6. Conclusion and Recommendations
The CE concept is fast becoming a new model for resilient growth in both developed and developing economies. In particular, it offers a viable alternative strategy for industrial development and job creation compared with the traditional manufacturing-led growth pathway for developing countries. Political and economic conditions in developing countries will necessitate different pathways to the CE from those employed to date in developed countries, but the CE opens up many new economic opportunities which developing countries are well positioned to harness.
The next two years offer a critical window of opportunity in which to set in motion an inclusive, global vision for the CE which is aligned with existing policy commitments at both domestic and international level. As countries around the world ratchet up their climate policy ambitions in 2020 under the Paris Agreement and take stock of progress against the 2030 Agenda for Sustainable Development, the CE offers a useful pathway through which to embed sustainable resource use at the heart of industrial growth.
The next two years offer a critical window of opportunity in which to set in motion an inclusive, global vision for the CE which is aligned with existing policy commitments at both domestic and international level.
Investment now in the fundamentals of a CE – in robust governance frameworks, in inclusive policies that harness existing circular activities in the informal sector in developing countries, and in partnerships at national, regional and international level to support cross-border trade and knowledge exchange – can provide the impetus required to deliver on circular practices at scale.
Below we outline a series of priority steps through which national policymakers, international policy and financial institutions, and the ecosystem of stakeholders supporting the UN’s 2030 Agenda can support the deployment and scaling up of the CE in developing countries.
6.1 Aligning the CE with existing policy priorities
- National governments should identify synergies between the CE and existing national plans and priorities. Rather than developing a separate ‘circular economy’ strategy to sit alongside existing industrial development, ‘green growth’ and climate strategies, for instance, governments should identify specific interventions and policies that can accelerate the delivery of existing national development goals as well as the objectives of industrial strategies. A cross-ministerial working group should be established on the CE to support the mainstreaming of CE approaches across sectoral strategy and policy development. Given the important role that the CE can and should play in mitigating emissions from sectors including agriculture, heavy industry and waste, national governments should prioritize the identification of avenues through which mitigation and adaptation can be strengthened by more circular approaches as they ratchet up the ambition of their NDCs by 2020.
- National finance ministries should undertake an assessment of the scale of opportunity associated with transitioning to a CE across key sectors of the economy. Demonstrations of the scale of opportunity in developed countries have been central to socializing acceptance of the CE and encouraging early investment and innovation; key to generating investment and buy-in for CE initiatives in developing countries will be a strong evidence base that illustrates the financial gains to be achieved and the economic and structural conditions associated with them. Finance ministries should work in partnership with national or international research institutes, universities and civil society organizations that are already exploring the potential for the CE in developing countries.
- Donor governments should support the CE as an industrial development strategy. Donors can mobilize the funds needed to support governments and business in developing countries in pioneering and scaling up CE initiatives. To do so, it will be critical that donors position the CE not simply as a waste management, environmental protection or resource efficiency exercise, but as an industrial development strategy with opportunities for value-adding activities across the economy. This can also ensure that the CE will be approached in a manner that enhances cross-sectoral cooperation and systems-level planning. To kick-start investment in developing-country CE value chains, donors should commit to ringfencing a share of overseas development aid for spending on projects and initiatives that include a CE element.
6.2 Investing in the fundamentals
- National governments should identify priority reforms to domestic policy in support of CE activities. Governments, in collaboration with businesses and other relevant stakeholders, should undertake a landscape mapping of existing fiscal and trade policies, identify where those policies are likely to hinder or discourage domestic innovation and foreign investment, and implement the appropriate reforms to remove the barriers. Governments should also explore and implement incentives and support structures to encourage R&D partnerships to accelerate innovation in relevant CE solutions. The incentives and structures could include network facilitation, tax incentives for SMEs looking to collaborate with universities, public grant provision and investment in national CE innovation hubs and pilot zones.
- Investors should develop cooperative and blended finance mechanisms to support and de-risk early investment in CE value chains. Public and philanthropic funds should be packaged to attract greater volumes of private-sector investment in CE activities. In the public sector, cooperative financing arrangements in which multiple MDBs or donor agencies pool resources to support CE investments would create a lower-risk environment in which to expand engagement in the CE. In the private sector, collaborative approaches to financing guidelines such as those launched by ABN AMRO, ING and Rabobank in 2018 could accelerate the creation of a lower-risk investment environment for private-sector financiers.
- Intergovernmental organizations (IGOs) such as the OECD, UNIDO or UNCTAD should launch a global ‘circular economy accelerator network’. This should include the establishment of 10 to 20 pilot zones in a range of countries – encompassing developing, emerging and developed economies – that trial new CE solutions and that provide a hub for learning and technology transfer to build the capacity both of domestic actors and of regional and global networks. IGOs should work with developing-country governments and multinational companies to create these zones. In doing so, they would support the establishment of institutional and regulatory frameworks while also building the capacity of developing-country suppliers in international supply chains. This would help to demonstrate the viability of whole-supply-chain CE approaches.
6.3 Supporting an inclusive global agenda
- Developed countries should identify early opportunities for ‘triple-win’ collaboration with developing countries to deliver on trade, the CE and broader sustainability goals. OECD countries should pursue trade negotiation opportunities that minimize trade restrictions standing in the way of more circular value chains in developing-country trade partners. Such opportunities could include the reduction or elimination of tariffs and non-tariff measures on environmental goods and services and secondary materials, and/or the removal of existing tariffs on secondary raw materials. The measures implemented could lower the costs of feedstock in import-dependent countries and boost the competitiveness of downstream industry in developing countries.
- Regional CE forums in developing countries should engage proactively in knowledge- and lesson-sharing at an international level. The Regional 3R Forum in Asia and the Pacific should explore opportunities to share lessons from its cooperative approach to policy coordination, investment in pilot projects and research – including through political missions and the convening of an international meeting, and building on the success of its own annual conferences. The African Circular Economy Alliance should work with regional and international civil society organizations to facilitate collaboration among cities, universities and start-ups and to explore opportunities for linking strong local networks with internationally focused forums. Multilateral organizations should facilitate this engagement through technical support and, where necessary, financial investments.
- G20 governments should demonstrate leadership in cooperative action in support of the CE, with Japan spearheading a ramping up of ambition. G20 leaders, building on the ‘resource efficiency dialogue’ instigated under the German G20 presidency and supported by Germany and the wider EU, should commit to ambitious action to support international cooperation on the CE, including with a range of developing countries that are not members of the G20. As G20 chair in 2019, the Japanese government, with the support of other G20 leaders, should announce its political support for the above-mentioned ‘circular economy accelerator network’ of CE pilot sites in developing countries. Such coordinated commitments would signal to the business and investment communities that future CE pathways will depend on international coordination and openness to trade in CE goods and services, and would strengthen the position of international financial institutions seeking to strengthen the synergies in their investments between the CE and wider sustainable development programmes.
- The EU and China should, under the auspices of their MoU, commit to establishing deeper dialogues with developing countries. High-level policy dialogues, the exchange of strategic information and policy ideas, and the sharing of best practice should be extended beyond the EU and China to include leading developing-country governments that are pioneering CE strategies. These dialogues should include an exploration of the potential impacts of domestic CE policy in the EU and China on developing countries and a commitment to mitigating any associated environmental or health risks. Multilateral organizations should facilitate this engagement through technical support and, where necessary, financial investments.
- MDBs should align investments in climate resilience, biodiversity protection and sustainable development with the CE. Donors should develop a compelling narrative outlining the ways in which the CE can accelerate delivery on climate mitigation and adaption, biodiversity protection and sustainable development. In support of this, MDBs should look to revise eligibility criteria to include CE projects for those funds that are well aligned with the principles of a CE, including the Global Environment Facility. Successful alignment of the CE with broader investment programmes in these areas should de-risk investments in CE initiatives by demonstrating multiple benefits and returns, and should promote synergistic investment approaches that promote CE innovations focused on climate resilience and biodiversity.
- Global trade bodies should spearhead the development of common standards for internationally traded waste and secondary materials. The OECD Council and Basel Convention Secretariat should establish a set of common minimum health, safety and environmental standards for international trade in waste products and secondary materials, to support the lowering of non-tariff barriers on cross-border CE trade. OECD countries with established CE value chains should lead on efforts to formally harmonize, through the WCO, HS classifications for secondary-material streams such as remanufactured goods and end-of-use goods intended for repair, recycling, disposal and/or energy recovery. They should explore the potential for new provisions for electric and e-waste and scrap under the WCO, while also working in a coordinated manner outside the WCO to ensure better consistency of descriptions for secondary-material streams at the national tariff line level. Options for using new digital and blockchain technologies for improved traceability in secondary-material flows should also be explored.