Report of the Club of Rome 2018, Chapter 3.8: “The economy of a closed cycle requires a different logic”

Published on August 06, 2018

Report of the Club of Rome 2018, Chapter 3.8: “The economy of a closed cycle requires a different logic”

Original author: Ernst Ulrich von Weizsäcker, Anders Wijkman
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I propose to deal with the report of the “world government” themselves, and at the same time help you translate the original source.


The current economy is based on the principle of “quick turnover” - it accepts, produces and disposes. The faster we replace our gadgets, the better; and now this applies to most of the items we consume - from cheap clothes to expensive cell phones. The construction sector, constituting 30–40% of the volume of material production in society, is no exception. Here, as in the case of consumer goods, how we manage the earth’s resources is not only terribly inefficient, but it is also a generator of large volumes of waste. The rapidly increasing levels of pollution, the depletion of resources, the loss of vital ecosystems and the substantial loss of economic value with each product placed - the consequences that we have to face. Continuing this path will lead to a catastrophic situation over time.

Economic values ​​lost due to linear material flows are rarely discussed. In Europe, for example, most of the cost of raw materials is lost after one cycle of use, despite valiant recycling efforts (“ Growth within”, McKinsey 2015). Even in the best systems, not all of the materials used are reused or recycled, and those that are recycled very often cannot be used again due to poor design, pollution or lack of standards. An example is electronics. The design is such that most electronic products cannot be dismantled. Another example is high-grade steel in automobiles. It becomes so polluted during the disposal process that it is mainly used as a low-value construction steel. The same can be said about many other materials, in particular, we are talking about plastic. It is implied that most recycled materials are either incinerated, buried or used only in minor cases.

In addition, because of the threatening prospect of the effects of climate change, the current linear economic model is extremely problematic. We know that recycling and reusing materials, at least metals, will save a lot of energy - and therefore prevent pollution. The extraction and production of basic materials, such as steel, cement and aluminum, account for almost 20% of global greenhouse gas emissions. Such measures would help switch to renewable energy sources and improve the energy efficiency of production processes. However, it is also important to reduce the amount of material produced by activities such as reuse, recycling, life extension, recovery and innovation and product replacement. Considering that the demand for basic materials is expected

3.8.1 Economy needs to be transformed

Natural resources are the basis of prosperity and well-being. All of the United Nations Sustainable Development Goals (SDGs) depend on the sustainable management and use of Earth’s natural resources. This relationship was clearly outlined in the report on ground issues - Resource Efficiency: Potential and Economic Impacts - by the International Resource Commission (IRP), launched at the G7 meeting in May 2016 in Japan. The IRP report details the risks that more or less linear production systems face today. The IRP stands for radical changes in consciousness, as well as in production and consumption systems. If resources of all kinds are not used much more efficiently, we can only dream of sustainable development.

But improving resource efficiency is only a step in the right direction. Equally important will be the transition to an economy based on renewable materials, flows of solid materials and the use of taxes to balance demand. If all this does not happen, the achieved effect will quickly evaporate due to the effect of return and economic growth. Unfortunately, most political measures in the past ignored these aspects and, thus, did not lead to an absolute outcome.

Governments and enterprises must work together to develop strategies for the use of resources to avoid both resource shortages and increasingly serious problems with waste and pollution. The concept of productivity should be expanded to include natural resources. Labor productivity has increased at least 20 times since the Industrial Revolution, and the increase in resource productivity has been modest. Since 2000, it has actually decreased, if you look at it from a global point of view. What we are experiencing today is the “recultivation of resources”, and not the “outcome”, that is, the growth in demand for resources is greater than the rate of economic growth. At a time when labor is very productive, and unemployment has become a worldwide disaster, shifting efforts to the productivity of basic resources, such as energy, materials,

New business logic is required. Circular business models should replace linear ones. One of the specific tasks for the future will be to create a breakthrough for the concept of services instead of products for a wide range of consumption - such as computers, mobile phones, household appliances, cars, furniture and textiles. Even in the real estate market, the same principles can be applied.

The most important problem will be the following: how can the principle of “generating income by selling more materials” be replaced by a system in which income increasingly arises due to the quality of service products that remain?

One of the innovators of the concept, a member of the Club of Rome, Walter Stael, puts it as follows:
“Social wealth and welfare should be measured by assets instead of flows, capital instead of sales. Growth then corresponds to an increase in the quality and quantity of all stocks — natural, cultural, human, and industrial. For example, sustainable forest management increases natural capital, deforestation destroys it; extraction of phosphorus or metals from waste streams supports natural capital, but dumping it increases pollution; the modernization of buildings reduces energy consumption and improves the quality of the building material. "
From this reasoning follows another argument in favor of replacing GDP growth with indicators that give an idea of ​​quality rather than quantity.

The transition to a new business logic will require decisive political action. The cost structure in the economy is seriously flawed. Financial capital is overvalued, and social capital and natural capital are undervalued. If these shortcomings are not eliminated, the circular economy will not be realized.

Fortunately, calls for a new model of production and consumption are becoming more frequent, aided by a number of studies by the Ellen MacArthur Foundation, the EU Commission, the OECD, the World Economic Forum and the Club of Rome. In the EU, the legislative “Circular Economy Proposal” was submitted in December 2015 and is currently being considered and discussed by the governments of the member states and the European Parliament.

Studies by the Ellen MacArthur Foundation, the EU Commission and the Club of Rome highlighted the fact that the transition to a circular economy — the use and reuse of materials, rather than just use — will bring many benefits. The proposal is that the circular economy, in which products are designed to simplify processing, reuse, disassembly and recovery - where products and their properties are used much more efficiently, for example, through leasing and sharing, you should replace the traditional linear model “take, produce and dispose of ", which until now dominated the economy.

Savings that promote reuse and recycling of materials, as well as extending the life of a product, are by definition more laborious than savings based on a disposal philosophy, that is, on linear resource flows. Taking care of what has already been done will lead to the creation of more jobs than mining and manufacturing, which often take place at automated and robotic facilities.

3.8.2 Social benefits of the transition to a circular economy

A Swedish case study conducted in 2015 shows that a transition to a circular economy will greatly contribute to increasing economic competitiveness, increasing jobs and reducing carbon emissions. Subsequent reports covering seven more European countries (Finland, France, the Netherlands, Norway, Poland, Spain and the Czech Republic) will consider the implications of the three decoupling strategies that underlie the circular economy - increasing the share of renewable energy sources and increasing energy efficiency, as well as material efficiency. The studies use the traditional I / O simulation model and conclude that by 2030 carbon emissions can be reduced by 60-70% in all the countries reviewed if a key set of policy measures is implemented.

The report discusses a range of policy and investment options that will help promote the circular economy and the benefits for work and the climate that it will bring:

  • Eliminate deficiencies in the cost structure of the economy, allowing market prices to reflect the full cost.
  • Revise taxation - in favor of a tax shift, lower taxes on labor and higher taxes on the use of nature. (This tax shift will accelerate the transition to a circular economy, which will also help balance the threat of job losses in an increasingly digitized economy).
  • Strengthen recycling and reuse targets to help reduce and process waste and residues. Impose restrictions on incineration.
  • Strengthen existing policies to promote the use of renewable energy sources such as electricity tariffs and renewable energy certificates.
  • Introduce design requirements for new products to facilitate repair and maintenance, dismantling and countering obsolescence. Also introduce material and product standards in key sectors of the economy.
  • Use government procurement to stimulate new business models, as well as the transition from the sale of goods to the sale of services.
  • To make material efficiency a major part of climate change mitigation policies. Most climate change mitigation strategies are based on economic areas, with a focus on energy use. But the aforementioned study at the Club of Rome shows advantages in terms of significantly lower carbon dioxide emissions from longer use of products and from increased processing and reuse.
  • Launch investment, primarily in infrastructure, to support a circular economy.
  • Support innovation in low carbon solutions.
  • Free all secondary materials from VAT.

Events in the EU are crucial. No nation can close material loops by itself. At the same time, common rules at EU level will significantly advance the agenda. The problem so far (June 2017) is that the EU Commission, when launching the proposal, the CE refrained from taking any meaningful action on issues that decide whether the transition to a more circular economy, that is, a shift in the tax base, providing design requirements for new products, as well as product standards. Most of the efforts that have so far been applied are devoted to changes in waste directives. However, an increased level of recycling will have a limited effect if the vast majority of products delivered to the market not intended for efficient reuse and recycling. When products are difficult to disassemble or there are too many different material qualities - for example, in the case of plastic and most building materials, the recycled materials market will not function well. The result will be that most recycled materials will be discarded or poorly used up.

It is extremely necessary to take policy measures that will encourage companies to market products that need to be recycled or reused after their useful life has expired. In the context of the EU, the environmental design directive, which until now has been mainly focused on energy efficiency, would be well used to increase material efficiency. Taxation should also be considered a political tool.

The current tax laws do not reward companies that use a circular approach to the economy. VAT rates can be easily based on the life cycle analysis of the environmental impact of ordinary products or products with a high content of recycled materials. And last but not least, a tax shift — a reduction in taxes on labor and an increase in taxes on the use of nature — would greatly help to transform the economy, which is urgently needed.

To be continued ...

For the translation, thanks to Diana Sheremyeva. If you are interested, I invite you to join the “flashmob” to translate a 220-page report. Write in a personal or email

More translations of the report of the Club of Rome 2018


Chapter 1.1.1 “Different types of crises and feelings of helplessness”
Chapter 1.1.2: “Financing”
Chapter 1.1.3: “An Empty World Against Full Peace”

Chapter 3.1: “Regenerative Economics”
Chapter 3.3: “Blue Economy”
Chapter 3.4: “ Decentralized Energy ”
Chapter 3.5:“ Some Success Stories in Agriculture ”
Chapter 3.10:“ Tax on Bits ”
Chapter 3.11:“ Financial Sector Reforms ”
Chapter 3.12:“ Economic System Reforms ”
Chapter 3.13:“ Philanthropy, Investment, Crowdsors and Blockchains ”
Chapter 3.14: “Not a single GDP ...”
Chapter 3.15: “Collective Leadership”
Chapter 3.16: “Ch Obal Government "
Chapter 3.17:" Actions at the National Level: China and Bhutan "
Chapter 3.18: “Literacy for the Future”


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