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trade and the transition towards circular economy a research on current global practices and recommendations for vietnam

MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

MASTER THESIS

TRADE AND THE TRANSITION TOWARDS
CIRCULAR ECONOMY:
A RESEARCH ON CURRENT GLOBAL PRACTICES
AND RECOMMENDATIONS FOR VIETNAM

Specialization: International Trade Policy and Law

NGUYEN THI HANG

Hanoi – 2020


MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

MASTER THESIS


TRADE AND THE TRANSITION TOWARDS
CIRCULAR ECONOMY:
A RESEARCH ON CURRENT GLOBAL PRACTICES
AND RECOMMENDATIONS FOR VIETNAM

Specialization: International Trade Policy and Law
Code: 8310106

Student: Nguyen Thi Hang
Supervisor: Dr. Vu Kim Ngan

Hanoi – 2020


i
STATEMENT OF ORIGINAL AUTHORSHIP
I, Nguyen Thi Hang, hereby declare that this Master's Thesis has been written
solely by the undersigned under the guidance of my supervisor, Dr. Vu Kim Ngan,
Foreign Trade University, Hanoi, Vietnam. The contents and results of this research
are completely honest. The information, data and documents which are collected
from various sources for analysis and evaluation have been fully cited in the main
content and in the references list of this master thesis as well.
I also state that said Master's Thesis has not been submitted elsewhere for the
fulfilment of any other qualification.
I make this statement in full knowledge of and understanding that, should it be
found to be false, I will not receive a grade and may face disciplinary proceedings.

Student
Nguyen Thi Hang


ii
ACKOWLEDGEMENT
In order to complete this master thesis, I have been received enthusiastic
guidance and support from my lectures, family, my friends and experts in the field.
From the bottom of my heart, I would like to express my thanks to them.
Firstly, I would like to express the sincerest thanks to my supervisor, Dr. Vu
Kim Ngan who has supported, guided and encouraged me during the completion of
this master thesis from choosing the topic, outlining the main ideas, turning those


ideas into this thesis to editing this paper. Without her enthusiastic and excellent
guidance and support, I could not have completed this master thesis.
Also, I would like to express my special thanks to all lecturers of the Master of
International Policy and Law program, Foreign Trade University as well as World
Trade Institute who gave me the chance to broaden my humble horizon in the field of
trade policy and law, especially Professor Claudio Dordi, who was also my former
supervisor at the European Trade Policy and Investment Support Project (EU –
MUTRAP), for the valuable knowledge and experiences that he’s shared with me.
Last but not least, I would like to express my warm thanks to my precious
family, my colleagues and my dear friends who never stop supporting, encouraging
and giving me the favorable conditions for my master journey.
Especially, I would like to dedicate this Master thesis to my beloved
Grandfather, who was once a brave soldier on the Dien Bien Phu battlefield, who
raised me and was my role model of hardworking spirit, positive attitude and
morality. I might not become who I am today without him. I am typing these lines in
tears of grief right after his funeral. I regret that I could not manage to let him see his
grandchild graduate before he left for the other side. Now my grandfather has long
gone, I truly hope he is still there beside me and knows that I miss him so much.
I love you, Grandpa!


iii
TABLE OF CONTENTS
STATEMENT OF ORIGINAL AUTHORSHIP ................................................... i
ACKOWLEDGEMENT .......................................................................................... ii
LIST OF ABBREVIATIONS...................................................................................v
LIST OF FIGURES AND TABLES ..................................................................... vii
ABSTRACT ........................................................................................................... viii
INTRODUCTION .....................................................................................................1
CHAPTER 1: OVERVIEW AND THE SIGNIFICANCE OF CIRCULAR
ECONOMY ...............................................................................................................9
1.1. The need to promote circular economy ........................................................9
1.1.1. Linear economy: the issue of resources efficiency & environmental
pollution...............................................................................................................9
1.1.2. The promotion of Circular Economy .....................................................13
1.2. The impact of circular economy on trade flows ........................................19
CHAPTER

2:

OVERVIEW

OF

GLOBAL

CIRCULAR

ECONOMY

PRACTICES AND TRADE ...................................................................................25
2.1. Overview of global circular economy practices .........................................25
2.1.1. WTO rules, domestic trade policies and circular economy ...................25
2.1.2. Restrictive trade measures and circular economy .................................28
2.1.3. Circular economy initiatives in some countries ....................................30
2.2. Circular economy practices in China .......................................................33
2.3. Circular economy practices in the EU ........................................................37
2.3.1. Circular economy policy .........................................................................38
2.3.2. The EU’s trade policies in relation to circular economy ......................40
2.3.3. The EU’s implementation of CE Action Plan .......................................46
2.4. Implications for Vietnam as a trade partner of the EU ............................47
2.4.1. The EU – Vietnam Trade Relation ........................................................47
2.4.2. The EU’s transition towards circular economy and implications for
Vietnam .............................................................................................................48
CHAPTER 3: TRADE AND CIRCULAR ECONOMY IN VIETNAM: LAWS,
REGULATIONS AND PRACTICES ...................................................................51


iv
3.1. Legal framework for the circular economy ...............................................51
3.1.1. International commitments related to circular economy ......................51
3.1.2. Domestic legal framework as a platform for circular economy
development .......................................................................................................53
3.2. Circular economy-based practices in Vietnam ..........................................55
3.3. Vietnam in the supply chain of the global circular economy ...................59
3.3.1. Global recycling industry........................................................................59
3.3.2. Vietnam’s trade in the transition towards circular economy ................63
CHAPTER 4:

RECOMMENDATIONS TO DEVELOP CIRCULAR

ECONOMY IN VIETNAM ....................................................................................73
4.1. Future prospect and the need to develop circular economy in Vietnam 73
4.2. Evaluation of the feasibility to develop circular economy in Vietnam ....74
4.2.1. Advantages of Vietnam in developing circular economy ......................74
4.2.2. Challenges for Vietnam’s transition towards circular economy ..........75
4.3. Recommendations for Vietnam to develop circular economy .................78
4.3.1. Development of a legal framework for circular economy .....................78
4.3.2. Initiatives for enterprises ........................................................................80
4.3.3. International cooperation for circular economy ...................................81
CONCLUSION ........................................................................................................87
LIST OF REFERENCES .......................................................................................88
ANNEX 1: LIST OF SCRAPS ALLOWED TO BE IMPORTED FOR
PRODUCTION MATERIALS ................................................................................ i
ANNEX 2: LIST OF WASTES SUBJECT TO TEMPORARY SUSPENSION
FROM TEMPORARY IMPORT, RE-EXPORT OR MERCHANTING
BUSINESS ............................................................................................................... iv
ANNEX 3: SUMMARY OF KEY LEGISLATION AND POLICIES
RELATED TO CIRCULAR ECONOMY IN VIETNAM ................................. vii
ANNEX 4: ALL 54 ACTIONS PLANS INCLUDED IN THE EU CIRCULAR
ECONOMY ACTION PLAN (2015) ..................................................................... ix


v
LIST OF ABBREVIATIONS
Abbreviation

Full version

AEC

ASEAN Economic Community

AfDB

African Development Bank

ASEAN

Association of Southeast Asian Nations

CE

Circular economy

CIEM

Central Institute of Economic Management

COP

Conference of the Parties

CPTPP

Comprehensive and Progressive Agreement for Trans-Pacific
Partnership

CTE

Committee on Trade and Environment

EBRD

European Bank for Reconstruction and Development

EEU

Eurasian Economic Union

EGS

Environment Goods and Services

EIB

European Investment Bank

EPR

Extended Producer Responsibility

EU

European Union

EVFTA

EU-Vietnam Free Trade Agreement

FTA

Free Trade Agreement

G7

Group of Seven

GATT

General Agreement on Tariffs and Trade

GDP

Gross Domestic Product

GFN

Global Footprint Network

HS

Harmonized System

IEEP

Institute for European Environmental Policy

MFN

Most Favored Nation

NDCs

Nationally Determined Contributions

NT

National Treatment

OECD

The Organization for Economic Cooperation and Development


vi
RCEP

The Regional Comprehensive Economic Partnership

SCM Agreement

The Agreement on Subsidies and Countervailing Measures

SDGs

Sustainable Development Goals

SIA

Sustainability Impact Assessment

SMEs

Small- and Medium-sized Enterprises

SPS Agreement

The Agreement on Sanitary and Phytosanitary Measures

TBT Agreement

The Agreement on Technical Barriers to Trade

TTIP

Transatlantic Trade and Investment Partnership

UK

The United Kingdom

UN

United Nations

UNCTAD

The United Nations Conference on Trade and Development

UNIDO

The United Nations Industrial Development Organization

VBCSD

Vietnam Business Council for Sustainable Development

VCCE

Vietnam Centre for Circular Economy

VCCI

Vietnam Chamber of Commerce and Industry

VRP

Vietnam Recycling Platform

WCO

World Customs Organization

WSR

Waste Shipment Regulation

WTO

World Trade Organization


vii
LIST OF FIGURES AND TABLES
FIGURES
Figure 1.1: Linear economy model ...........................................................................10
Figure 1.2: Principle of circular economy: Making things last ................................11
Figure 1.3: Circular Economy to tackle the overlooked emissions ..........................12
Figure 1.4: The circular economy – an industrial system that is restorative by
design ........................................................................................................................15
Figure 1.5: Opportunities for trade in waste and secondary materials .....................24
Figure 2.1.The evolution of circular economy policy in China ................................35
Figure 2.2 Circular Economy development in China ...............................................37
Figure 3.1: Global waste traded internationally, by value and weight .....................59
Figure 3.2: Major exporters of plastics waste to China in 2016 ...............................60
Figure 3.3: Imports of plastic scraps coming to Vietnam (in tons) showing the top
10 export partners ......................................................................................................65

TABLES
Table 1.1: Impact of circular economy on trade flows .............................................20
Table 2.1: Resource Efficiency & Circular Economy National Policy/Strategy ......32
Table 2.2. Circular Economy Package 2015: Proposed amendments to four waste
management legal acts of the EU ..............................................................................38
Table 2.3: The EU’s Circular Economy Actions and their trade implications .........49
Table 3.1. Non-profit alliances/initiatives with the concept of circular economy ....57
Table 3.2: List of Vietnam’s regulatory documents for trade in waste and scraps as
recyclable materials for production ...........................................................................67
Table 3.3: Used goods, waste and scrap banned from import to Vietnam ...............69
Table 3.4: List of scrap temporarily suspended from import into Vietnam..............70


viii
ABSTRACT
As a new approach in the way resources are treated, circular economy is
gaining attention worldwide for being the solution for the conflict between
economic development and environment protection. Research has shown that the
transition towards circular economy at both domestic and global level has close
linkage to international trade, i.e. the trade in second-hand goods, end-of-life
products, secondary materials and waste. The trade flows of such circular goods
and relevant services should be facilitated for the world to reach a global circular
economy.
This study aims to determine whether that ideal circular trade is facing any
restrictions and the research results indicate that these trade flows are indeed being
blocked by some barriers namely import bans (e.g. China’s National Sword Policy
& Basel Convention) by “waste” importing countries including Vietnam. Based on
a review of the literature on theories of circular economy and trade policy, it is
revealed that such barriers are resulted from the lack of international cooperation for
agreed common standards and regulations. Legal review also presents with
Vietnam’s existing laws regulating trade in waste and scrap and the restrictions in
place. On that basis, it is recommended that Vietnam should promote its domestic
circular economy, then engage in collaboration through dialogues, trade
agreements, and missions to lift unnecessary trade barriers to circular goods &
services, and participate in the development of a harmonized system of standards.
Further research is needed to identify how circular economy could be integrated
into trade policy and trade agreements.


1
INTRODUCTION
1. Research rationale
As a matter of fact, the excessive exploitation and consumption of the earth’s
limited natural resources plus poor waste management and treatment are shown to
lead human beings to the exhaustion of resources and serious environmental
pollution. Notably, signs of climate change which is originated from human
activities have become more and more obvious as “global warming reaches above 1
degree Celsius above preindustrial level”1. Understanding the global challenges,
countries are now trying to settle the problems. 17 UN Sustainable Development
Goals (SDGs) by 2030 and the Paris Climate Agreement are among those efforts to
“save” humanity from disasters. Circular economy – a new economic model – was
later introduced and now has gained much attention globally for its promising
potential in achieving sustainability as set forth in the Paris Agreement and SDGs.
Circular economy could be simply understood as "where the value of
products, materials and resources is maintained in the economy for as long as
possible, and the generation of waste minimized”2, which seeks to combat pollution
and achieve sustainable development. Leading the movement towards circular
economy is the EU, its member states, China, etc. who have started their efforts for
years with the implementation of national action plans, strategies, and promulgation
of relevant laws, etc. Vietnam, among the most vulnerable countries to the negative
impacts of climate change3, has also recently made its first baby steps in the circular
economy shift by, among others, organizing workshops to educate and promote
circular economy to relevant entities including policy making bodies and
enterprises.

1

UN report, 2018
Material Economics (2018): The Circular Economy: A powerful force for climate mitigation; Arno Behrens
(2016): Time to connect dots: What is the link between climate change policy and the circular economy?,
CEPS Policy Brief, Nr. 337.
3
IPPC (2019), Global Warming of 1.5 oC. Available at:
https://www.ipcc.ch/site/assets/uploads/sites/2/2019/06/SR15_Full_Report_High_Res.pdf
2


2
It is reported by Ellen MacArthur Foundation and UNCTAD in 2016 that
circular economy can have massive impact on nations, on giant economies such as
India and China as examples, the report estimates that India, by adopting circular
principles, could create approximately $624 billion in additional economic value,
44% reduction in greenhouse gas emissions, and a 38% reduction in the use of
virgin materials all by 20504. Similarly, circular economy in China could reduce
emissions of fine particulate matter by 50%, emissions of greenhouse gases by 23%,
and traffic congestion by 47% - all by 20405.
However, the Circularity Gap Report 20196 finds that only 9% of the global
economy is circular, which means, only an annual rate of 9% of total weight of
minerals, fossil fuels, metals, and biomass that enter the economy are re-used,
implying a huge room for the transition from the linear “take-make-waste“
economy to a circular economy.
From a trade perspective, the transition requires comprehensive efforts of
different sectors and actors of the economies, including trade sector. It is argued in
the most recent relevant working paper of OECD that “the transition towards a
more resource efficient and circular economy has broad linkages with
international trade through the emergence of global value chains as well as trade
in second-hand goods, end-of-life products, secondary materials and waste“7.
Indeed, in a circular economy “materials can be recycled and are injected back into
the economy as new raw materials.... These “secondary raw materials“ can be
traded and shipped just like primary raw materials“8. According to modern trade
theory, these materials and products should flow into countries of relevant
competitive advantages (i.e. in waste sorting or recycling). Therefore, in order to
promote global circular economy, it is apparently essential to facilitate the crossborder circulation of recyclable waste as inputs and recycled products as outputs of
4

https://www.ellenmacarthurfoundation.org/publications/india#buypubs-anchor
https://www.weforum.org/agenda/2019/01/the-circular-economy-turns-waste-into-gold-so-lets-get-on-withit/
6
https://docs.wixstatic.com/ugd/ad6e59_ba1e4d16c64f44fa94fbd8708eae8e34.pdf
7
OECD, 2018
8
European Commission, 2015
5


3
the circular economy. However, the other “competitive advantages“ of countries
namely low labor costs and lax environmental enforcement are being taken
advantage of, evidenced by the statistics that import of waste are concentrated in a
small number of countries.9 To control these huge inflows of waste, countries like
China and Vietnam start imposing waste and scrap import restrictions in the course
of environment and human health protection. In this spectrum, Vietnam, as well as
other countries, do have regulations governing the import and export of the
mentioned materials for production and recycled products.
Nevertheless, the question is whether such trade restrictions and other relevant
regulations in trade policy of countries hinder the transition towards circular
economy, and what could be done in terms of trade policy to promote circular
economy. Up to date, specialized policies and legal framework towards the
formation and development of circular economy, which is supposed to cover trade
sector, are not made available in Vietnam. As a follower in the circular economy
trend, it is necessary for Vietnam to recognize the significance of circular economy,
to learn from other countries‘ experiences to apply to its own transition; moreover,
as a part of the global supply chain, to understand its role in contributing to a global
circular economy to develop proper relevant trade policies.
2. Literature review
So far, quantitative data on the relationship between trade and circular
economy is rather limited. The number of qualitative researches on the potential
linkages between the two is not so considerable either.
Acknowledging that lack of research on the issue, OCED has published a
backbone concept paper on international trade and the transition towards an energy
efficient and circular economy in 2018, authored by Shunta Yamaguchi of the
OECD Secretariat, in order to map out potential issues to address and to guide

9

Doug Woodring (2019), Basel Convention Amendments on Plastics Could Hinder Efforts to Reduce
Pollution. Available at: https://www.linkedin.com/pulse/basel-convention-amendments-plastic-could-hinderefforts-woodring


4
further research areas to explore on the topic. The research introduces circular
economy concept and how trade can come into play; highlights the various ways in
which trade and the circular economy can potentially interact with one another i.e.
trade in waste and scrap, second-hand goods, secondary raw materials, goods for
refurbishment and remanufacturing; and proposes further work to answer the
ultimate question of how could circular economy policies and trade policies be
aligned to encourage the decoupling of resource consumption from economic
growth at the global level without creating unnecessary barriers to international
trade as well as undesirable environmental consequences.
The concept paper was then followed by a research by Preston F., Lehne J.,
and Wellesley L., in 2019 on circular economy priorities for developing countries.
The paper discussed the potential interrelation between domestic trade policies and
WTO rules and circular economy. A wide range of issues are brought to the table
for discussion namely the non-discrimination principle of the WTO which should
also be applied for circular goods and services, relevant protectionist trade
measures, product standards & classification, the integration of circular economy
into trade agreements, etc. It argued that domestic trade policies potentially provide
an important means through which national governments can encourage and
incentivize the transition towards circular economy.
The EU is one of the pioneers in the transition towards Circular Economy. The
block has even formulated a Circular Economy Action Plan to achieve the ultimate
goal. The effectiveness of the Action Plan and existing policies of the EU are then
evaluated by researchers including those of Institute for European Environmental
Policy. In their paper just published at the end of 2019, Kettunen M., Gionfra S.,
and Monteville M. examine the interface between the EU circular economy, trade
and sustainable development. The paper investigates the role of trade in either
incentivizing or hindering the process of shifting to circular economy and highlights
the need for better policy coherence among circular economy, trade and sustainable
development in the EU.


5
UNIDO (2019) has also studied this issue recently. According to the
organization, there are several trade-related barriers that hinder recycling industry
towards a circular economy. The first barrier is regulatory requirements: the
complexities and inconsistencies of the international legal and policy framework, as
well as the difference in national definitions of the materials in national legislation
and the absence of internationally agreed limits and tolerances of contaminants
create obstacles for international trade in recyclable materials. The second barrier is
import bans on recyclable materials, mostly for the purpose of protecting human
health and the environment from the negative effects of materials that are
considered hazardous. However, import bans reduce the availability of recyclable or
recycled material in a country. Last but not least, tariffs (border costs, customs
duties, etc.) and non-tariff barriers (permits, licenses, testing requirements and
emission controls) also contribute to the hindering of the cross-border movement of
recyclable materials. And to settle the issue, UNIDO recommends harmonization
of national regulations (definitions, codes and import/export requirements),
modification of import bans (for non-hazardous recyclables) and engagement
through global or regional trade agreements for the liberalization of trade in
secondary raw materials, machinery and equipment used by the recycling industry.
In Vietnam, Nguyen Hoang Nam (Institute of Strategy and Policy on Natural
Resources and Environment) appears to be the expert with most publications on
circular economy. In his researches, he and his colleagues have explained in details
the definition of circular economy, current circular economy practices, Vietnam’s
legal framework for circular economy implementation, and propose policy
recommendations for Vietnam. However, like other available researches in
Vietnam, his have not touched the trade dimension of circular economy. The
international experiences or recommendations discussed in his researches focus on
the general implementation of circular economy within the boundaries of nations
rather than at a global scale. Therefore, the role of trade has never been mentioned
in any researches of his or his Vietnamese colleagues.


6
3. Research objectives
The research aims at analyzing the new norm of “circular economy” and its
linkage to trade to provide an overall understanding of the norm and emphasize its
importance in facing global issues in general and in the sustainable development of
Vietnam in particular; conducting research on global practices of circular economy
promotion with a focus on the EU and China; studying Vietnam’s current circular
economy practices, and the status of trade in inputs and outputs of circular
economy, its domestic legal and policy framework, including trade-related
regulations and policies to evaluate the feasibility for Vietnam to develop circular
economy; and on such basis, providing general policy recommendations for
Vietnam to develop circular economy in general.
4. Research questions
• What is Circular Economy? Why it is needed? And how beneficial could it
be?
• How the transition towards circular economy takes place around the world in
general and in trade sector?
o What other countries have done? (Focus on the EU and China)
o What are the take-aways for Vietnam?
• What are the existing conditions for the formation of circular economy in
Vietnam, including but not limited to socio-economic conditions, trade in
inputs and outputs of circular economy, and legal and policy framework?
o From trade perspective, where is Vietnam in the global supply chain
of the global circular economy? (Global recycling sector)
o What are the potential enablers and barriers towards the transition to
circular economy of Vietnam?
• What are the policy recommendations for Vietnam to develop circular
economy in general and in circular trade promotion ?


7
5. Scope of research
In a circular economy, there are four main stages in the life circle of materials (as
illustrated below), starting from the processing of primary materials in production (Stage
1), consumption of final products (Stage 2) until being thrown away as waste, materials
at this stage is treated as waste (Stage 3) and then moved to the final stage (Stage 4) of
turning them into materials again (Secondary materials).
To realize that stage of “material reborn” in order to create a circular economy,
there must exist a recycling industry (at stage 4) to turn waste to resources. If recycling
industry is considered a living body, it needs recyclable waste to use as its food.
However, waste generated in the economy could be hazardous or non-hazardous; and in
practice, both hazardous and non-hazardous waste could be recyclable or non-recyclable.
These categories of waste are subject to trade regulations to be mentioned in this
research. For example, hazardous waste is regulated by the Basel Convention on the
Control of Transboundary Movements of Hazardous Wastes and Their Disposal and
recyclable waste is subject to regulations on import and export of waste and scrap for
recycling.
The focus of this research is the input recyclable waste in the final stage “from
waste to resources”, which involves its cross-border movement in the global value
chain.
Life cycle of materials in circular economy

Production

Classification of waste within this research

Primary
materials

Waste

4

1

From waste to
resources

Consumption

Hazardous

nonhazardous

2

Recyclable

Non Recyclable

3

Waste
Management


8
For this is a vast topic, the research only conducts a brief investigation of
global circular economy practices then focus further on the policies of the EU,
China and Vietnam.
6. Research methodology
This research uses an overall and comprehensive approach to collect and
summarize the recent studies, reports, articles, etc. which are related to this topic, of
which desk research for literature review and policies review plays the key role.
Methods also include comparative legal analysis to identify, compare and contrast
relevant laws and regulations in different jurisdictions and Socio-legal research
methods.
All the data and figures are obtained based on the secondary data provided by
some public organizations like the Ministry of Natural resource and Environment,
Ministry of Industry and Trade, Vietnam’s Customs, UN COMTRADE, European
Commission, etc.
7. Research structure
This research is divided into four separate parts in corresponding chapters.
Chapter 1 explains the significance of a circular economy. Chapter 2 studies global
circular economy policy practices, including trade policy practices with a focus on
the practices in the EU. Chapter 3 provides insight on circular economy in Vietnam,
its legal framework, existing circular economy practices and its trade in recyclables.
Finally, chapter 4 gives recommendations for Vietnam to develop circular economy
from trade perspective.


9
CHAPTER 1: OVERVIEW AND THE SIGNIFICANCE OF CIRCULAR
ECONOMY
1.1. The need to promote circular economy
1.1.1. Linear economy: the issue of resources efficiency & environmental
pollution
The need for resources
With a growing population of more than 7 billion people living on earth, our
need for resources also increases consequently. According to estimation by GFN
(2018), we now need 1.7 earths to meet the world’s resource needs today.10 The UN
estimates that since 1970, the world's total amount of raw materials used has tripled
and could double by 2050 without intervention. This is beyond the supply of the
Earth’s natural resources. Resource supply and resource efficiency apparently
become the challenge that we need to handle.
Waste management
Statistics in World Bank 2018 report shows that global cities in 2016
generated about 2.01 billion tons of solid waste in urban areas with at least 33% of
that being managed in an environmentally unsafe way. With population growth and
urbanization, this figure could increase by 70% to 3.40 billion tons by 2050. By
2025, the value of the global waste management industry is expected to hit USD
$530 billion, from $330.6 billion in 2017. 11
As natural resources become increasingly more expensive and difficult to
source, the solution is to keep existing products and materials in circulation for as
long as possible, extracting the maximum value from them. However, looking at the
linear economy model (Figure 3) of extraction, transformation (production),
utilization (consumption) and disposal that has been in operation for more than 150
years since the Industrial Evolution, it appears to only cause resource depletion and

10
11

https://www.footprintnetwork.org/our-work/ecological-footprint/
https://www.amcsgroup.com/newsroom/blog/global-waste-and-recycling-market/


10
waste increase rather than to be a proper solution. This traditional model has shown
its drawback of a great pressure on the environment in the context of climate
change, environmental pollution due to the poor management of waste and the
exhaustion of natural resources plus the high price of resources in general. Taking
plastic waste as an example, by 2050, it is estimated that the volume of plastic waste
discharged into the sea will be more than the total volume of fishes. 12
Figure 1.1: Linear economy model

Source: Circular Tayside website13

In order to minimize harm to the quality of life, it is necessary to have
solutions to recycle waste, use recycled materials as input materials for production
to save natural resources. The rational management and use of natural resources
with the principle of "Closing the loop" through the efficient use of renewable raw
materials and waste management by recycling to minimize value optimization has
been embedded in the theory of circular economy, where products and materials are
kept flowing in the economy for the longest. This circular economy can be achieved
by designing products with their whole life cycle in mind, allowing them to be
maintained in use for longer, then reused and refurbished to extend their lifetime,
and, when their life is deemed over, recycled to create new products from old
without the need for virgin raw materials.14

12

Ellen MacArthur Foundation, 2016, P.17
Extracted from https://circulartayside.co.uk/what-is-the-circular-economy/
14
https://circulartayside.co.uk/what-is-the-circular-economy/, accessed on Feb 8, 2019
13


11
Figure 1.2: Principle of circular economy: Making things last

Source: Circulartayside.co.uk15
The efficient use of resources can enable economic growth while also ensuring
resource security and environmental sustainability. The promotion of business
models which reduce the extraction of primary raw materials, increase the use of
secondary materials, and generate less waste is central to achieving resource
efficiency and a circular economy.16
Climate change
According to a report on countries' efforts to combat climate change published
at the UN Conference on Climate Change (COP24) in 2018, although the world has
achieved certain results through actions to prevent global warming, but the
temperature increase is still very high. With current policies, the Earth's temperature
at the end of the 21st century will increase by 3.3 degrees Celsius compared to the
pre-industrial period. The UN, meanwhile, affirms that the goal of raising 1.5
degrees Celsius - a threshold considered safe for Earth - is still possible, but requires
urgent and unprecedented levels of action.

15
16

https://circulartayside.co.uk/what-is-the-circular-economy/
https://www.teriin.org/policy-brief/g20-enable-business-models-circular-economy


12
The Circularity Gap report shows that in response to climate change,
governments' policies must focus on developing renewable energy, improving
energy efficiency and ending deforestation.17 In order to reduce pollutant emissions
and waste, economies should pursue a "circular" model and reuse products and
scraps. The Ellen MacArthur Foundation reports that today’s efforts to combat
climate change have focused mainly on the critical role of renewable energy and
energy-efficiency measures. However, meeting climate targets will also require
tackling the remaining 45% of emissions associated with the making of products. A
circular economy offers a systemic and cost-effective approach to tackling this
challenge.18 The Foundation explains that when applied to four key industrial
materials (cement, steel, plastic and aluminum) circular economy strategies could
help reduce emissions by 40% in 2050. When applied to the food system the
reduction could amount to 49% in the same year. Overall such reductions could
bring emissions from these areas 45% closer to their net-zero emission targets19.
Figure 1.3: Circular Economy to tackle the overlooked emissions

Source: Ellen McArthur Foundation, 2019

17

Circle Economy (2019), the Circularity Gap Report
Ellen MacArthur Foundation (2019), Completing the picture how the circular economy tackles climate
change. Available at:
https://www.ellenmacarthurfoundation.org/assets/downloads/Climate_Executive_Summary.pdf
19
Ibid.
18


13
In a circular economy, waste is minimized, reused and recycled. In the face of
an increasing global population and expanding cities, the world's resources are
gradually exhausted with climate change being likely to be more serious. Therefore,
many experts believe that circular economy, which focuses on reusing materials and
waste, is considered a solution that can help countries adapt and move forward in an
environmentally friendly way. The efficient use of this material could support the
realization of the key goal in the Paris Agreement on combating climate change to
keep the temperature rise not more than 2 degrees Celsius above pre-industrial
levels. Circular economy could solve the math of human need for resources, waste
management and climate change, such an approach change from linear to circular
economy is inevitable.
1.1.2. The promotion of Circular Economy
1.1.2.1.Overview of Circular Economy
1.1.2.1.1. History of circular economy
As reported in the Summary of the Second World Circular Economy Forum,
held on 22 – 24 October, 201820, the work on circular economy builds on
contemporary ideas developed by, namely, the Ellen MacArthur Foundation and
others such as Walter Stahel (performance economy), William McDonough and
Michael Braugart (cradle to-cradle design), Janine Benyus (biomimicry); and
Amory and Hunter Lovins and Paul Hawken (natural capitalism), and Gunter Pauli
(blue economy systems).
In 2018, Walker and his colleagues presented in their research that the notions
of a circularity and non-linear thinking are not new, the principle of early circular
economy strategies were initially designed to focus on waste management,
embedded in “3Rs theory: Reuse – Reduce – Recycle” but gradually evolved to
include more systematic approaches for the whole economy to include the 6Rs
(reuse, recycle, re- design, remanufacture, reduce, recover). Under current circular

20

WCEF, 2018, https://enb.iisd.org/download/pdf/sd/enbplus208num27.pdf


14
economy systems adopted by the Ellen MacArthur Foundation, products are
designed to be restorative and regenerative, where products are utilized at their
highest value. 21
In 2008, China became the pioneer in the transition towards circular economy
with its adoption of the first circular economy promotion law in the world. China
was then followed by other countries with a considerable number of both national
and multinational initiatives (See further in Section II). For example, in 2016,
Finland became the first country in the world to ever develop a national Roadmap
towards a circular economy named “Leading the Cycle – Finish Road Map to a
Circular Economy 2010 – 2025”, which was then included in the organization of the
first World Circular Economy Forum 2017.
1.1.2.1.2. Definition of circular economy
Lately, Kirchherr, Reike and Kekkert (2017) have discovered 114 different
definitions of circular economy. Their analysis’s findings indicate that circular
economy is frequently conceptualized as the combination of reduce, reuse and
recycle activities and the definitions show few explicit linkages of the circular
economy concept to sustainable development22.
Circular economy emphasizes the management and regeneration of resources
in a closed loop to avoid waste generation. Resource utilization comes in many
ways, from redesigning, reducing, repair, reuse, recycling, material sharing or
leasing. Circular economy could be simply understood as one in which products are
recycled, repaired or reused rather than thrown away, and in which waste from one
process becomes an input into other processes23. Ellen MacArthur Foundation, in
its 2012 report has defined circular economy as “an industrial system that is
restorative and regenerative by intention and design. It places the “end-of-life”
concept with restoration, shifts towards the use of renewable energy, eliminates the

21

Zhe Liu, Michelle Adams, Tony R. Walker (2018), Are exports of recyclables from developed to
developing countries waste pollution transfer or part of the global circular economy?
22
https://www.sciencedirect.com/science/article/pii/S0921344917302835. Access on 04.02.2020
23
https://logscale.fi/en/global-policy-and-funding-key-for-circular-economy/


15
use of toxic chemicals, which repair, reuse, and aims for the elimination of waste
through the superior design of materials, products, systems, and, within this,
business models”.
Figure 1.4: The circular economy – an industrial system that is restorative
by design

Source: Ellen MacArthur Foundation, Circular Economy systems diagram (Feb,
2019), www.ellenmacarthurfoundation.org. Drawing based on Braungart &
MacDonough, Cradle to Cradle (C2C)
Circular Economy now has received much attention globally and there is still
no fixed definition for circular economy. The circular economy concept has been
applied differently due to diverse cultural, social and political systems globally. 24
For instance, the CE has been implemented as the national development strategy in
24

Geng et al., 2013


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