Facts about the Circular Economy
Financing the circular economy
- According to the Ellen MacArthur Foundation, the circular economy “can scale fast across industries to create value and jobs, while increasing the resilience of supply chains and delivering massive economic growth potential, estimated at 1.8 trillion euros a year in Europe alone”.
- Lack of funding has slowed down the development of the circular economy, but the barriers are coming down. Leading multilateral development banks announced in July 2023 they would tighten their collaboration to accelerate the circular economy.
- In July 2018, several Dutch banks and other stakeholders came together to develop the first circular economy finance guidelines as “voluntary process guidelines that recommend transparency and disclosure and promote integrity in the debt and equity market for the circular economy”. They suggest the following definition for circular economy finance: “Circular economy finance is any type of instrument where the investments will be exclusively applied to finance or re-finance, in part or in full, new and/or existing eligible companies or projects in the circular economy”.
- A broad number of banks, financial institutions, consultancy companies and others continue to develop analyses, reports and studies about the challenges and opportunities of financing the circular economy. The UNEP Finance Initiative published Financing circularity: demystifying finance for circular economies in October 2020, stating:
“Redesigning economies to embed circularity can change the way we produce and consume, addressing issues ranging from greenhouse gas emissions to plastics, resource scarcity, waste management and use of hazardous chemicals, while increasing resilience. This report offers emerging evidence of the potential to scale up finance to accelerate the shift away from a take-make-waste model of resource use and pollution to a circular economy, and practical steps to embed circularity into financing. The insights in this report can guide financial institutions to address the opportunities and threats offered by the transition, providing recommendations for policymakers for frameworks to accelerate financing for a circular economy, with examples of measures that have proven effective around the world.” - In 2023, a new report recommends that Latin America and the Caribbean accelerate the transition to a circular economy by overhauling laws and partnering more closely with the private sector to fund projects with a circular model. The study, titled Unlocking Circular Economy Finance in Latin America and the Caribbean: The Catalyst for a Positive Change, was led by the United Nations Environment Programme (UNEP) and its financial initiative (UNEP FI), with support from the Inter-American Development Bank (IDB) and IDB Invest.The resource is based on multi-stakeholder consultations and engagement with strategic partners in the seven following jurisdictions: Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Mexico, and Peru.
- In 2023, the Economic Commission for Latin America and the Caribbean (ECLAC) together with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and financed by the Federal Ministry of Economic Cooperation and Development (BMZ) of Germany, launched the study Scaling up circular economy initiatives in Latin America and the Caribbean. This document analyses the possibility of scaling up the potential of the circular economy through financial instruments in Latin America and the Caribbean.
- In 2024, Multilateral Developments Banks (WB, ADB, EIB and EBRD) published their shared vision for a circular economy.
- Also in 2024, Multilateral Development Banks launched the report The circular economy in motion, approaching how they are advancing the transition.
Circular economy policies
Finland was the first country in the world to create a national road map to a circular economy. The road map, published in 2016 and subsequently updated in 2019, outlines the circular economy measures to which Finnish state administration, municipalities and businesses have already committed themselves.
Since then, many countries and regions all over the globe have created their own road maps and started implementing them. An up-to-date overview of circular policies in different countries can be found on the Chatham House website: Policies | circulareconomy.earth | Chatham House.
Sitra has compiled a guide based on what has been learned from Finland’s circular economy road map process. The guide features tools, guidelines and inspiration for countries that want to move towards or are already taking their first steps towards a circular economy.
Brazil has stood out globally in issues and debates related to the preservation of the planet and climate change. Since the 1980s, the country has been creating regulations and actions following the principles of sustainable development, seeking to reconcile the needs of economic growth with environmental respect and social inclusion.
In a timeline, since Rio92, important national laws, international agreements and world events have been implemented in which the country has participated, taking a lead in debates on climate and the environment:
- In 2009, Brazil adopted a National Climate Change Policy, with the goal of decarbonising the economy, to achieve carbon neutrality by 2050.
- In 2010, another major step was taken with the National Solid Waste Policy, which includes incentives for the recycling industry, such as promoting the use of raw materials and inputs derived from recyclable and recycled materials, in addition to the non-generation, reduction, reuse, recycling and treatment of solid waste.
- In 2012, Brazil hosted Rio+20 and in 2025 it will host COP30. More recently, the circular economy has become part of national public policies as a necessary strategy to achieve climate goals and ambitions.
The Ecological Transformation Plan, prepared by the Ministry of Finance, includes the circular economy as one of its main axes.With this, the National Circular Economy Strategy (ENEC) was instituted by the Ministry of Development, Industry, Commerce and Services (MDIC), as a result of the relevance of the agenda in industrial policy launched at the beginning of 2024: the New Industry Brazil. In the legislative sphere, bills for the establishment of a national circular economy policy are already being processed in Congress.
In 2021, the Latin America and the Caribbean Regional Coalition on Circular Economy was announced during a virtual side event at the XXII Meeting of the Forum of Ministers of Environment of the region, hosted by Barbados and the United Nations Environmental Programme (UNEP). In 2022 the Circular Economy Coalition of Latin America and the Caribbean published Circular Economy in Latin America and the Caribbean: A Shared Vision, which aims to help align and strengthen cooperation to guide future projects.
The circular economy and climate change
- Climate and biodiversity impacts from material extraction and processing greatly exceed targets based on staying within 1.5 degrees of climate change and avoiding biodiversity loss.
- According to the Ellen MacArthur Foundation, energy efficiency and switching to renewable energy is only half the story of mitigating climate change. By adopting a circular economy approach in the products, services and systems we design, we can also start to tackle the remaining 45% of emissions associated with industry, agriculture and land use that the energy transition can’t address.
- According to a Material Economics study commissioned by Sitra, switching to the circular use of the four largest materials in terms of emissions – steel, plastics, aluminium and cement – is indispensable to cutting global greenhouse gas emissions and achieving the Paris Agreement. A more circular economy could cut EU industrial emissions by more than half by 2050.
- The study explores a broad range of opportunities for steel, plastics, aluminium and cement and two large use segments for these materials (passenger cars and buildings). The measures identified could reduce EU industrial emissions by 56% (300 Mt) annually by 2050, more than half of what is necessary to achieve net zero emissions. Globally, the reductions could be 3.6 billion tonnes per year in the same period.
Sources:
- Global Resources Outlook 2024 by IRP
- The circular economy – a powerful force for climate mitigation by Sitra
The circular economy and biodiversity
- Circular economy interventions in four key sectors – agriculture, construction, textiles and forestry – can halt global biodiversity loss and help the world’s biodiversity recover to the same levels as in the year 2000 by 2035, according to a study by Sitra.
- Biomass (agricultural crops and forestry) also accounts for over 90% of the total land use related biodiversity loss and water stress, according to IRP.
- Circular interventions can have the largest positive impact in food and agriculture. Merely by shifting to more alternative proteins and regenerative agriculture, and by reducing food waste by half, biodiversity loss could be halted by 2035.
- In practice, the transition to a circular economy in the food and agriculture sector will make it possible to produce the food humanity consumes on a much smaller area of agricultural land and with fewer inputs such as fertilisers, leaving more room for nature to thrive. According to the study, which captures the impacts on biodiversity from changes in land use, the circular interventions examined could, for example, free up agricultural land corresponding to as much as 1.5 times the size of the European Union for other uses by 2050.
- Many circular interventions that tackle biodiversity loss also reduce greenhouse gas emissions, not least those solutions that give us more value from our biomass. Substituting alternative proteins for meat and reducing food waste are the two solutions in the study with the most impact and are also practices that people can easily adopt. In the food and agriculture sector, the transition to a circular economy would reduce methane emissions from agriculture by as much as 90% by 2050.
Sources:
- Tackling root causes – Halting biodiversity loss through the circular
economy - Global Resources Outlook 2024 by International Resources Panel
(IRP)
The circular economy, materials and waste
High-income countries use six times more materials per capita and are responsible for ten times more climate impacts per capita than low-income countries. Material use has increased more than three times over the last fifty years. It continues to grow on average over 2.3% per year. (Source: Global Resources Outlook 2024 by IRP).
Mainstreaming circular solutions is essential to living within the safe limits of the planet. Effectively adopting the circular economy across key global systems could allow us to fulfil people’s needs equitably, with only 70% of the materials we now use. (Sources: Circularity Gap Report 2023 & Circularity Gap Report 2022 by Circle Economy Foundation)
The world generates 49 Mt of electronic waste worth 63 billion US dollars per year; only 20% is collected and recycled under appropriate conditions.
(Source: https://ellenmacarthurfoundation.org/topics/cities/overview)
The circular economy, youth and job creation
Please note: Estimates about the impacts of a circular economy on employment depend on the kind of definition applied to the circular economy, as seen by the following differing evaluations.
According to the International Labour Organization (ILO), changes in energy production – including the generation of renewable energy, greater efficiency, adoption of electric vehicles and increasing efficiency in buildings – can create a net gain of 18 million jobs throughout the world economy. Of 163 economic sectors analysed by the ILO, 14 show employment losses of more than 10,000 jobs worldwide, and only two (petroleum refining and the extraction of crude petroleum) show losses of one million jobs or more.
According to the Club of Rome, a full adoption of a circular economy would create for example more than 75,000 jobs in Finland, 100,000 in Sweden, 200,000 in the Netherlands, 400,000 in Spain and 500,000 in France by 2030.
The Global Climate Action Summit estimates the creation of over 65 million new low-carbon jobs by 2030.
Sources:
- IISD report: Effects of the circular economy on jobs
- Sitra article: What do we know about the effects of a circular economy on jobs?
Surprising facts about the circular economy
- Today, our economies are using about 1.6 Earths; this means that we’re using about 60% more of the earth’s resources than it can regenerate every year. By 2050, with an increased global population and a resulting rise in consumption, that “overshoot” could get to 3-4 Earths, which is clearly unsustainable.
- Today, the world produces over 2 billion tonnes of solid waste, and that’s expected to grow to 3.4 billion tonnes by 2050. About one-third of that waste is not managed properly. By volume, global waste includes 44% food and organics, 17% paper and 12% plastic – all valuable commodities.
- We’re throwing away over 50 million tonnes of electronic and electric goods, worth 63 billion dollars, every year, including rare earth minerals, gold and copper.
- Why are landfills especially insidious? In addition to taking up otherwise productive land, this explanation from Waste Dive is especially helpful: “When trash is packed into a pile, the oxygen-free environment supports bacteria that thrive in those conditions. As the microbes degrade the waste, they release carbon dioxide and methane. The latter is… 84 times more potent of a global warming agent than carbon dioxide in the first 20 years of its release.”
- Many of us waste food every day. About 22% of global emissions and 30% of energy consumption come from the food sector. At the same time, nearly one-third of all food produced is wasted, and food waste continues to be the top product found in landfills.
- Humanity will throw away 148 million tonnes of clothing each year by 2030. Approximately 500 billion dollars in value is at stake by adopting circular fashion solutions, keeping valuable materials out of landfills and reducing our reliance on virgin commodities.
Sources: