In the 19th century, with the invention of the steam engine, the economy significantly diverged from its original form. Under this system of economy, production substantially increased, innovation incessantly appeared, and the quality of life for most strata of society began to elevate. But this economy was in the form of a “linear economy,” which relies on the cycle of “make-use-dispose.” At first, this cycle seemed as a boon for all: humanity could extract natural resources indefinitely, and throw the products created from the resources whenever they wanted to. However, in response to the exponentially booming human demand, the Earth began to reach a limit; pollution exceeded the range of Earth’s self-purification, and resources such as coal or trees were consumed before they were replenished. Then came the conventional mantra that we must consume less and dispose less, which also roused concerns of the developing world that such actions are detrimental to economic growth. However, can economic development really never coexist with environmental protection? Will humanity have to stifle growth, restrain consumption, and regress to a pre-industrialization society to preserve the environment?
To answer this question, Kenneth Boulding, Tim Jackson, and a myriad of other scholars, decided to find the answer in the environment itself. In the natural state of things, any organism is part of a perpetual cycle. A newborn owl, for example, consumes other organisms grown from the Earth, ages, dies, and its dead body provides nutrients to the Earth. Then, these nutrients nourish other organisms, which become food sources for the owls of the next generation. Now, replace the owl with man made products, and the outcome is a self-sustainable economy that focuses on making the most out of what rather than producing more and more.
This new perspective of viewing the economy is called the “circular economy,” as it aims to circulate goods so that they would not be disposed after the initial use. Notably, circular economy does not have a conclusive definition; rather, it has values that delineate its nature. A circular economy hinges upon the idea of stock optimization, eco-efficiency, and eco-effectiveness. (J. Kalmykova et al, 2018)
The first value of circular economy, stock optimization, recognizes that the Earth has a finite reserve of resources and capacity of taking in waste, which will both reach a limit at some point. Thus, stock optimization aims to maximize the utility of a given resource. In fact, this value is not a newly synthesized concept; rather, its examples are widespread. From macro level, such as recycling, to a micro level, such as sewing a hole in a pair of jeans, are all instances of “stock optimization.” In circular economy, stock optimization redefines “ownership,” as purchasing a good is gaining a “license” to the good for an infinite amount of time in circular economy. When the consumer believes the product is no longer necessary, he or she returns it to the producer, rather than disposing it. Subsequently, the producer extracts raw materials from the product, and utilizes it to create a product once more. In this case, a finite amount of resources is used infinitely, meaning that its utility has been optimized. Then, the similarity between the owl analogy and circular economy is evermore conspicuous. This process–which we commonly refer to as recycling–is only a part of the “stock optimization.”
Shared economy, another form of economy that redefines ownership, is also a newly emerging part of stock optimization. In a shared economy, individuals voluntarily share their products with strangers for monetary gains or any sort of incentive. Uber or AirBnB would be the prominent examples at this stage. Thus, less natural resources need to be extracted and less production would be needed, meaning a reduction in pollution also.
These various notions inside stock-optimization are implemented in different ways for each community, based on the community’s characteristics. While developing nations tend to encourage material flow into government-led organizations, nations in Europe (or commonly referred to as the West) facilitate recycling on an individual scale. Such individual-scale actions include supplying broken bikes to local bike repair shops, furnishing fabric shops with dirty or outdated clothes, and so on. In Asian countries–where most megacities are located–services that share cars, bicycles, or scooters have constantly been on the rise. This trend is mainly because such shared transportation services guarantee convenience and speed while also maintaining a relatively low cost. In most megacities, cheap transportation (such as buses) are slow and unsanitized, while their faster counterparts are efficient but costly. Purchasing one’s own vehicle may also be a choice, but it is burdensome for most workers in megacities. Shared transportation provided a both novel and green solution to this dilemma that denizens of megacities faced. Using the scooter-sharing system Lime, one living in India can go to work quickly without having to buy one’s own motorcycle or pay for an expensive taxi.
Another value that circular economy upholds is eco-efficiency, which focuses on “minimization” and “dematerialization.” In other words, eco-efficiency hinges upon the idea of minimizing the volume, velocity, and toxicity of the material flow system. This concept is not mutually exclusive under a circular economy; still, it is a pivotal notion to circular economy. A constant concern raised by the skeptics of circular economy was that the process of reusing might be more harmful than recreating. Even if we melt plastic bottles to recreate them, if the process emits huge amounts of pernicious fumes, a linear economy might be better. Also, they claim that it is impossible to holistically assess the long-term and short-term effects, meaning that it is inconclusive whether circular economy is actually more greener than its counterparts. (Robért et al, 2013) The pursuit of eco-efficiency is what effectively tackles such concerns, because it aims to minimize the deleterious impacts.
Then, how can eco-efficiency be achieved in real life? A British beet sugar company Wissington, for example, not only produces sugar, but also produces topsoil, animal feed, bioethanol, tomatoes, yeast protein, and a plethora of other products using its otherwise harmful byproducts. Also, minimizing energy required to gather waste in a circular economy is crucial. Municipalities could either encourage such recycling to happen on an individual level or gather waste using transportation that operates on renewable resources.
Eco-efficiency can also happen via a joint action between nations. China is currently the greatest importer of scrap metals, while the United States is the greatest exporter. In America, there is a glut of metal scrap while the labor force to recycle scrap metal is expensive, meaning that it is cheaper to follow the traditional “make-use-discard” cycle. On the contrary, China has less metal scrap compared to the US while having an inexpensive labor force. After American goods that use metal are discarded, they are packaged in container boxes and sent to ports. Consequently, ships that export products to America and return to China put their products on American soil and carry scrap metal home. Because these ships do not return barehanded, not only does it contribute beneficially to the environment, but also transportation companies also reap economic benefits. When the scrap metal arrives to China, Chinese businesses utilize the scrap metal to produce their merchandise, and export it back to America using ships from America. This process minimizes the number a ship must move from one place to another and also maximizes the utility of metal; thus, this cycle is a paragon of circular economy that achieves both eco-efficiency and stock-optimization.
The final pillar of circular economy is eco-effectiveness. This concept is mutually exclusive under circular economy, as it envisions to form a “supportive relationship with ecological system and economic growth.” (EMF, 2012) In other words, it aims to achieve a production system in which the environment and economy both benefit. For instance, corporations such as MycoWorks have been creating products from naturally degrading materials–in the case of MycoWorks, a fungus named Mycelium. Since these materials naturally decay, they do not turn into harmful waste, but rather degrade into nutrients for the local ecosystem, benefiting the environment.
Yet, circular economy is not a concept that can entirely eradicate pollution. As the second law of thermodynamics states, energy is always required to perform “work,” meaning that every action that humanity performs will have at least some impact on the environment. Also, municipalities need to find waste in order to include it into circular economy; this search process would also require energy. (Georgescu-Roegen, 1971) However, circular economy aims to minimize, rather than eliminate, the impacts of human action through the values mentioned above. In a nutshell, circular economy cannot guarantee the halt of environmental problems; still, it is the best option that humanity currently has.
Skeptics of circular economy still claim that it is a rather unfeasible concept when seen through an economist’s lens. The most prominent among these are the system boundary limitations, limits posed by physical economic growth, lock-ins within circular economy, and the hardships of enforcing a “physical flow.” (J. Korhenen et al, 2018)
The system boundary argument rejects the premise itself that circular economy is beneficial for the environment at large. According to the argument, there are economic structures or innovations within circular economy that allow the system to be more effective. This difference has the potential to cause a monopoly, or increase the implementation cost of more efficient economic structures.
The third argument, that growth physically barriers the benefits of circular economy, focuses more on the possible impacts. Often referred to as the Rebound effect or Jevon’s paradox, argues that under circular economy the production efficiency will increase. This increase will result in the decrease in prices, which will encourage consumer spending. When consumer spending increases, the benefits of circular economy are nonexistent, since the more people use the good, the more pollution the production will cause. The response to this criticism is mainly fourfold: (i) stock optimization, in forms such as shared economy, makes it unlikely that humankind will be in a perpetual cycle of needing more. (ii) when demand increases, the price will increase again due to simple supply and demand rules. (iii) even when price stays the same, when there starts to exist an excess in supply, demand will soon begin to plateau. (iv) when we assume for the sake of argument that the supply and demand will continuously increase, this scenario will not be different in a linear economy, because development in technology and automation will decrease production costs. It may even be far worse since the produce-use-dispose mantra will still persist. On a comparative, circular economy provides a brighter outlook.
After the advent of the steam engine, it had been the widespread consensus that the choice between the economy and the environment is a trade-off. The saccharine fruits of industrialisation and economic development trumped environmental concerns, and humanity enjoyed a headlong growth. But we must pay the costs of prosperity one day. Maybe it is time for us all to transit into a circular economy.
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