Circular economy and growth

What is the definition of circular economy? We discuss a lot about it, but I am afraid that not all of us have the same definition. It is difficult to find an exact definition, but I feel that combining the following two we can have a good idea.

According to the Ellen Macarthur foundation, the circular economy aims for a “transformation of products and their associated material flows such that they form a supportive relationship with ecological systems and future economic growth”.

In Wikipedia we get some more details “The circular economy is a generic term for an industrial economy that is, by design or intention, restorative and in which material flows are of two types, biological nutrients, designed to reenter the biosphere safely, and technical nutrients, which are designed to circulate at high quality without entering the biosphere.”

So allow me to say two issues. At first, circular economy aims to create a supportive relationship between ecological systems and economic growth. At second, the concept is built on two material flows, the biological and the technical ones. This post will address the first of those two points. The discussion regarding the biological and technical nutrients will follow.

I would state that the concept of circular economy is one more effort to bridge the widening gap between the predominant production and consumption patterns of our world, especially the developed one, and the continuously restricting limits posed by resource availability and environmental quality. In this view, circular economy has many common points with concepts like natural capitalism, industrial ecology and cradle-to-cradle. All of those concepts are based on a more or less same, old principle: with the right technology development and innovation, our world can achieve continuous economic growth without substantial or irreversible environmental impacts.

What is rather new in the circular economy approach is the emphasis given to suitable business models and social interfaces and not just to technology development and application. In this way, circular economy is one step forward because it represents a more systemic approach than cradle-to-cradle and natural capitalism.

There are two elementary and conceptual questions to be raised. My problem is that when we discuss about circular economy we consider the answers to those questions as given, which is not the case, as I will attempt to explain. Here are the two questions.

Question 1: is our earth capable to sustain a continuous economic growth (for all the population and not just for 20% of it) or there are planetary limits to growth, which must be respected?

Question 2: what is the role of technology development in relation with economic growth and environmental impacts? More specifically, what are the expected results by technology development that leads to more efficient industrial production and improved resource utilization, even with less environmental impacts (although this is not always the case, as we all know)?

Let’s start with question 1, which I will call briefly “limits to growth”. I think that we have already a lot of evidence that there are very important global limits to growth. Let me quote some of them.

Declining oil reserves and Peak Oil concept offers a lot to understand the planetary growth limits (for more here ). As Fatih Birol, Chief Economist EIA, put it in 2008 “We have to leave oil before it leaves us”.

Several important metals are in a depletion phase (e.g. gallium and indium) while others are going to be depleted soon (e.g. zinc and platinum between 2020-2030) – for more here  . Especially the scarcity of rare metals is seriously hindering the green and the electronics industry (for more see the report “Rare Earth Metals Scarcity: A 'Ticking Time Bomb' for the World?” here .

Industrialized fishing has already reached its global limits and we have passed to the declining phase of specific fishes’ populations. Fish stocks across the world are declining faster than feared, with the smallest fisheries faring worst. Doing nothing will result in an almost complete depletion of salt water fishes around 2050, as it was documented by Boris Worm at his emblematic work “Impacts of Biodiversity Loss on Ocean Ecosystem Services”, (Science, Nov. 3, 2006; vol. 314: pp 787-790 here).

Of course, there is a certain CO2 limit. Oceans and terrestrial ecosystems absorbed roughly 315 of a total 555 gigatonnes of accumulated anthropogenic carbon emissions in the period 1750-2011. And while CO2 emissions continue to grow, the absorbing capacity of carbon reservoirs is limited and will probably tail off (see the excellent paper “Increase in observed net carbon dioxide uptake by land and oceans during the past 50 years”, Nature 488, 70–72 (02 August 2012) doi:10.1038/nature11299 here).

In 2009, the Stockholm Resilience Centre published a report on Planetary Boundaries. According to the estimates of an international group of scientists, five of the nine crucial boundaries have already been overstepped, namely climate change, loss of biodiversity, ocean acidification, chemical dispersion and nitrogen cycle (for more here ).

I can write much more examples of undeniable, specific limits to growth. However, the conclusion remains the same. There are definite limits to economic growth; specific planetary natural barriers limit the economic expansion.

The logical consequence is that since there are limits to growth, any efforts for a “supportive relationship” between ecosystems and economic growth are certainly restricted by the limits to growth. Or in another phrasing, circular economy can’t resolve (or it can only partially resolve) the conflict between environmental impacts and economic activity, even if it is 100% adopted worldwide.

Despite this limitation, the adoption of circular economy policy approaches (which has become mainstream as we all know) is certainly helpful and environmentally useful. After all, waste prevention, reuse, recycle and recovery activities are more and more crucial for certain materials just because the limits to growth exist!

So let me summarize my first conclusion. Circular economy approaches are advantageous and useful, but they are limited (and at the same time stimulated) by limits to growth. Let’s see what are the consequences of technology development at the next post.