UN Environment contribution to a EU Green Week 2019 session about the transition to circular economies

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EU Green Week: Conference session “Fostering investments in support of the EU circular economy package”

On 16 May Mr Bruno Pozzi, UN Environment Europe Office Director, participated in an EU Green Week conference session entitled ‘Fostering investments in support of the EU’s Circular Economy Package.’

Developing a circular economy is a key driver of the European sustainability agenda. The session explored the most up to date developments and on-going initiatives to support the transition to circular economies, from policy recommendations to circular economy financing tools.

It was organized by the European Commission in collaboration with the European Bank for Reconstruction and Development (EBRD).

Mr Pozzi spoke in the first part of the session providing a high level perspective alongside Mr Misiga, Head of Unit on Eco-Innovation, DG Research, and Gianpero Nacci, Deputy Head of Energy Efficiency and Climate Change at EBR. The Second part consisted of presentations of case studies on how implement circular economy.

Watch the recording of the event here.

The following is a report on the High Level part of the session.

Mr Pavel Misiga explained that the European Commission sees the Circular Economy as a very important environmental and economic policy through which we can address many pressing problems such as environmental degradation in Europe and global environmental problems like climate change. He noted however that despite broad support across sectors, the transition to a circular economy is very slow. In Europe we only reuse and recycle less than 10 percent of materials he noted, therefore the circular economy needs to be taken up better by the market and consumers. How? In 2015 the European Commission presented a Circular Economy Action Plan with over 100 actions. Today a majority of them have been implemented, but there is still a lot to do in the future, he said. For instance, we need to address barriers to financing by the business sector. Businesses often have ideas but investors often consider this as too risky and not bankable.

Mr Misiga explained how through an expert group involving all stakeholders (including from the finance sector and with the EBRD, businesses, government, civil society) the European Commission has tried to tackle this. He explained that the exercise has shown that there is still no level playing field for the Circular Economy. This is because consumers often still prefer linear products, and it is often cheaper for companies to go for primary materials and not recycled ones; also there is a lack of understanding of the Circular Economy by the financial sector.

The Group made recommendations for financiers, policymakers and public authorities (such as on collaborative agreements and providing guarantees) he explained, as well as for Small and Medium Enterprises showing how to move to a Circular model. These recommendations now need to be taken up by the various players, he concluded.

Mr Gianpero Nacci, Deputy Head of Energy Efficiency and Climate Change at EBRD, built on points raised by the EC speaker. We live in a world where we use more resources than the planet can regenerate – there is a resource deficit–this is a clear condition, he said. We also indeed have a climate challenge: in order to achieve the Paris agreement by 2050 we need to reduce the carbon intensity of the economy, and so reduce the amount of carbon emitted by unit per euro of GDP, by 200 folds. This entails an important shift in terms of how our economies and system are organized.

Mr Nacci observed the decoupling of economic growth and the growth of wages. Economists tell us that labour growth productivity is declining, despite things like digital technology, but at same time inequality is rising. So basically, he said, ‘our economic system is failing to provide the support to our life. ‘

Hence he invited people to reflect on whether the Circular Economy can deliver the paradigm of prosperity rather than of growth. It looks like the Circular Economy tends to be able to deliver on these challenges. Typically in his view, the Circular economy shifts to services, and can address one of the fundamental problems of the system: privatisation of gains and socialization of losses. The Circular Economy tends to be more labour intensive he explained, so in a way it also responds to societal challenges we are facing.

He added that as an actor in the financial sector, he sees various types of conditions that are relevant to make the Circular Economy work:

The first is participation: it is key in his view for economic actors, including financial institutions, to be part of a network /of a system. This is important because the success of Circular Economy business models is based on the allocation and fair distribution of risks across different economic actors. This means that we need to understand the risks for supporting the transition, he underlined. What can help is introducing more uniform and comparable taxonomy, he said. And, we need to understand where the risks are (also for linear business model). Again this requires the patricipation by different actors from the value chain and in society to provide information, he noted.

He went on to describe two elements that connect Circular Economy models with banks: The fist is the value of long term partnerships and relationships – this is part of how banks operate, they want long term relationship; the second is the value and importance of disclosure – ultimately, creating partnerships and integrated value chains. This entails the creation of trust, which in turn is based on the disclosure of information. In this regard, he supports the increasing trend to include non financial information in reporting. This is important for the creation of partnerships.

Mr Bruno Pozzi, Regional Director at the UN Environment Programme agreed with most of the remarks by previous speakers. He noted that the UN, the EC and the EBRD are speaking with the same voice and that this is reassuring. All agree that the way we deal with our economy in a linear way is not working anymore. Our resources are used much faster than that they are being replenished. But indeed we are far from having a full circular economy he pointed out: we have developed only 10% of our economy in a circular way. So the goal is to increase a Circular Economy and the way we use our resources efficiently, he said.

At industry level Mr Pozzi explained that UN Environment has calculated that re-manufacturing, refurbishment, repair and re-use could cut industrial waste by between 80-99% and cut greenhouse gas emissions by 79-99%.We need a holistic approach to circularity that can achieve important material resources and energy savings, and that can produce jobs, and create better jobs because you need more skilled labour for a circular economy than for linear production, something that was also indicated by previous speakers. So we want to promote investment and creativity, and innovation in production but also in services. To unlock this potential we need to have the financial sector on board, Mr Pozzi told the meeting.

At UN Environment we support this approach and we provide science and the economic basis to support policies and practices in terms of Sustainable Consumption and Production.

As mentioned by previous speakers, there is a need to educate consumers and entertain a dialogue with the financial sector on the benefits of a Circular Economy and how it will generate growth and prosperity Mr Pozzi noted. It will allow citizens to have a better life, he said.

UN Environment can help to set up platforms as well, to support innovation in Circular Economy and we can identify synergies with all actors mentioned (from Civil Society to the financial sector). He referred to a number of programmes UN Environment has put in place, with different partners, including SWITCH programmes in Asia, Africa and the Mediterranean, which is an important programme to develop the green and circular economy in developing countries, as well the blue economy etc.

But in all these programmes we see that the access to finance is very difficult and sometimes impossible. This is because the financial world mostly still thinks in terms of the linear model. Mr Pozzi suggested that we need to work on capacity and education to change that model; if we manage, we will unlock a potential for our planet he observed.

UN Environment has some suggestions, that go from a change in fiscal policies that can redirect investment tools towards the achievement of the Sustainable Development Goals, towards looking at fiscal reforms that create incentives and motivate more efficient technological investments. He gave the example of countries like Egypt and Morocco that have reviewed their fuel subsidies and have unlocked financial resources to invest in the circular economy and in different ways of development.  Fiscal policy can favour recycled material and has been used in countries like Sweden, Denmark and China.

At the end of the day it is really about creating synergies to make the circular economy concept better understood and make it a concept understood as linked to prosperity and to growth, that will help the economy develop, he concluded.

Link to video produced by UNEP with support of the European Commission about the Green Economy: https://vimeo.com/338667043

The event was hosted by the EBRD 

Featuring

Astrid Motta, Principal, Energy Efficiency and Climate Change, EBRD

Gianpiero Nacci, Deputy Head of Energy Efficiency & Climate Change, EBRD

High level perspective

Pavel Misiga, Head of Unit Eco-innovation, DG RTD

Gianpiero Nacci, Deputy Head of Energy Efficiency & Climate Change, EBRD

Bruno Pozzi, Regional Director for Europe, UN Environment

Experience on the ground

Kestutis Juscius, CEO of AUGA Group

Konca Çalkıvik, Secretary General, Business Council for

Kemal Demirkol, Managing Director, Sustainability & Innovation Expert, GTE

Jan Raes, Sustainability Advisor, ABN Amro