Circular Economy for China:

Theory and practice from an ecological economics perspective

Prof Dajian Zhu Institute of Sustainable Development & Governance Tongji University,Shanghai,China Dajianzhu@263.net

Circular economy initiative in China

1998-2002: academic studies 2002-2005: become one of national sustainable strategies and policies 2006-now: circular economy initiative in the 11th five year plan of economic-social development

Three issues on CE

Why (Scenario)China needs to decouple economic growth from environmental impact, but in the sense of relative decoupling What (Model)CE is the kind of multicycled economy towards more services with less throughputs. How (Strategy)How for China to make CE into practice.

1.Why: Decouple environment

economy

with

Three ends of ecological economics

Ecology: sustainable scale Society: equitable distribution Economy: efficient allocation

Development curves of ecological economics

Quality of life

Economic growth

Material throughput

Three pillars for Chinas development

Economic growth (): World Average Income
GDP per capita

Environmental impact (): World Average Impact

Eco-footprint per capita

Social Development(): World Average Wellbeing HDI or RGI

2050:Economic Size of the BRICs

GDP (2003 US$bn) 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2000 2010 2020 2030 2040 2050
GS BRICs Model Projections.

BRICs Have a Larger US$GDP Than the G6 in Less Than 40 Years

BRICs G6 2025: BRICs economies over half as large as the G6 By 2040: BRICS overtake the G6

GDP (2003 US$bn) The Largest Economies in 2050 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0
Ch US In Jpn Br Russ UK Ger Fr It GS BRICs Model Projections.

Three scenarios of China development

Scenario 1traditional growth: Under the present mode,the impact of China will be at least 4 times of the current level; Scenario 2absolutely decoupling: To keep the current impact level, we should at least raise 4 times of eco-efficiency. Scenario 3relatively improving: In the level of relatively decoupling, we should raise 2-3 times of eco-efficiency

1. 1 Scenario#1: Economic Growth with more impacts

I=Impact: resource consumption and pollution impact of development P=Population:How many people will we have ? A=Affluence:Whats the consumption level? T=Technology and Management: How fast and big do we consume the resource and environment ?

Population: How many people China will have in 2020

China has 1.3 billion people in 2000 Increasing 10 million persons per year 1.4-1.5 billion till 2020 in China (1.1 times of the year 2000) Demand of 10 million persons for urbanization per year 60% urbanization rate till 2020 in China

Affluence: In terms of GDP per capita

Beginning of Reforming and Opening: $250 per person 1981-1990: $500 per person 1991-2000: $800 per person 2001-2020: $3000 per person (about 4 times of the year 2000)

How big is environment impact in 2020 ?

(According to the formula: I=PAT,when T=1)
Year Population (billion) 1.3(1.0) 1.4(1.1) 1.5(1.15) Affluence (GDP per capita) 800(1.0) 3000(3.75) 10000(12.5) Environment impact (how many times) 1.0 4.0 14

2000 2020 2050

To call for an alternative development model

traditional approach high economic performance and high environmental impacts

The resource and environment in China are not available to provide a growing population with higher standards in a traditional lifestyle of consumption.

alternative approach high economic performance and low environmental impacts

The challenge for China is to create an alternative one to traditional development modes which would meet the needs for development while maintaining and even improving the health of ecosystem.

1.2 Scenario #2: Absolute Decoupling of economic growth from impacts

Wellbeing Resource throughput Traditional development

Ecological Economy

Alternative development

Different requirements for the developed economy and developing economy

The target for sustainable development is to reduce the global material flow by 50% in the future fifty years, Its known to all that reduction of materials into industrial countries (20% of the materials that human possess), we can organize in this way:increase the material consumption of southern countries temporarily and then reduce it in the material flow reduction plan. Maybe this is a reasonable hypothesis of developing policy. Breek: How large the world needed by human 1994

Different requirements for dematerialization

100% 80%
The world

To 2020,decrease 20%

Developed countries To 2050,decrease 50%

50% 40% Developing countries 20% 10% 2000 China 2020 2050 2100 To 2100,decrease 90%

Human Development and Eco-footprint

Low-median HDI (under 0.8) High HDI (above 0.8)

Low EF (under1.8 hectares)

Survival or less Sufficiency or developed (level A) Sustainable development (level C) High EF( above Overshot (Level 1.8 hectares) B)

China: low HDI with low Eco-footprint

Basic Needs for survival and Decent Life

1.3 Scenario#3: Relative decoupling of Chinas development and environment

Growth of economy Decoupling Factor
1

Growth of resource use

Relative decoupling
Growth of environmental pressure
Time

Decrease of resource use

Absolute decoupling
Decrease of environmental pressure

Three stages of Chinas development

Well-being

Resource throughput

2000

2020

2050

Target of China development in terms of three pillars

Chinas developing phase General well-off 1978-2000 Economic growth $800 per capita Social development Human development index 0.7 Environment impact Eco-footprint s rapidly increasing

Entire Well-off

2001-2020

$3000 per capita

Human development index 0.8 Human development index 0.9

Eco-footprints slowly increasing Keep the world average level

General 2021-2050 modernizati on

$10000 Per capita

2.WhatTowards a multi cycled economy

resource

Economic performance on the base of ecological economics

EP= Service/Throughput = Service/StockStock/Throughput Here are three guiding principles

Maximum of service (well-being); Minimum of resource (throughput); Sufficiency of stock (accumulation). To raise productivity efficiency ( Stock/Throughput ) To raise service efficiency ( Service/Stock)

To two efficiency of development

To increase resource productivity

One of the key issue of CE is for China to raise resource productivity. That is to decrease the resource consumption and pollution impacts while to increase the economic output

Economic output

RP

= Resource throughput

To get more service with appropriate consumption

Circular Economy

Level A

Level C

Level B

2.1 Explanation#1: Linear economy or fromcradle-to-grave economy

Raw materials

Basic Chemicals

Products

POS

(EOP)

Use of products

Waste Disposal

From vertical to horizontal improvement

From linear thinking to circular or multicycle thinking

2.2 Explanation#2: Three kinds of circulating

Eco-efficiency Service economy Reuse of goods
Jump #3

Recycling of wastes
Jump #2

End of pipe treatment Jump #1 1980s 1960s

time 1990s 2000s

Level #1from end-pipe treatment to waste recycling

Recyclin g of wastes

Clothes from recycled material

Level #2from throwaway of products to reusing

Product manufacture resource materials Loop 1 Loop 2 waste Loop 1to close the loop of goods (reusing of products) Loop 2to close the loop of materials recycling of waste product use

Level#3: from selling product to providing service

Circular economy emphasizes on value add-on

Low value Value add-on Substance transform

High-value

material

product

Linear economy emphasizes on substance production

Service instead products

Customer needs helps Electrolux clean clothes without dirtying the environment

Yesterday

Customer Buys: A Washing Machine

Tomorrow
Electrolux provides a laundry function with:

Customer Gets: Clean Clothes

A washing machine at home - Electricity - Service - Upgrading - Product Recycling

Public transit instead of private cars

Towards a function-oriented lifestyle

degree of ownership TOOL HIRE

LEASING/SERVICE none
use per unit time as required; product not owned by group eg public transit

rental of product per unit time as requiredeg taxi

individual
the majority of consumer Durableseg private cars

shared

specified share of time use of product owned by groupeg company bus

degree of sharing

CONSUMER GOODS

full ownership

CO-OPERATIVE

Manzini, Ezio and Francois Jegou (2003) Sustainable Everyday, Edizioni Ambiente, Milan

2.3 Explanation#3: scales of circular economy

FACTORY

ECO-INDUSTRIAL PARK

REGIONAL ECO-INDUSTRIAL NETWORK

(1)Inside level of enterprises

At the individual firm level, managers are to seek much higher efficiency through the 3Rs Principles, reduce consumption of resources and emission of pollutants and waste, reuse resources, and recycle byproducts. In this regard, we want to mention that sustainable product design or DFE (Design for environment) is important in the current Chinese CE concept.

(2)Inter level of enterprises

The second level is to optimizing resource efficiency within industrial parks and clustered or chained industries, which can be larger than the sum of improvements made by unconnected individual actors. But this level is simply not equal to the reuse of by-products within the network of firms.

(3)Regional level: integration of production and consumption

The third level is to integrate different production, consumption and its support systems in a region so the resources circulate among industries and urban systems. This level requires development of municipal or regional by-product collection, storage, processing, and distribution systems. One example is such application is resource-based planning for city and regional development.

3.HowTo enable Circular Economy

US
Stock of goods Developed

Europe
Developed Strong Strong

China
Developing Strongest Developing

Government Weak initiative Green Culture Weak

3.1 Strategy#1: leapfrog instead of follow-up

CO2 policy

Indicators for social change

System innovation
Mobility leasing

Personalized public transport

Advanced collective transport

Organized car sharing

P+R, bus lanes

Anti congestion policy Urban cars Intelligent motorways

System optimisation

Car electronics Fuel cell vehicles

System optimization versus system innovation in passenger road transport (Kemp and Rotmans, 2001)

China needs to develop his stock of goods

Entire well-off
1200

G D P
1000

10909 101

housing transportation
clothing

800

foods

600

400

200

0 1990 1992 1994 1996 1998 2000 2002

General well-off

Towards a Circular-Economy-based product service system

Product group

Strategy

Issues Packages, Solvents Household applications Cars and mobility Buildings and housing, Infrastructures and public service

Catalytic goods Reduce and recycle

Consumption goods Durable goods Reuse and remanufacture Selling performance

2012:Shanghai public rail transit network

Transport differential policies in Shanghai

Major transit mode City central Ratio of public transport to private cars Large capacity rail 3:1 network 2:1 1:1

Inner area Surface and rail transit Suburban Expressway area network

3.2 Strategy#2: Active government and governance

Institutional capital Capacity building

Government

Active government

Circular Economy Policy achievement

Voluntary participatio n

Social capital

Civil Society

Bottom-up self-organizing model BSM

Emerges from decisions by private actors motivated to exchange resources to meet goals such as cost reduction, revenue enhancement, resource access. The individual initiative to begin resource exchange faces a market test and if the exchanges are successful, more MAY follow. In the early stages there is not consciousness by participants of inclusion in an industrial ecosystem, but this can develop over time.

Evolved Kalundborg EIP in Denmark

Top-down planned model TPM

Includes a conscious effort to identify companies from different industries and locate them together so they can share resources across and among them. Conceptually, it is an attempt to design and direct a closed-loop system in a circumscribed geographic unit. Involves key stakeholders and the participation of at least one governmental or quasi-governmental agency with powers to encourage development.

Planned Guitang EIP in China

Source: Q. Zhu and R. Ct, 2004

2006-2020: CE initiatives by Government

3.3 Strategy#3: From general principles to context-based theory for developing economy

To develop a leapfrog theory on the base of ecological economics To raise the awareness and knowledge of senior levels of policy-makers

To develop a system policy for circular economy

How long could Ecological Economics replace New Classic Economics?

New classic economics

Ecological economics

1998

Ecological economics: think about the next 20 years (2008-2028)

The past 20 years: to establish guiding principles based the high income countries (version 1.0) The next 20 years: to improve and develop theory and policy based on the developing countries practice (version 2.0)

Let China become one of the world labs for Ecological Economics