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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 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:
In light of these conclusions we recommend the following: