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chinese import policy towards circular economy and lesson to vietnam

MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

MASTER THESIS

CHINESE IMPORT POLICY TOWARDS CIRCULAR ECONOMY AND LESSON TO
VIETNAM

Specialization: International Trade Policy and Law

PHAM THI THUY DUNG

Hanoi – 2020


MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

MASTER THESIS

CHINESE IMPORT POLICY TOWARDS CIRCULAR ECONOMY AND LESSON TO

VIETNAM

Major: Economics
Specialization: International Trade Policy and Law
Code: 8310106

Full name: Pham Thi Thuy Dung
Student ID’s number: 1806060002
Supervisor: Dr. Ly Hoang Phu

Hanoi – 2020


i

DECLARATION

I hereby declare that this master thesis is the scientific research of my own
which made on the basis of the theoretical studies, field report and under the
direction and supervision of Dr. Ly Hoang Phu. The research contents and results of
this thesis is completely honest. These data and documents for the analysis, review
and evaluation were collected from various sources which are fully listed in the
reference list.
I am fully responsible for the content of this master thesis as well as this
declaration.
Hanoi, 14 March 2020
Author

Pham Thi Thuy Dung


ii

ACKNOWLEDGEMENT
During the completion of this master thesis, I received the guidance and
valuable help from the lecturers, siblings and friends. With great respect and deep
gratitude, I would like to express sincere thanks to:
Dr. Ly Hoang Phu, who wholeheartedly helped, supported and encouraged me
from the initial to the final level of this dissertation. He provided me with
comprehensive guide from choosing the topic, outlining the thesis and editing this


research.
Professors and lecturers, who not only spread profound knowledge and
information in the fields of economy and law but generated strong motivation for
me while I was taking this course as well.
Last but not least, I would like to express my sincere thanks to my family, my
colleagues and my friends, who have always by my side encouraging, supporting,
contributing valuable ideas and giving me favorable conditions for me to complete
this scientific research.


iii

TABLE OF CONTENTS
DECLARATION ....................................................................................................... i
LIST OF FIGURES ............................................................................................... vii
LIST OF MAPS ...................................................................................................... vii
ABSTRACT ........................................................................................................... viii
INTRODUCTION .....................................................................................................1
1. Research Rationale ...............................................................................................1
2. Literature Review .................................................................................................2
3. Research objectives ...............................................................................................5
4. Research questions ................................................................................................5
5. Objects and Scope of research .............................................................................5
6. Research methodology ..........................................................................................6
7. Thesis outline .........................................................................................................6
CHAPTER 1: THEORETICAL BACKGROUND OF CIRCULAR
ECONOMY ...............................................................................................................7
1.1 Background ..........................................................................................................7
1.1.1 History................................................................................................................7
1.1.2 Definition .........................................................................................................11
1.2 Principles ............................................................................................................13
1.3 Implementation of CE at different scales .......................................................16
1.3.1 CE at micro level .............................................................................................16
1.3.2 CE at intermediate level ..................................................................................19
1.3.3 CE at macro level ............................................................................................19
1.4 Opportunities and challenges to move towards a more CE ..........................22
1.4.1 Opportunities ...................................................................................................22
1.4.2 Challenges .......................................................................................................24
1.5

Linkages between international trade and circular economy ..................25

1.5.1 Potential impacts of the circular economy transition on trade flows ...........26
1.5.2. The importance of import policies toward circular economy .......................27
1.5.3 Trade in waste and scrap ................................................................................29


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1.5.4 Trade in secondary raw materials ..................................................................31
1.5.5 Trade in second-hand goods ...........................................................................33
1.5.6 Trade in goods for refurbishment and remanufacturing ..............................33
1.5.7 International co-operation on circular economy value chain ......................34
CHAPTER 2: CHINESE IMPORT POLICY TOWARDS CIRCULAR
ECONOMY .............................................................................................................35
2.1

Overview of Circular Economy in China ...................................................35

2.1.1 CE at micro level .............................................................................................38
2.1.2 CE at intermediate level ..................................................................................38
2.1.3 CE at macro level ............................................................................................39
2.2

Introduction to Chinese importation ..........................................................40

2.2.1

Mechanism ..................................................................................................40

2.2.2

Market .........................................................................................................42

2.2.3

Legal framework .........................................................................................44

2.3. Import policy towards CE ...............................................................................50
2.3.1 Chinese operation green fence policy.............................................................53
2.3.2 Chinese waste import ban policy ....................................................................55
2.3.3 “Zero Waste” Cities Construction Pilot .........................................................56
2.4 Assessments ........................................................................................................61
2.4.1 The positive impact ..........................................................................................61
2.4.2 The negative impact ........................................................................................62
CHAPTER 3: SOME LESSONS TO VIETNAM ................................................65
3.1

Overview of CE in Vietnam .........................................................................65

3.1.1 Current status ..................................................................................................65
3.1.2 Some good practical applications ...................................................................67
3.2 Current Vietnamese import policies in transition to CE ..............................70
3.2.1 Tariff measures ...............................................................................................70
3.2.2 Non-tariff measures ........................................................................................71
3.3. Evaluation of CE adaption in Vietnam in terms of import policy .............77
3.3.1. Achievements ..................................................................................................77


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3.3.2. Existing issues ................................................................................................78
3.4. Lessons to Vietnam in terms of adapting CE ................................................83
CONCLUSION ........................................................................................................86
APPENDIX ..............................................................................................................87
Published References ..............................................................................................89
Electronics References ............................................................................................92


vi

LIST OF ABBREVIATIONS

Abbreviation

Full name

ASEAN

Association of South East Asian Nations

CE

Circular Economy

DFE

Design For Environment

EMF

Ellen MacArthur Foundation

EU

European Union

EPR

Extended Producer Responsibility

LCA

Lifetime cycle assessment

MSWM

Municipal Solid Waste Management

PP

Pollution Prevention

TUR

Toxic Use Reduction

ISO

International Organization for Standardization

IRP

International Resource Panel

NAFTA

North American Free Trade Agreement

SME

Small-and-Medium-Size Enterprise

VGCL

Vietnam General Confederation of Labor

UN

United Nations

UNIDO

United Nations Industrial Development Organization

WB

World Bank

WTO

World Trade Organization

WRAP

Waste and Resources Action Programme


vii

LIST OF TABLES
Table 1.1: Global Imports of Aluminum Scrap by Country and Year (in metric tons) ...32
Table 2.1: China’s Global Merchandise Trade: 1979-2018 ($ billions) ...................42
Table 2.2: China’s Major Merchandise Trading Partners in 2018 ...........................43
Table 2.3: Major Chinese Merchandise Imports in 2018..........................................44
Table 2.4: Import China Taxes (%)...........................................................................45
Table 3.1: Summary of Waste Management Status in the ASEAN Countries .........65
Table 3.2: Preferential import duties on various commodities .................................70
Table 3.3: Some of specific legislation for recyclable materials and products ........71

LIST OF FIGURES
Figure 1.1: The circular economy - an industrial system that is restorative by design .....9
Figure 1.2 Some of the elements of a circular economy mentioned above and others
in relation to each other .............................................................................................13
Figure 1.3: Sources of value creation for the circular economy ...............................15
Figure 1.4: Linkages between international trade and the circular economy ...........26
Figure 1.5: Plastic Waste Import Quantity (in million kilograms) ...........................30
Figure 1.6: Plastic Waste Import Value (in million US$), cumulative, 1988-2017 .30
Figure 2.1: Circular economy development in China ...............................................37
Figure 2.2 : Import processing model .......................................................................48
Figure 2.3 : Contract processing model ....................................................................49
Figure 2.4 Volume of plastic waste exported by European Union (EU-28) to China
from 2015 to 2017 (in million tons) ..........................................................................60
Figure 2.5: Imports of plastic waste by some countries between January 2016 and
November 2018 (in tons per month). ........................................................................63

LIST OF MAPS
Map 1.1: Circular economy activities around the world. ..........................................11
Map 2.1: 11 pilot “zero waste” cities in China .........................................................57


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ABSTRACT
In the last few years, the circular economy has received considerable attention
worldwide because it offers an opportunity to optimise and promote sustainable
production and consumption through new models based on continuous growth and
limitless resources. This concept has been adopted in some countries
such as Denmark, Netherlands, Scotland, Sweden, Japan, China, and Germany
while it is being considered by others including England, Austria, and Finland.
Although applications of a circular economy have been identified in many
developed countries, a few of studies exist that investigate practices in developing
countries. However, the implementation of each country may vary, with specific
priorities. This paper aims at analyzing the concept of circular economy (CE) and
some international experience of implementing CE. An in-depth exploration of
current practices in developing countries such as China would enhance the circular
economy’s significance and would help understand its wider level of
implementation. With this concern, this study provides an analysis of experiences of
China in adapting circular economy in terms of import policies. In order to analyse
the effectiveness as well as shortcoming of applying of import policy towards
circular economy of Chinese government, a critical review and analysis of the
literature was conducted. It also identified the implementation structure of the CE in
China which CE was proposed as a national strategy that developed to address
environmental issues and resource scarcity after a period of intensive economic
development. In the end, the experiences in transition to CE will be drawn in case of
Vietnam.


1

INTRODUCTION
1. Research Rationale
The fundamental need for an alternative to the traditional linear model of
growth has led to the emerging debate about circular economy (CE), described as an
economy with closed material loops. The circular economy is a new way of creating
value, and ultimately prosperity. It works by extending product lifespan through
improved design and servicing, and relocating waste from the end of the supply
chain to the beginning—in effect, using resources more efficiently by using them
over and over, not only once. It has received considerable attention worldwide
because it offers an opportunity to optimise and promote sustainable production and
consumption through new models based on continuous growth and limitless
resources. Scholars have produced rich studies in regard with the CE from its
fundamental concept to its practical implementation.
At the country and regional level, in 2008 China was among the first to adopt
a circular economy law promoting the recovery of resources from waste. In that
same year, the G8 environment ministers agreed on an action plan for the 3Rs:
reduce, reuse and recycle. Following on that, the 2015 G7 Summit Leaders’
Declaration underscored the need for “sustainable supply chains” that protect
workers and the environment.
Then, in late 2015, the European Union adopted an ambitious Circular
Economy Package, including goals for food, water and plastics reuse. “The message
is that while you are protecting the environment you can boost your economic
development and provide new growth and new jobs,” said the then European
Commissioner for Environment Janez Potočnik in support of the EU Circular
Economy Package in 2014.
Indeed, there is a strong business case to be made for a circular economy.
Nike, Google, and H&M are already implementing aspects of the circular economy
in their global business. Dutch technology company Philips refurbishes medical
quipment such as MRI systems. Chilean pump technology company Neptuno
Pumps remanufactures energy-efficient pumps from reused and recycled pump


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material, and its common practice for automotive manufacturers is to use recycled
plastics in components under the hood and for vehicles’ internal parts. Mexican
brewer Cuauhtémoc Moctezuma Heineken México and American computer
company Dell, as well as smaller companies such as Serbian rolling-element
bearing manufacturer FKL Temerin are also leaders in adopting circular economy
principles. By designing products with resource recovery in mind, they can protect
themselves from price changes in the raw-materials market by creating a more
reliable source of raw materials, as well as maintain longer-lasting relationships
with consumers by ensuring contact throughout a product’s life cycle.
It can be said that Circular economy has become one of China’s important
strategies to realize scientific development and build ecological civilization at
present. As in China circular economy was put forward as a new economic pattern,
the international community generally holds that this is an innovative move for
China’s economy to realize leap-forward development and hopes to learn more
about the theory, policy and practice relating to China’s circular economy. This
research aims at studying the import policies of Chinese government to facilitate the
transition to circular economy, which have not been investigated further until now.
From the above reasons, the author selected the topic "Chinese policy towards
circular economy and lesson to Vietnam".
2. Literature Review
The selection of published studies was performed according to several
integrated criteria: (1) chronological order (from 1990 to 2019), (2) topics of
interest (circular economy origins, principles, implementation at different scales
(micro, e.g. company or consumer level; intermediate, e.g. eco-industrial parks
level; macro, e.g. city, province, region, nation), (3) comparison to present
economic growth and alternative patterns (steady state economy), (4) problems and
challenges. The literature search was performed in all web of science databases and
Science direct, by means of keywords such as “circular economy”, “circular
economy an cleaner production”, “circular economy and eco-industrial park”,
“circular economy and zero waste”, “circular economy and international trade”,


3

“circular economy and sustainability”. In a like manner, only a small number of
published studies designer discuss CE indicators, therefore calling for additional
research. Until now, discussions on the CE have paid minimal attention to
developing economies other than China. Very few other developing countries are
included in existing macroeconomic models of the effects of shifting to a CE. This
section shall make a general assessment on several typical and prominent
researches.
Firstly, in term of circular economy concept, there are some useful research.
‘‘The circular economy: historical ground’’ (José LuÍs Cardoso, 2019) shows
historical origins of the concept of the circular economy and affirms the vitality of
the concept of the circular economy increasingly involve the business sector. In
addition, ‘‘The Circular Economy: A review of definitions, processes and impacts ’’
(Vasileios Rizos, 2017) reviews the growing literature on the circular economy with
the aim of improving our understanding of the concept as well as its various
dimensions and expected impacts. On the basis of this review, it attempts to map the
processes involved and their application in different sectors. The paper suggests that
research on the circular economy is currently fragmented across various disciplines
and there are often different perspectives and interpretations of the concept and the
related aspects that need to be assessed. This fragmentation is also evident in the
available studies that adopt different approaches in calculating the impacts, which
makes efforts at comparing the results from different sources very challenging. This
paper also suggests that there is limited information on the indirect effects on the
economy (e.g. impacts on the value chain and/or changes in consumption spending
patterns) as well as the social impacts of the circular economy transition.
Secondly, ‘‘EU circular economy and trade Improving policy coherence for
sustainable development’’ (Kettunen, M., Gionfra, S. and Monteville, M. 2019)
examines the interface between the EU circular economy, trade and sustainable
development. It identifies the expected global impacts associated with the EU’s
shift to circularity and investigates the role of trade in either incentivising or
hindering this process. Finally, the paper highlights the links between the circular


4

economy, trade and sustainable development, emphasising the need for better policy
coherence among these areas in the EU.
Thirdly, ‘‘A review on circular economy: the expected transition to a balanced
interplay of environmental and economic system’’ (Patrizia Ghisellini, 2015)
evidenced features and progresses of CE patterns in some countries and
geographical areas. Because of different development stages and country specific
constraints, European Union Japan and USA (post-industrialization stage) and
China (midindustrialization stage), the main areas and countries of CE
development, evidence unique features in circular economy patterns. In the former,
CE policies and actions are mainly identified within waste area as they emerged in
response to the increasing problem of waste management.
Forthly, to have more details on Chinese case, ‘‘Efforts for a Circular
Economy in China’’ (Zunming Zhu 2018) is a research reviewing all policies
beyond law that contribute to the development of China ‘s CE.
The research that must mentioned is ‘‘A Review of Circular Economy
Development Models in China, Germany and Japan’’ (Olabode Emmanuel
Ogunmakinde, 2019). This paper specifically identifies such policies and laws that
were used by the pioneer countries. It made several contributions to the literature
and policy and served as a guide for countries planning to introduce the concept.
Besides these above mentioned books focusing on CE, there have been some
papers specialized in CE in Vietnam, for example, ‘‘Implementing Circular
Economy: International Experience and Policy Implications for Vietnam’’ (Nguyen
Hoang Nam, Nguyen Trong Hanh, 2019) focusing on internatonal experiences on
implementing CE such as Denmark, China, Japan, Canada, EU. The study also
discusses some policy implications for Vietnam in term of CE.
‘‘An Assessment of Vietnamese Firms’ Readiness to Adopt a Circular
Economy’’by Thao Hoa Dinh and Hong Long Nguyen (2018) is carried out by the
results of the PEST analysis and the survey on the factors proving the potential of
applying circular economy in Viet Nam show that Viet Nam is ready for circular


5

economy. Some findings of this research shows that the implementation of existing
plans and actions towards developing circular economy is still inefficient and slow.
Other paper can be mentioned is ‘‘Circular Economy in Vietnam ’’ (Nguyen
Duc Quang, Nguyen Hoang Nam, 2019). The study focuses on the situation of
waste generation and waste management in Vietnam and find out that Vietnam has
not any specific terms on CE, however, the necessary of the circle the natural
resources have been emphasized in legistration documents and in may sub-models
of recycle and reuse of waste.The authors also suggested that Vietnam should be
focused on 3R policy to build a proper infrastructure before applying the circular
economy concept and frame for substainable development of the country.

3. Research objectives
The main objective of this research is to clarifying the characteristics of
Chinese import policy toward CE by analyzing the policies and its impacts.
Also, there are some personal as well as collected opinions from different
publications about lessons to Vietnam can be drawn to make adaption of CE more
effective and timely.
4. Research questions
The objectives of the research are derived from the research questions as follows:
- How have been Chinese governments conduct laws and policies towards CE?
- What are the types of import policies that Chinese government apply?
- What are the current CE policies and strategies adopted by Vietnamese
government?
- What needs to be done in order to facilitate the application of CE in Vietnam?
5. Objects and Scope of research
This research aims at studying the role of import policy in transition to CE.
Regarding the content of the research, it focuses on the real situation of CE
adaption

in

Chinese

and

Vietnamese

governments

recommendation. The scope of this thesis is as follows:

as

well

as

policy


6

As for geographical scope, the research is intended to conduct the case of two
economies: China and Vietnam.
As for time scope, the research focuses on analyzing the situation of adopting
CE in the period from 1990 to 2019, the author can draw deeper and broader results
from the analysis.
As for the general theoretical framework, the study concentrates on import
policies in relation to circular economy.
6. Research methodology
During the research process of this thesis, the author has combined different
research methods as follows:
- Theoretical research methods:
The thesis will collect legal documents, economic information through
historical research method and then classify and systematize them.
- Practical research methods:
The thesis will observe the real situation of issuing import policies of Chinese
governments toward CE and base on particular experiences from China , giving
recommendations for Vietnam by professional solution method.
7. Thesis outline
Depart from the introduction, reference document and the conclusion. This
thesis contains three chapters:
Chapter 1: “Theoretical Background of CE” provides the most essential
knowledge of CE including theories, concept, principle, implementing, and the
importance of import policy in CE
Chapter 2: “Chinese import policy towards CE” presents more detail on CE
practices applied by Chinese government as well as assessment results.
Chapter 3: “Lessons to Vietnam” presents more detail on CE practices applied
by Vietnamese government and points out some solutions.


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CHAPTER 1: THEORETICAL BACKGROUND OF CIRCULAR
ECONOMY
1.1 Background
1.1.1 History
The circular economy concept has deep-rooted origins and cannot be traced
back to one period or author. Its practical applications to modern economic systems
and industrial processes have gained momentum since the late 1970s, led by a small
number of academics, thought-leaders and businesses.
The generic concept has been refined and developed by the following schools
of thought:
Regenerative design
In the US, John T. Lyle started developing ideas on regenerative design that
could be applied to all systems, i.e., beyond agriculture, for which the concept of
regeneration had already been formulated earlier. Arguably, he laid the foundations
of the circular economy framework, which notably developed and gained notoriety
thanks to McDonough (who had studied with Lyle), Braungart and Stahel. Today,
the Lyle Center for Regenerative Studies offers courses on the subject.
Performance economy
Walter Stahel, architect and economist, sketched in his 1976 research report to
the European Commission the Potential for Substituting Manpower for Energy, coauthored with GenevieveReday, the vision of an economy in loops (or circular
economy) and its impact on job creation, economic competitiveness, resource
savings, and waste prevention. Along with the expression “Cradle to Cradle” in the
late 1970s, Stahel worked at developing a “closedloop” approach to production
processes and created the Product Life Institute in Geneva more than 25 years ago.
It pursues four main goals: product-life extension, long-life goods, reconditioning
activities, and waste prevention. It also implied on the importance of selling
services rather than products, an idea referred to as the ‘functional service
economy’, now more widely subsumed into the notion of ‘performance economy’.
Stahel argues that the circular economy should be considered a framework: as a


8

generic notion, the circular economy draws on several more specific approaches
that gravitate around a set of basic principles.
Cradle to Cradle
German chemist and visionary Michael Braungart work to develop, together
with American architect Bill McDonough, the Cradle to Cradle™ concept and
certification process. This design philosophy considers all material involved in
industrial and commercial processes to be nutrients, of which there are two main
categories: technical and biological. The Cradle to Cradle framework focuses on
design for effectiveness in terms of products with positive impact and reducing the
negative impacts of commerce through efficiency.
Cradle to Cradle design perceives the safe and productive processes of
nature’s ‘biological metabolism’ as a model for developing a ‘technical
metabolism’ flow of industrial materials. Product components can be designed for
continuous recovery and reutilization as biological and technical nutrients within
these metabolisms. The objectives are:
Eliminating the concept of waste as “Waste equals food”. This is essential to
design products and materials with life cycles that are safe for human health and the
environment. As a result, they can be reused perpetually through biological and
technical metabolisms. In addition, they can create and participate in systems to
collect and recover the value of these materials following their use.
Powering with renewable energy. Using current solar income is set priority.
It means that the use of renewable energy is maximized.
Respecting human & natural systems. It means that diversity of human and
natural resources play an important role in circular system. Therefore, water is
managed use to maximize quality, promote healthy ecosystems and respect local
impacts. Guide operations and stakeholder relationships using social responsibility.


9

Figure 1.1: The circular economy - an industrial system that is restorative by
design
Source: Ellen MacArthur Foundation circular economy team drawing from
Braungart & McDonough and Cradle to Cradle (C2C)
Industrial Ecology
Industrial ecology is the study of material and energy flows through industrial
system. Focusing on connections between operators within the ‘industrial
ecosystem’, this approach aims at creating closed-loop processes in which waste
serves as an input, thus eliminating the notion of an undesirable by-product.
Industrial ecology adopts a systemic point of view, designing production processes
in accordance with local ecological constraints while looking at their global impact
from the outset, and attempting to shape them so they perform as close to living
systems as possible. This framework is sometimes referred to as the ‘science of
sustainability’, given its interdisciplinary nature, and its principles can also be
applied in the services sector. With an emphasis on natural capital restoration,
industrial ecology also focuses on social well- being.
Bio mimicry
Janine Benuys, author of Biomimicry: Innovation Inspired by Nature, defines
her approach as ‘a new discipline that studies nature, best ideas and then imitates


10

these designs and processes to solve human problems’. Studying a leaf to invent a
better solar cell is an example. She thinks of it as ‘innovation inspired by nature’.
Biomimicry relies on three key principles:
• Nature as model: Study nature’s models and emulate these forms, process,
systems, and strategies to solve human problems.
• Nature as measure: Use an ecological standard to judge the sustainability of
our innovations.
• Nature as mentor: View and value nature not based on what we can extract
from the natural world, but what we can learn from it.
Blue Economy
Initiated by former E cover CEO and Belgian businessman Gunter Pauli, the
Blue Economy is an open-source movement bringing together concrete case studies,
initially compiled in an eponymous report handed over to the Club of Rome. As the
official manifesto states, ‘using there sources available in cascading systems, the
waste of one product becomes the input to create a new cash flow’. Based on 21
founding principles, the Blue Economy insists on solutions being determined by
their local environment and physical/ecological characteristics, putting the emphasis
on gravity as the primary source of energy. The report, which doubles up as the
movement’s manifesto, describes ‘100 innovations that can create 100 million jobs
within the next 10 years’, and provides many examples of winning South-South
collaborative projects—another original feature of this approach intent on
promoting its hands-on focus.
Walter Stahel, architect and industrial analyst, sketched in his 1976 research
report to the European Commission 'The Potential for Substituting Manpower for
Energy', co-authored with Genevieve Reday, the vision of an economy in loops (or
circular economy) and its impact on job creation, economic competitiveness,
resource savings, and waste prevention. Credited with having coined the expression
“Cradle to Cradle” in the late 1970s, Stahel worked at developing a “closed loop”
approach to production processes and created the Product Life Institute in Geneva
more than 25 years ago. It pursues four main goals: product-life extension, long-life


11

goods, reconditioning activities, and waste prevention. It also insists on the
importance of selling services rather than products, an idea referred to as the
‘functional service economy’, now more widely subsumed into the notion of
‘performance economy’. Stahel argues that the circular economy should be
considered a framework: as a generic notion, the circular economy draws on several
more specific approaches that gravitate around a set of basic principles.
Map 1.1: Circular economy activities around the world.

Source: The Royal Institute of International Affairs Chatham House
1.1.2 Definition
According to Kirchherr, Reike & Hekkert 2017, more than 100 different
definitions of circular economy are used in scientific literature and professional
journals. There are so many different definitions in use, because the concept is
applied by a diverse group of researchers and professionals. Definitions often focus
on the use of raw materials or on system change. Definitions that focus on resource
use often follow the 3-R approach: Reduce (minimum use of raw materials); Reuse
(maximum reuse of products and components); Recycle (high quality reuse of raw
materials).


12

According to Korhonen, Nuur, Feldmann & Birkie (2018), definitions that
focus on system change often emphasize three elements, which are further
explained as:
Closed cycles: In this system, it is therefore not only important that
materials are recycled properly, but also that products, components and raw
materials remain of high quality in these cycles.
Renewable energy: The circular economic system is fed by renewable
energy sources. Because it is not possible to recycle energy, there is no mention of
energy cycles or energy cycles, but of ‘cascade type energy flows’ (Ellen
MacArthur Foundation, 2015)
Systems thinking: The circular economy does not only require closed
material cycles and renewable energy, but also systems thinking. Every actor in the
economy (company, person, and organism) is connected to other actors.
The World Economic Forum’s Definition Of Circular Economy has the
definition of CE as “A circular economy is an industrial system that is restorative or
regenerative by intention and design. It replaces the end-of-life concept with
restoration, shifts towards the use of renewable energy, eliminates the use of toxic
chemicals, which impair reuse and return to the biosphere, and aims for the
elimination of waste through the superior design of materials, products, systems and
business models. ”
Ellen McArthur Foundation defines Circular Economy as “Looking beyond
the current take-make-dispose extractive industrial model, a circular economy aims
to redefine growth, focusing on positive society-wide benefits. It entails gradually
decoupling economic activity from the consumption of finite resources and
designing waste out of the system. Underpinned by a transition to renewable energy
sources, the circular model builds economic, natural, and social capital. It is based
on three principles: design out waste and pollution; keep products and materials in
use; regenerate natural systems.”


13

Figure 1.2 Some of the elements of a circular economy mentioned above and
others in relation to each other
Source: PBL, 2019
1.2 Principles
Circular economy is based on a few simple principles as follows:
First, at its core, a circular economy aims to design out waste. Waste does not
exist: products are designed and optimized for a cycle of disassembly and reuse.
These tight component and product cycles define the circular economy and set it
apart from disposal and even recycling, where large amounts of embedded energy
and labour are lost.
Secondly, circularity introduces a strict differentiation between consumable
and durable components of a product. Unlike today, consumables in the circular
economy are largely made of biological ingredients or ‘nutrients’ that are at least
non-toxic and possibly even beneficial, and can safely be returned to the biosphere,
either directly or in a cascade of consecutive uses. Durables such as engines or
computers, on the other hand, are made of technical nutrients unsuitable for the


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biosphere, such as metals and most plastics. These are designed from the start for
reuse, and products subject to rapid technological advance are designed for upgrade.
Thirdly, the energy required to fuel this cycle should be renewable by nature,
again to decrease resource dependence and increase systems resilience (to oil
shocks, for example)
In addition, according to the research of Ellen MacArthur Foundation, there
are four principles:
A true circular economy is zero waste. Nothing is thrown away, because
waste is designed out by making things for repair, disassembly and reuse.
There are two types of industrial ‘ingredients’: disposable and durable.
Disposable ingredients are those that can biodegrade, such as paper or fabric.
Second, there are ‘technical’ ingredients like metal or plastic that can be reused.
Things must be one or the other so that everything can be either reused or put back
into nature. More complex objects should be designed to be dismantled so that they
can be sorted into those two categories at the end of their lives.
If this industrial cycle is to be sustainable, then the energy that powers it
needs to be entirely renewable. This also reduces businesses exposure to resource
depletion or supply shocks.
Customers are no longer consumers, but users. This means that companies
will want the materials back when you’re done with them. That could mean an
incentive to return things at the end of their useful life, or it could mean more
leasing, renting and sharing.


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Figure 1.3: Sources of value creation for the circular economy
Source: Ellen MacArthur Foundation circular economy team
The power of the inner circle refers to minimizing comparative materials use
vis-à-vis the linear production system. The tighter the circle, i.e. the less a product
has to be changed in reuse, refurbishment and remanufacturing and the faster it
returns to use, the higher the potential savings on the shares of material, labour,
energy and capital still embedded in the product, and the associated externalities
(such as greenhouse gas (GHG) emissions, water and toxicity).
The power of circling longer refers to maximizing the number of consecutive
cycles (be it repair, reuse, or full remanufacturing) and/or the time in each cycle.
Each prolonged cycle avoids the material, energy and labour of creating a new
product or component.
The power of cascaded use refers to diversifying reuse across the value chain
where cotton clothing is reused first as second-hand apparel, then crosses to the
furniture industry as fiber-fill in upholstery, and the fiber-fill is later reused in stone
wool insulation for construction-substituting for an inflow of virgin materials into
the economy in each case-before the cotton fibers are safely returned to the
biosphere.


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