Policy briefing: Circular Savings - Business perspectives on energy savings through circular practices
10 May 2023 - Europe is undergoing a deep transformation towards a greener, cleaner economy. There is a systemic shift that is needed. Currently, this is happening too slowly, and greater acceleration is needed if we are to meet our climate objectives. Energy policies can tackle 55% of global emissions, but the circular economy can further tackle the remaining 45% of emissions derived from material production. The Materials & Products Taskforce has released its new policy briefing, building on business insights, on how circular economy practises could enable energy savings.
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About the report
We have passed the one-year anniversary of Russia’s invasion of Ukraine, which has had global consequences, particularly in the areas of food and energy supplies. Prices of commodities are still high but stabilizing, and there are serious concerns about ‘stagnation’ of western, industrialised economies - low growth and high inflation - for the foreseeable future. Food prices have fallen but remain high, whilst crude oil and natural gas prices have witnessed volatile trading sessions since the start of the war.
Politicians have naturally been keen to alleviate the worst effects of rising food and energy prices for people. This has led to tensions around whether long-term ambitions to shift towards a green economy should be postponed in favour of tackling shorter term challenges.
Circular economy tackles the amount of energy consumption required to make a product by reusing the resources we already have or finding ways to use less of it. This also means that we produce less greenhouse gas emissions. Furthermore, the EU’s recently released Critical Raw Materials Act highlights the challenge of procuring the raw materials we need to create the products necessary for the green transition in Europe. In this respect, circularity has the additional benefit of keeping materials in the system for longer, which also reduces emissions and energy cost from extraction and transport.
This paper highlights how a circular economy can lead to energy savings while reducing emissions, making it a double win for both the economy and environment. Energy, circularity and the economy go hand in hand. Furthermore, this paper demonstrates how leading progressive businesses are already benefitting from this shift to a circular economy, leading to a reduction in both emissions and energy consumption. This paper also highlights the current challenges which prevent greater savings through circularity. Finally, we offer six recommendations for policymakers on how to build greater circularity through existing policy measures can unlock the benefits faster.
Key takeaways:
Businesses are facing various challenges when it comes to circular economy practises:
- Incoherent and misaligned policy environment
- Lack of adequate end-of-life provisions
- Lack of adequate technologies
In order to foster energy savings through circular practises, policy makers should:
- Set targets beyond waste management. E.g., the Netherlands established an absolute resource reduction target of 50% reduction in the use of virgin materials by 2030 as part of the "A Circular Economy in the Netherlands by 2050" strategy.
- Introduce fiscal policies for recirculating materials. A more holistic fiscal policy approach applied across the entire life cycle of products could have stronger effects on the purchasing decisions, enable behavioural change and incentivise a shift away from the unsustainable consumption and production of virgin materials. For instance, Denmark introduced a tax on domestic raw materials in 1990, which helped increase the recycled construction & demolition waste from 12% in 1985 to 94% in 2004. Sweden has adopted a 50% tax break on labour costs for repair services conducted at home and a VAT reduction from 25% to 12% for repair services of products such as bikes, footwear, textiles or IT goods.
- Have a clear vision for a new European green industrial strategy, which would allow a more holistic integration of circular practices and industrial decarbonization into a strategy.
- Create clearer supporting links between energy efficiency and circular economy policies to reduce energy consumption of the industry sector.
- Support the development and widespread adoption of recycling technological solutions. The adoption of more efficient recycling technologies that retain the high quality of materials will be critical for enabling the growth of secondary material markets and reducing the energy consumption associated with the production of virgin materials.
- Enable the recirculation of materials through fiscal policies applied across all stages of the product’s life cycle in alignment with existing EPR fees. The EU could rethink the building blocks of the existing taxation system by introducing or strengthening the taxes on raw materials, shifting taxation from labour to resources and materials or applying tougher landfill taxes.
- Use demand-side policies to increase the demand for circular products and services. Consumers could be incentivised through tax deductions for repairing or purchasing products made from recycled materials. Digital platforms (such as the existing My Little Plastic Footprint App and Repair Efficiency Wales platform, but also the introduction of a Digital Product Passport through the Ecodesign for the Sustainable Products Regulation) can also provide accessible information for consumers and help shift their behaviour.
- Improve policy coherence across Member States to facilitate the transition towards a sustainable circular economy by avoiding unnecessary policy fragmentation.
Citing this report
University of Cambridge Institute for Sustainability Leadership (CISL). (2023). Circular Savings: Business perspectives on energy savings through circular practices. Cambridge, UK: CLG Europe.