DRAFT VERSION (June 12, 2015) CONFIDENTIAL PLEASE DO NOT DISTRIBUTE DELIVERING THE CIRCULAR ECONOMY A toolkit for policymakers DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS V1.1DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS 3 FOREWORD Flemming Besenbacher Chairman of the Supervisory Board of Carlsberg A/S How can we create prosperity for a growing world population while strengthening the systems that support us? How can we achieve continued economic development while preserving the resource base that is fuelling this economy? The growing interest around these questions suggests it is time to rethink the way we operate. The circular economy holds the promise of reconciling these seemingly opposing objectives and creating long-term value. It is my firm belief that the take-make- waste economy is about to be replaced by a circular, restorative approach where we no longer consider anything to be waste. The circular economy is of particular interest to Carlsberg because our products depend on well-functioning natural systems and a stable supply of raw materials. We are working in this area through our partnership platform the Carlsberg Circular Community to develop innovations and practical solutions optimised for the circular economy. This toolkit represents a valuable blueprint for policymakers who want to stimulate the progression from a linear to a circular economy. It rightfully positions the circular economy as a unique opportunity for dialogue and collaboration between private and public entities to achieve the common goal of long-term value creation. I therefore encourage governments across the world to apply this toolkit and work closely with businesses to unleash the circular economy in their country and unlock its true potential. I also urge companies to continue to lead the way to a more resilient operating model, decoupled from resource constraints. Carlsberg is determined to do so. FLEMMING BESENBACHER JUNE 20154 DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS “There is a new movement within cities, regions and governments to accelerate the move towards a circular economy. This toolkit is a key resource for policymakers to enable them to get to grips with the complexity of this emerging area and develop route maps that will help the transition from linear to circular.” Wayne Hubbard Chief Operating Officer LONDON WASTE AND RECYCLING BOARD (LWARB) “The methodology and insight provided in this toolkit will be invaluable to help mobilise stakeholders in Northern France to develop a shared circular economy strategy. Most importantly, it provides structure to go beyond a nice idea and move towards implementation.” Christian Traisnel Director CD2E RESPONSIBLE FOR DEVELOPING THE CIRCULAR ECONOMY IN NORTHERN FRANCE “This inspiring report is very helpful to us I am sure we will apply some of the tools and insights from the Denmark pilot in our program to accelerate the transition to a circular economy.” Kees Veerman Policy Coordinator DUTCH MINISTRY OF INFRASTRUCTURE AND THE ENVIRONMENT “This report provides a useful methodology that will help move all stakeholders involved in a circular economy transition into action.” Pere Torres Grau Secretary for Business and Competitiveness MINISTRY FOR BUSINESS AND LABOUR, GOVERNMENT OF CATALONIA “A well-structured guide to practical policy development for transitioning to a circular economy.” Steve Creed Director Business Growth WRAP “We are delighted that this report is dedicated to the role of policymakers in the circular economy. We would like to, together with businesses and knowledge institutes, contribute to the transition to a circular economy.” John Nederstigt Deputy Mayor HAARLEMMERMEER “The Ellen MacArthur Foundation has once again shown the way forward in how to move to a circular economy. This toolkit is an excellent starting point for policymakers.” Caroline Ankarcrona Project Manager for “Resource efficient business models increased competitiveness” ROYAL SWEDISH ACADEMY OF ENGINEERING SCIENCES (IVADELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS 5 “This report, exploring the policy tools to help deliver a circular economy, provides lots of food for thought.Creating a circular economy is an economic, environmental and moral necessity it will create jobs in our communities, improve quality of life, and just makes good sense. As the Scottish Government prepares to publish its own circular economy strategy, we are proud to be working with international partners such as the Ellen MacArthur Foundation and the Danish Government towards a more circular economy.” Richard Lochhead Member of Scottish Parliament, CABINET SECRETARY FOR RURAL AFFAIRS, FOOD AND ENVIRONMENT “This toolkit is a much needed and relevant aid to policymakers globally to assist them in the transition towards a circular economy. The pilot has been very helpful for Denmark by clearly outlining effective options for Danish policymakers to accelerate the shift towards a circular economy.” Ida Auken Member of the World Economic Forum Meta-Council on the Circular Economy 2014-2016; MEMBER OF DANISH PARLIAMENT “Pinpointing economic opportunities through the combination of company-level analysis, macro-economic modelling and barrier assessment provides a very powerful starting point for our future work on the circular economy.” Anders Hoffmann Deputy Director General DANISH BUSINESS AUTHORITY “This project has been a fruitful experience for us. The systematic approach offered by the toolkit has given us valuable new insights into the potential of, and barriers to, further transitioning towards a circular economy.” Claus Torp Deputy Director General DANISH ENVIRONMENTAL PROTECTION AGENCY “The toolkit offers additional evidence on the circular economy opportunity and provides an important key to help the EBRD to focus on investments increasing resilience and competitiveness in the Banks region. It provides us with pragmatic arguments and case studies to use in our engagement with commercial clients and governments.” Dr. Nigel Jollands Senior Policy Manager EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT (EBRD6 DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS GLOBAL PARTNERS OF THE ELLEN MACARTHUR FOUNDATIONDELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS 7 DISCLAIMER This report has been produced by a team from the Ellen MacArthur Foundation, which takes full responsibility for the reports contents and conclusions. While the key contributors and contributors listed in the acknowledgements provided significant input to the development of this report, their participation does not necessarily equate to endorsement of the reports contents or conclusions. The McKinsey Center for Business and Environment provided analytical support. NERA Economic Consulting provided support for the macroeconomic and policy analysis for Parts 2 and 3 of this report. This report describes a methodology for circular economy policymaking. It also explores a range of policy options that Denmark the country of the reports pilot study could choose to pursue. The report does not recommend any specific policy intervention to Denmark or to any other country8 DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS ELLEN MACARTHUR FOUNDATION PROJECT TEAM Andrew Morlet, Chief Executive Jocelyn Blriot, Executive Officer, Lead,Communications and Policy Stephanie Hubold, Lead, Gov. Member of Danish Parliament Sren Gade Former Member of Danish Parliament, The Liberal Party LONDON WASTE AND RECYCLING BOARD (LWARB) Wayne Hubbard Chief Operating Officer MATACHANA GROUP Marino Alonso Marketing Director NCC CONSTRUCTION Vibeke Grupe Larsen Senior manager, Sustainability NOVOZYMES A/S Anders Lyngaa Kristoffersen Head of Public Affairs Denmark OUROBOROS AS Jasper Steinhausen, Business Developer Professor of Resources and Environmental Policy UNIVERSITY OF COPENHAGEN Professor Peter Birch Srensen, Department of Economics UNIVERSITY OF SHEFFIELD Professor SC Lenny Koh Director of Advanced Resource Efficiency Centre (AREC) WRAP Steve Creed, Director Business Growth PRODUCTION Editor: Ruth Sheppard Design: Sarah Churchill-Slough ELLEN MACARTHUR FOUNDATION12 DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS TABLE OF CONTENTS Foreword 3 Disclaimer 7 Acknowledgements 8 Executive summary 13 Readers guide 16 1 Why the circular economy matters 19 1.1 From linear to circular Accelerating a proven concept 19 1.2 A favourable alignment of factors makes the transition possible 28 1.3 The role of policymakers and this toolkit 32 2 Methodology for policymakers to accelerate the transition 39 2.1 Align on starting point, ambition and focus 39 2.2 Assess sector opportunities 53 2.3 Analyse economy-wide implications 75 2.4 How regional differences could impact the methodology 85 3 Case study Denmark 91 3.1 National perspective 91 3.2 Food (iii) further demonstrate circular economy benefits to businesses and build skills as well as capacity. As businesses are already starting the transition, the circular economy offers an opportunity for policymakers to collaborate with businesses. Furthermore, there is a need for cooperation between different government departments (including business/industry, finance and environment) so that no new unintended policy barriers are created and like the business solution the policy response is designed to maximise system effectiveness. Other society stakeholders, including citizens and consumers, labour unions and environmental organisations, should also be engaged. 3 4 5DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS 15 Even in a country with a starting position as advanced as Denmark, there are significant opportunities to scale up the transition towards the circular economy, and policymakers can play an important enabling role. Opportunities were investigated in five focus sectors, and the economic potential appears to be the largest in Construction (ii) institutional set-up; and (iii) available resources. While more basic starting positions allow a country to leapfrog to high-performing circular systems, strong starting points provide confidence that circular economy is a viable option to create economic value, and allow a country to move from strength to strength. 7 8 6 These insights are further elaborated in the upcoming sections of this report, which is structured as follows. Part 1 introduces the core concepts of the circular economy and discusses the role of policy within that framework. Part 2 lays out a how-to guide for policymakers who want to design a strategy to accelerate the transition towards the circular economy. Part 3 covers the core findings of the pilot study in Denmark.16 DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS READERS GUIDE This report is structured in three parts: Part 1. Why the circular economy matters This part introduces the core concepts of the circular economy, which provides a positive and viable alternative to the linear take, make, dispose economic model that is pervasive at global scale. It discusses how the circular economy might contribute to important policy objectives such as generating economic growth, creating jobs, reducing virgin resource consumption, and reducing carbon emissions, and why it is important for countries to consider transitioning to the circular economy now. There is also a discussion of the potential role of policymakers in the circular economy, and an overview of selected previous work on circular economy policy. Part 2. Methodology for policymakers to accelerate the transition This part is a how-to guide for policymakers who want to design a strategy to accelerate the transition towards the circular economy. It offers a detailed step-by-step methodology to explore and prioritise circular economy opportunities; quantify their impact; identify the barriers limiting these opportunities; and map and prioritise the policy interventions to overcome these barriers. There is also a discussion of when and how to engage relevant stakeholders, and a final section for policymakers considering how to tailor this methodology to their specific circumstances. Part 3. Case study Denmark This part covers the core findings of a pilot study in Denmark. The pilot study was undertaken in order to make this toolkit as concrete and actionable as possible. This part explores circular economy opportunities, barriers and potential policy options for five focus sectors. The findings may be of interest to Danish stakeholders. While they cannot be directly transposed to other countries, they might serve as a source of inspiration for the identification of opportunities, barriers and policy optionsDELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS 17 WHY THE CIRCULAR ECONOMY MATTERS18 DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERSDELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS 19 1 WHY THE CIRCULAR ECONOMY MATTERS The linear take, make, dispose economic model relies on large quantities of cheap, easily accessible materials and energy and is reaching its physical limits. The circular economy is an attractive and viable alternative that businesses are already exploring today. The circular economy is one that is restorative and regenerative by design and aims to keep products, components, and materials at their highest utility and value at all times, distinguishing between technical and biological cycles. This new economic model seeks to ultimately decouple global economic development from finite resource consumption. It enables key policy objectives such as generating economic growth, creating jobs, and reducing environmental impacts, including carbon emissions. A favourable alignment of factors makes the transition possible. Resource- related challenges to businesses and economies are mounting. An unprecedented favourable alignment of technological and social factors enables the transition to the circular economy. As many circular economy opportunities have a sound underlying profitability, businesses are driving the shift towards the circular economy. Yet there are often non-financial barriers limiting further scale-up or holding back pace. Policymakers therefore can play an important role to help overcome these barriers and to create the right enabling conditions and, as appropriate, set direction for a transition to the circular economy. This toolkit aims to complement existing literature by offering policymakers an actionable step-by-step methodology to design a strategy to accelerate the transition towards the circular economy. 1.1 From linear to circular Accelerating a proven concept CIRCULAR ECONOMY AN INDUSTRIAL SYSTEM THAT IS RESTORATIVE AND REGENERATIVE BY DESIGN The linear take, make, dispose model, the dominant economic model of our time, relies on large quantities of easily accessible resources and energy, and as such is increasingly unfit for the reality in