Circular Economy: Game Changer or Dead-End for the Climate Crisis?
What you need to know to make progress regarding your climate pledges.
If you are currently working in the field of sustainability or you are an attentive listener to the daily news, you probably already heard this message over and over again: to transform our resource-intensive world, we need to move towards a circular economy, where materials are reused and recycled indefinitely. The promises of this circular economy are numerous: fewer resources need to be extracted and processed, resource shortages become history, and global greenhouse gas emissions are drastically reduced.
Since early 2000, multinationals started implementing circularity — or that’s what they say — into their business operation and products. Governments and supranational bodies are setting up policy bundles to accelerate the circular transition. And the scientific community is coming up with endless ways how to measure circularity. Despite all these efforts, the question remains: Can the circular economy idea hold its promises and create earth on heaven? Or is it just another way to greenwash the old engine? Let’s have a closer look.
Circular Economy and Climate — A Big Misunderstanding?
To prevent the worst effects of a climate crisis, basically all leading scientists, businesses, and governments call to rapidly reduce emissions fast (not just CO2). Each year, the world adds about 50,000,000,000 tons of greenhouse gas emissions to the atmosphere. Somehow, we need to reduce our emissions by mid-century drastically as agreed by basically all countries in the world (see Paris Agreement). Thus, the “what” and “why” have been agreed on. But the “how” is still under construction. To understand a bit better the context of our common climate problem, let’s have a look at where these 50,000,000,000 tons come from. When splitting global emissions into sectors, about 73.2% of all emissions are caused by only one single activity: using energy. Using energy for driving our car, heating our house or producing electricity. Without energy, our modern world cannot function.
The solution to this problem seems straightforward: Turn away from fossils fuels and move towards low-carbon energy technologies. Easy to say, difficult to do. Our entire economy is built around the availability of cheap, easily accessible fossil fuels. The good news: low-carbon intensive technologies do exist already in most sectors. The bad news: changing such a fundamental system as the energy system takes a lot of time, investment, and willingness to change. Assuming that we have all of that, we could sooner or later lower our emissions by three-fourths. “If we need to transform the way we produce and use energy, why does everyone nowadays talk about the circular economy?” the attentive reader would say. Good question. Let’s look at the graph below showing the same content as the one above. The pie chart above clearly pinpoints to the problem: fossil fuels.
The more commonly used graph to the left (here only the US) does not clearly point to the root cause. It could look like emissions would somehow magically appear from each sector, while it actually is just about burning fossil fuels. Mix our second pie chart with some statements from some very reputable organizations and politicians and the confusion is perfect. The circular thinking goes like this: if “the industry” causes a large share of global emissions, its primary production must be reduced by reusing and recycling materials to ultimately reduce emissions. Right. This is indeed true. But there is an important detail missing. Greenhouse gases are emitted during industrial production processes of materials and products by the use of fossil fuels. The material or product, per see, is not the problem, the energy carrier is. That’s a big difference. Here’s why.
Steel — the Backbone of our Society
Let’s take steel as an example of why we should not simply focus on reducing steel production through circularity strategies in order to lower emissions, but rather to get rid of fossil-fuels-using processes. We produce and consume a tremendous amount of 1,300,000,000 tons of steel. Every year. To produce one ton of steel, about 2.3 tons of CO2 are emitted on average. You can do the maths yourself. The bottom line is that steel production is one of the sources of our changing climate.
Recycled steel produced in an electric arc furnace emits only about one-third of the emissions compared to virgin steel. Therefore, it is clearly important that we keep recycling. But here is the classic confusion between cause and symptom. A symptom is an indication of a root cause, but it is not, by itself, a cause. The cause of the (climate) problem of steel is the burning of fossil fuels in the blast furnace to generate heat and to convert iron oxides to molten iron with the support of coal as a reducing agent. It is not by itself the amount of steel produced. If we assume that we simply produce too much steel — which we might do — it seems reasonable to say that recycling and demand reduction are the only solutions. However, the problems with these solutions are: (1) recycling does not come emission-free; (2) the quality of most recycled materials is often lower than the virgin version and is decreasing every time you recycle; and, (3) global demand of all major resources (cement, iron, steel) rises so sharply that simply recycling what we already have in stock is by far not sufficient. In other words:
If the iron & steel industry is continuing to use fossil fuels in its production, we will miss our climate goals; doesn’t matter if the economy is circular, blue or green.
So if circular strategies are not the primary solution, what is? The approach of choice must be to focus our time, money, and energy on phasing out fossil fuels till the last drop. Even in so-called “hard to abate” sectors such as the steel industry, technologies exist that can squeeze out fossil fuels. I am not saying that technology will always provide the answer. We must face some serious questions regarding our consumption pattern. Nevertheless, even in steel production, we already see very promising technologies that have the potential to radically reduce the emissions per ton of steel produced. For example, a ready-to-use technology is “direct reduction” with natural gas — already producing 5% of current world production — and emitting “only” 1.1 tons of CO2 per ton of steel. That is a 50% performance improvement compared to the world’s standard technology. Still, natural gas is a fossil fuel that we want to get rid of. So that technology is maximum a bridge to get us where we want to be. One promising technology currently under development uses hydrogen in steelmaking instead of coal as a direct reduction agent. The climate advantage of hydrogen is that it only forms water after reacting with iron ore instead of CO2. Important here is that hydrogen must be produced with renewable energy, otherwise, we simply shift emissions from the blast furnace to the production of hydrogen. Overall, the production of one ton of iron or steel by direct reduction with green hydrogen can reduce the emissions by 90% — cost-effectively. The remaining emissions could be captured by carbon capture and storage (CCS) if not able to be eliminated. And voilà, you got one possible pathway to produce steel with negligible emissions.
The exercise here is not to push a particular technology but to illustrate that significant shifts are possible in each industry to achieve deep transformation and to phase out fossil fuels. Electric cars are the obvious way ahead for passenger transportation and this transition is already on the way. Heat pumps can be the cornerstone to switch the fossil fuel heating system of your house towards (nearly) zero carbon emissions. Sweden has shown the world that it can work. They have now by far the highest penetration of heat pumps per capita in the world. In terms of energy for heating, the share of fossil fuels is now below 5%. All of those transformations will require a lot more renewable-produced electricity. And we can produce more than enough without compromising planetary boundaries. Maybe not by tomorrow. But by focusing our time, energy, and money on researching, developing, and scaling these innovative technologies, we can get there in time to meet our goal set in Paris.
Is a Circular Economy disposable?
Yes, it is a provocative question. But maybe it is sometimes necessary in today’s silo-world to break out of common thought patterns. From my work and research experience, I find myself (more often than not) in situations where people already think they know the answer without having heard the question. Indeed, circular economy is a very attractive concept. And there are business cases where circularity makes absolute sense (e.g. textiles).
But circular solutions do not tackle the core of the climate problem — the burning of fossil fuels. And once you get into the details, you find yourself confronted with challenges that are often happily ignored — rebound effects, energy requirements in recycling processes, compound materials — just to name a few. Nevertheless, circular economy has its place in a sustainable economy. It has for thousands of years (think about the extinct milkman!).
While it cannot be the primary choice to tackle the climate problem, it has the potential to lower pressure on other planetary boundaries such as freshwater consumption and biogeochemical flows. The argument, that the circulation of materials is needed to prevent possible resource shortages is rather short-sighted. While it is true, that the recycling rates of the world’s most used materials by weight (cement, steel, iron) are rather low, we will not run out of these resources any time soon. But it still makes sense to increase those recycling rates for one reason: The more ores we extract from the ground, the lower the grade of the remaining ores in the earth crust will be. The lower the grade, the more energy is needed to extract the remaining ores.
This is illustrated by the graph to the left, showing the ore grade distribution of major elements in the earth's crust. Mining companies currently extract only ores with high grades for cost reasons (right-hand tail). The mineralogical barrier illustrates the threshold, over which elements cannot be extracted cost-effectively with current technology (this barrier is not fixed as technology and market prices are subject to change). So better keep the materials we already have extracted at the highest quality grade possible with circular strategies than extracting ores with decreasing grades.
It’s All About Setting the Right Focus
The climate problem is three-fourths a fossil fuel-burning problem. Circulating materials that are produced by fossil fuel processes will do little to tackle the core problem. In other words:
Circular economy can only be a secondary solution. The primary goal must be to exclude fossil fuels from the economic system, even if that system is a circular one.
One of my mentors used to say: you create what you focus on. Thus, we want to focus our most precious resources (time, money, energy) primarily on the expansion of low-carbon energy tech and on the design of industrial processes that can run (mostly) without fossil fuels. In this regard, the news from the International Energy Agency (IEA) that only 2% of governments’ pandemic recovery spendings are going to clean energy tech is worrisome. Or as Fathi Boril, Executive Director of the IEA, said:
“Not only is clean energy investment still far from what’s needed to put the world on a path to reaching net-zero emissions by mid-century, it’s not even enough to prevent global emissions from surging to a new record.”
Despite the missing governments’ financial support, the main challenge of the transition endeavor is costs. The price of “green” technologies and processes are often more expensive than current state-of-the-art technologies. As Bill Gates said, everything about climate change boils down to the question of what the difference in cost is between a product that involves emitting carbon and an alternative that doesn’t. Addressing this “Green Premium” is the key to the climate crisis. And collaboration, innovation, and focus (on the causes, not symptoms) are the vehicles that will get us there.
Questions? Have any lessons that I missed? Need to brainstorm a topic you’d like to explore? Share below in the comments — I’d love to hear them! If you like to hear more about my perspectives on sustainability, innovation, and change, feel free to follow me on Linkedin: www.linkedin.com/in/gregor-braun
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Gregor Braun is a Sustainability Scientist at Empa, the Swiss Federal Laboratories for Materials Science and Technology, and the Sustainability Manager of the University of Basel. He works closely with industrial partners to develop actionable sustainability strategies.
