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A circular economy of sorts


One of the tell-tale signs that it is Davos week is that the media publish a raft of techno-utopian stories about just how great the economy is going to be in future even as it collapses around our ears (stock market bubbles aside) in the present.  One such was Elizabeth Schulze’s article for CNBC, which went under the lurid headline:

“There’s a new type of economy in town — and some businesses think it could change everything.”

Well thank goodness for that, because the old Neoliberal economy that we bought into in the 1980s is clearly past its sell-by date.  So what is this new type of economy that is going to rise to the rescue?  It turns out that it is that old chestnut, the ‘circular economy’:

“Leasing a car or an apartment is part of everyday life. But what if you could also lease daily household products like a washing machine or a lightbulb?

“The circular economy aims to do just that. It’s a system designed to keep materials and resources in use for as long as possible.

“And it’s become an attractive business strategy for companies looking to extend the life of their products and achieve sustainability targets.”

The basic proposition makes sense.  If you or I buy something, the manufacturer’s interest is in building obsolescence into the design.  Apple’s one-use-only batteries, for example, oblige us to buy a new smartphone just at the time when Apple is unveiling the next ‘must-have’ version.  If, on the other hand, we got to rent our phones direct from Apple, their interest would be to design-in longevity.  More importantly from an environmental point of view, they would also have an interest in making smartphones recyclable.

There are examples of this already.  Schulze points to the deal between Philips and the UK National Union of Students:

“Rows of LED lights illuminate the office, turning on and off based on movement in the room. Instead of buying the lightbulbs, NUS signed a 15-year lease with Philips Lighting to receive light as a service…

“NUS pays Philips a quarterly fee for the light, which covers all maintenance and replacement costs over the 15-year period. Joao Pola, CEO of Philips Lighting in the UK and Ireland, said the model encourages his company to provide the most efficient light, while maintaining ownership of its resources.”

Of course a circular economy in which we design goods to last and in which materials are recycled is preferable to the ongoing destruction of the only habitable planet we know of.  But just because something is desirable doesn’t mean it is possible.  Four years ago, Defra minister for water, forestry, rural affairs and resource management, Dan Rogerson, stunned a waste management conference audience by questioning whether circularity was possible or desirable.  It is, perhaps, telling that the audience homed in on the question of desirability while ignoring all of the potential barriers to a circular economy.  Rogerson’s point, however, was that attempts at circularity would suffer diminishing returns.  As Roy Hathaway at isonomia reported:

“Pressed to explain his view, the minister argued that there comes a point of diminishing returns when the cost of trying to recover additional material for recycling would outweigh the benefits from doing so – whether in terms of energy use, CO2 emissions, other environmental damage, and/or money.”

This gets to the heart of why pure circularity is impossible – it defies the second law of thermodynamics; one of those pesky laws of physics that, unlike speed limits, cannot be broken at will.  Entropy dictates that down-cycling from superior to inferior materials is all that we can hope to achieve; and only then with an increasing amount of energy use at each turn.  And while this is still preferable to landfill or waste burning to begin with, waste (and the need for new raw materials) is inevitable.

Physics, however, is just one (all be it the most concrete) barrier to a move to a circular economy.  It is likely that the Minister had other socioeconomic barriers in mind when he questioned the desirability of a circular economy.  Linearity, remember, was a deliberate policy decision taken at the height of the Great Depression in order to maintain employment, sales and profits.  By building obsolescence into design, corporations could more or less guarantee a steady flow of new goods off the production line to replace those making their way to the municipal dump.  This kept people in work, kept shareholders happy, and made the politicians electable.

The disconnect today is that while many of us express a desire for a radical shift to some vision of a sustainable economy, few are actually prepared to accept the hardships that this will inevitably entail.  Even the (relatively small) adoption of machine learning in recent years has served to drive millions of formerly well-paid workers in the developed countries into a growing, Trump/Brexit/AfD-voting precariat (I guess being green is okay when it is someone else’s family that is thrown on the scrap heap).  Any switch to greatly extend the longevity and recyclability of goods must lead to politically explosive dislocation along the supply chains.  What would happen to the global economy, for instance, if the Chinese have to stop buying US Treasury Bonds in order to cope with economic and political turmoil following the closure/downsizing of their manufacturing base?

Beyond a few half-hearted experiments with Universal Basic Income and the suggestion of a ‘robot tax,’ it is all politicians and economists can do to put sticking plasters on the gaping wounds that have opened up in the current system.  None has even the first idea of how to mitigate the mass unemployment that would follow a concerted shift to a circular economy model.

The pachyderm sat on the sofa that techno-utopians have been studiously ignoring for more than a decade is the cause of breakdown of the the current system.  Although we can all point to such things as growing debt, stagnant wages, low productivity, etc., these are but the symptoms of the real drag on the economy – falling net energy.  We see this to some extent in energy per capita statistics, which show a sharp decline in the developed states.  We also see it in the huge increases in the cost of energy.  The simple truth, however, is that we are gradually running out of the cheap and easy fossil fuels on which the global economy was built.  As a result, we are increasingly obliged to turn to difficult and expensive substitutes like hydraulically fractured oil and gas, tar sands and ultra-deep water oil; together with low-density energy sources like wind and solar.  The more the remaining cheap and abundant fossil fuels are consumed and the more the world has to turn to a mix of expensive and low-density energy, the harder it will become to maintain the system that we built back in the days when ‘economic externalities’ like energy, resources and pollution were not seen as a problem.

The good news for fans of the circular economy is that as net energy falls, circularity is the only kind of economy that will be possible.  Quite simply, the economy will not be able to afford to pay for miners in developing states around the planet to recover minerals to send to China to be converted into the electrical goodies that our techno-utopian fantasies depend upon.  The more that process accelerates, the more we will be obliged to scavenge the materials that we already have.  The real circular economy of the future, however, is more likely to look like an episode of the 1998 Scrapheap Challenge TV show than the kind of ‘internet of things’ economy fantasised about by the billionaires and their lackeys at Davos.

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