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The Next Economy
How Eastern Europe Is Working to Go Circular

The prospects of linear models in Europe are slowly diminishing. European experts have concluded that the current cradle-to-grave way of life – exploiting resources, processing them, using them, and discarding them – has no future.

The prospects of linear models in Europe are slowly diminishing. European experts have concluded that the current cradle-to-grave way of life – exploiting resources, processing them, using them, and discarding them – has no future. The European Commission recently reinforced that belief through the adoption of the Circular Economy Package and announcement of €24 billion in funding available to assist businesses that are transitioning to circular models.

In tandem, the European Union (EU) has set common targets for recycling 65 percent of municipal waste by 2030, recycling 75 percent of packaging waste by 2030, and reducing waste sent to landfill to just 10 percent of all waste by 2030; and the Ellen MacArthur Foundation and the World Economic Forum recently estimated that circular models for single-use plastic packaging could prevent losses of $80-120 billion annually in the global economy.

But despite high-level buy-in, implementing a shift to circular business and economic models will be a challenge. Romania, for example, is struggling with low recycling rates (around 14 percent), insufficient waste management infrastructure, and flaws in its waste laws. But with a newly appointed Minister of the Environment, Water and Forests, there is renewed hope that the country could meet its target of recycling 50 percent of municipal waste by 2020. It’s an ambitious target with only four years to essentially triple the recycling rate, and there are concerns about where the tax burden will fall, as well as infrastructure development and accountability.

“For 2016 we expect technical solutions coming from a technocrat Government where one should assess very well the impact of regulatory changes,” Constantin Damov, co-founder of one of the leading recyclers in the country, Green Group, with a turnover of €150 million, told The Diplomat - Bucharest. “There are many flaws in the details of the waste laws and their solving could lead Romania to an explosion of collection and good results. Details of environmental legislation hide some unexpected solutions of economic growth.”

Damov worries that if Romanian waste legislation is not carefully fixed, the country’s citizens could end up paying as much as €200,000 per day per type of waste in taxes. He believes that local authorities need to bear more responsibility.

“City halls are not penalized for targets, are not included into the system,” he explains. “Unfortunately, those who have money – such as producers – are where the fingers point and we will end up saying that all the pollution in Romania is made by them. What’s the next step? Stop production? I think we should organize an infrastructure and legislation to penalize every link in the chain who doesn't do his job.”

However, as The Diplomat - Bucharest points out, the municipalities do not currently have the ability to manage waste except through the linear method of collection, transportation and landfilling. The president of Romania’s National Environmental Protection Agency (ANPM), Toma Florin Petcu, agrees with Damov that municipal waste management is the responsibility of local public administrations and believes that European funds could be a solution to develop the infrastructure needed for the separate collection and recycling of municipal waste.

If Romania hopes to access those funds, however, it needs to elaborate on its National Waste Management Plan. The newly appointed Minister of the Environment, Water and Forests, Cristiana Pasca-Palmer, declared it a priority in mid-January, saying, “The National Waste Management Plan will be a top priority this year as it is an ex-ante conditionality, meaning that we will not be able to access European funds in 2014-2020 without having this plan worked out. It is a challenge, I tell you that, because we are very late, we have to unlock some things, but – together with my team – we have committed to elaborate the plan this year with all necessary efforts.”

Local experts agree that there is economic promise in the transition to a circular economy for Romania, and that opinion is supported by research. For example, the European Remanufacturing Network (ERN) recently found that EU remanufacturing could represent up to €90B annually and 600,000 jobs by 2030.

“The circular economic model is based on reuse, repair, reprocessing and recycling of materials and products,” said Florin Diaconu, general commissioner of the National Environmental Guard (GNM). “The impact on Romania should materialize in increased resource productivity and separating economic growth from resource consumption and environmental impact.”

“We must go towards practical solutions and see that each molecule of waste can have another use,” Damov said. “The Ministry of Economy will have to work closely with the Ministry of Environment to find law packages adapted in Romania in order to exploit the financial potential of waste as raw material potential. That way we can disconnect the economic development from the consumption of raw mineral materials.”

Meanwhile, Ljubljana, Slovenia is one of several European capitals striving to be champions of the next economy. The city of just over 272,000 people is the 2016 European Green Capital and boasts a sustainability strategy (‘Vision 2025’) that integrates environmental protection, sustainable mobility, an energy action plan, and green procurement. Ljubljana is on track to see public transport, non-motorized traffic and private vehicles account for equal one-third shares of all transport by 2020. Now, the city and the country of Slovenia are realizing their potential to lead the development of new business models and the adoption of a circular economy.

As Adriatic region marketing expert Ladeja Godina Košir explains, Slovenia has reason to be proactive. It is a small EU country with 2 million inhabitants nestled between Italy, Austria, Croatia and Hungary, and does not have strong geopolitical power. Furthermore, 60 percent of its land area is covered by forests, so most Slovenian companies are suppliers and there are very few large multinational companies exporting final products. The country has recognized that the circular economy presents a new opportunity in international competitiveness.

In 2015, its Ministry of Environment and Spatial Planning introduced an action plan for a transition to a resource-efficient economy, including a circular economy, industrial symbiosis, energy efficiency and sustainable development. According to Košir, the country has hosted two recent conferences to bring together different stakeholders to discuss the circular economy, and a call for development partnerships has been announced. Slovenia has also started the process to join the Ellen MacArthur Foundation's** CE 100 Program**. Over the first six months of 2016, research and workshops for stakeholders will focus on the advantages of the circular economy for Slovenia and how it can be implemented.

The transition has strong support from local government. Former EU Commissioner for the Environment and former EU affairs minister of Slovenia Janez Potočnik was central to the adoption of the circular economy by the EU Commission, and remains a key advocate of the framework at international level.

“It is important to understand the transition to the circular economy as a long-term process,” Slovenian Prime Minister Miro Cerar said. “A broader social consensus is needed, as well as the establishment of an appropriate supportive environment. The best guarantee for this would be for the concept of a circular economy to become the foundation of Slovenia’s Long-Term Development Strategy.”