The Next Economy
New Reports Highlight How AI, Circular Economy Can Save Us All

Circle Economy: Circular economic strategies would tip balance in battle against climate change

A new report from impact organization Circle Economy launched today during the annual meeting of the World Economic Forum highlights the vast scope to reduce greenhouse gas emissions by applying circular principles to key sectors such as the built environment — yet it notes that most governments barely consider circular measures in policies aimed at meeting the UN target of limiting global warming to 1.5°C.

The Circularity Gap Report 2019 finds that the global economy is only 9 percent circular — just 9 percent of the 92.8 billion tonnes of minerals, fossil fuels, metals and biomass that enter the economy are reused annually.

Climate change and material use are closely linked. Circle Economy calculates that 62 percent of global greenhouse gas emissions (excluding those from land use and forestry) are released during the extraction, processing and manufacturing of goods to serve society’s needs; only 38 percent are emitted in the delivery and use of products and services.[^1] Yet global use of materials is accelerating. It has more than tripled since 1970 and could double again by 2050 without action, according to the UN International Resource Panel.[^2][^3]

“A 1.5-degree world can only be a circular world; recycling, greater resource efficiency and circular business models offer huge scope to reduce emissions,” said Circle Economy CEO Harald Friedl. “A systemic approach to applying these strategies would tip the balance in the battle against global warming.

“Governments’ climate change strategies have focused on renewable energy, energy efficiency and avoiding deforestation, but they have overlooked the vast potential of the circular economy. They should re-engineer supply chains all the way back to the wells, fields, mines and quarries where our resources originate so that we consume fewer raw materials. This will not only reduce emissions but also boost growth by making economies more efficient.”

The report calls on governments to take action to move from a linear to a circular economy that maximizes the use of existing assets, while reducing dependence on new raw materials and minimizing waste. It argues that innovation to extend the lifespan of existing resources will not only curb emissions but also reduce social inequality and foster low-carbon growth.

Cutting emissions and waste from the built environment

Circular strategies to reduce waste are particularly important in the built environment, which accounts for a fifth of global emissions. Circle Economy calculates that nearly half of all materials going into the economy — 42.4 billion tonnes a year — are used in the construction and maintenance of houses, offices, roads and infrastructure.

The opportunity requires global coordination, as countries will need to adopt different strategies. In emerging economies, where high population growth and rapid urbanization is driving a massive building boom, the challenge is to adopt building practices which minimize the use of raw materials and consequent emissions.

Fundamental principles of a circular built environment include:

• Financing and investment decizions which recognize the long-term and future value of built assets;

• Reusing existing building materials;

• Modular design of new building materials to allow for re-use and re-assembly;

• Alternatives to carbon-intensive materials such as cement;

• Optimizing the lifetime of buildings and designing them for flexible use.

In China, for example, the majority of houses and roads people will use in the next 10-50 years have yet to be built. Circle Economy calculates that its built environment emits a staggering 3.7 billion tonnes of greenhouse gases every year and is set to more than double in size by 2050, from 239 to 562 billion tonnes of material. While less than 2 percent of China’s construction inputs currently consist of reused or recycled materials, the report notes that increasing this proportion can make a huge impact on emissions. Promisingly, the recycling rate for construction and demolition waste had increased to 10 percent by 2015 and continues to rize. And a 2018 report from the Ellen MacArthur Foundation estimates scaling circular economy in China could save businesses and households ¥70 trillion ($10 trillion) by 2040.

In Europe and other developed economies with a mature housing stock, growth in the built environment is much slower. The report calls on these countries to maximize the value of existing buildings by extending their lifespan, improving energy efficiency and finding new uses for them when necessary. It is also important to increase reuse and recycling of material in Europe’s built environment from the current level of 12 percent.

“Huge work remains to be done in established economies where the priority is to make better use of existing infrastructure,” Friedl said. “At the same time, it's crucial that we work with emerging economies to avoid mistakes made in the past. Now is the time to replace traditional building methods with state-of-the-art practices which will not lock in high emissions for decades to come. Countries will make maximum impact by designing not just homes, buildings and infrastructure, but whole cities for maximum resource efficiency.”

Three key strategies for a circular economy

The report highlights three key circular strategies that could be adapted throughout the economy:

1. Optimizing the utility of products by maximizing their use and extending their lifetime. Ex: Ridesharing and carsharing already make it less important to own a car.

2. Enhanced recycling, using waste as a resource. Ex: By 2050, there will be an estimated 78 million tonnes of decommissioned solar panels. Modular design would enable products to be easily disassembled, components to be reused and valuable materials to be recovered to extend their economic value and reduce waste.

3. Circular design, reducing material consumption and using lower-carbon alternatives. Ex: Bamboo, wood and other natural materials have the potential to reduce dependence on carbon-intensive materials such as cement and metals in construction. Instead of emitting carbon, these materials store it and will last for decades. They can be burnt to generate energy at the end of their life.

Recommendations for governments

Although The Netherlands has set itself a target of becoming 50 percent circular by 2030 and 100 percent by 2050, most governments have yet to wake up to the potential of the circular economy. The report calls on governments to ensure that climate change and circular strategies are aligned to achieve maximum impact, through the use of tax and spending plans to drive change. They should:

• Abolish financial incentives that encourage overuse of natural resources, such as subsidies for fossil fuel exploration, extraction and consumption;

• Raise taxes on emissions, excessive resource extraction and waste production — for example, by implementing a gradually increasing carbon tax;

• Lower taxes on labor, knowledge and innovation and invest in these areas. Lower labor taxes will encourage labor-intensive parts of a circular economy, such as take-back schemes and recycling.

*[^1]: In 2017, total greenhouse gas emissions (excluding land use and forestry) were 50.9 bln tonnes of CO2 equivalent including: 12.5 bln in extraction; 10 bln in processing; 9.3 bln in production; 6.5bln in delivery of products and services; and 12.7 bln during consumption. Circle Economy, analysis based on: Exiobase and Olivier J.G.J. and Peters J.A.H.W. (2018), Trends in global CO2 and total greenhouse gas emissions: 2018 report. PBL Netherlands Environmental Assessment Agency, The Hague.

[^2]: Global use of materials rose from 26.7 bln tonnes in 1970 to 92.1 bln in 2017. IRP, 2019, MaterialFlows.net, Domestic Extraction of World in 1970-2017, by material group.

[^3]: By 2050 global material use is forecast to reach 170-184 bln tonnes. IRP, 2017, Assessing global resource use: A systems approach to resource efficiency and pollution reduction.*

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Ellen MacArthur Foundation: AI could help create a regenerative, circular economy at scale

Meanwhile, today in Davos, the Ellen MacArthur Foundation and Google, with research and analytical support from McKinsey & Company, launched Artificial Intelligence and the Circular Economy, which provides an initial exploration of the intersection of the two emerging megatrends. Built on insights from over 40 interviews with experts, it presents first steps towards understanding how artificial intelligence (AI) could be applied to create a regenerative, circular economy at scale. 

• It examines AI application in two value chains: food and agriculture, and consumer electronics. The potential value unlocked by AI in helping design out waste in a circular economy for food is up to US$127 billion a year in 2030. For consumer electronics, the equivalent figure is up to US$90 billion a year in 2030. 

• Today’s hugely wasteful, take-make-dispose economy has created urgent and growing negative social and environmental problems. These complex global challenges require new skills and capabilities in design, business, systems thinking and data science to address.  

• Artificial intelligence deals with models and systems that perform functions generally associated with human intelligence, such as reasoning and learning. As an emerging megatrend, AI is predicted to add an extra US$13 trillion to global economic activity by 2030.

• Applied within a circular economy framework, AI offers new and unique abilities that can accelerate a shift towards a regenerative system fit for the future: 

  • Designing circular products — eg. suggesting new recipes for plant-based foods by combining characteristics and features of vast amounts of materials, creating completely new solutions.

  • Operating circular business models combining user data with historical and real-time product data — eg. extending the lifetime of electronics through predictive maintenance.

  • Optimizing circular infrastructure including automating and improving the recovery, sorting, and disassembly process — eg. using image recognition to determine when fruit is ready to pick.