition is a principal benefit of efforts to improve understanding the political economy of a CE.

In light of these conclusions we recommend the following:

  1. Analyse the analyses: Do not assume analyses are complete or accurate and do not assume the opposition has taken the time to properly understand it. Analyse the analysis to not only understand the potential but also to help undermine opponents’ arguments, or perhaps even recruit supporters.
  2. Identify likely supporters and opponents and their alliances. Identify the most significant of likely supporters and opponents on the basis of their assumed interests and motivations. Refine this assessment by identifying their commercial, political, and ideological allies, which may lead them to support or oppose a given CE policy in a way that is contrary to initial assumptions.
  3. Let sleeping giants sleep. If natural opponents to CE policy are not actively opposing it, be careful not to arouse their opposition.
  4. Match CE goals with policy design. Consider a mixture of mandatory and voluntary policies that incentivize and impose (“carrot and stick”), meanwhile providing stakeholders a helping hand in reaching aspired goals. In addition, assess what the real or perceived impacts on key stakeholder groups could be and their power to rally in favor of or resist the change.
  5. Build alliances with leading individuals. Identify and recruit business, political, and other leaders who might take a progressive position on CE policy. Additionally, seek opportunities to build commercial, political, or ideological alliances with companies and organizations that might have been inactive, neutral or opposed to a CE policy – alliances which might lead to their active support despite the superficially-apparent interests.
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This entry was posted on March 5, 2017 by .

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