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DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS •
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POTENTIAL FOR DENMARK AS A CIRCULAR ECONOMY
A CASE STUDY FROM: DELIVERING THE CIRCULAR
ECONOMY – A TOOLKIT FOR POLICY MAKERS
 ERU, Alm.del - 2015-16 - Bilag 93: 'Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making', fra Erhvervs- og Vækstministeriet
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
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POTENTIAL FOR DENMARK AS A CIRCULAR ECONOMY
A CASE STUDY FROM: DELIVERING THE CIRCULAR
ECONOMY – A TOOLKIT FOR POLICY MAKERS
This report presents findings from a Denmark case study,
undertaken as part of developing a methodology for circular
economy policymaking. The findings, identifying circular
economy opportunities, barriers and policy options, were first
presented in the report Delivering the circular economy – a
toolkit for policymakers by the Ellen MacArthur Foundation.
They may be of special interest to Danish stakeholders,
although this report does not recommend any specific policy
intervention to Denmark or any other country. While the
findings cannot be directly transposed to other countries, they
might serve as a source of inspiration.
DRAFT VERSION (June 12, 2015) • CONFIDENTIAL • PLEASE DO NOT DISTRIBUTE
DELIVERING
THE CIRCULAR
ECONOMY
A toolkit for policymakers
DELIVERING THE
CIRCULAR ECONOMY
A TOOLKIT
FOR POLICYMAKERS
Readers who are interested in further material around the circular economy, and the
methodology used in this case study, are encouraged to read the full toolkit report, as
well as other Ellen MacArthur Foundation publications. These can be downloaded from
the Ellen MacArthur Foundation website:
www.ellenmacarthurfoundation.org/books-and-reports
CONTENTS
List of figures
Foreword
Acknowledgements
Executive Summary
Introduction
1
2
3
4
5
6
National perspective
Food & Beverage
Construction & Real Estate
Machinery
Packaging
Hospitals
4
7
10
14
25
26
44
53
66
73
83
93
132
Appendix
About the Ellen MacArthur Foundation
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
LIST OF FIGURES
Figure A: 10 circular economy opportunities in the Denmark case study
Figur A: 10 muligheder i den cirkulære økonomi i case studiet af Danmark
Figure 1: Circularity baselining in the Denmark pilot
Figure 2: Policy landscape in the Denmark pilot
Figure 3: Results of sector prioritisation in Denmark pilot
Figure 4: The ReSOLVE framework: six action areas for businesses and
countries wanting to move towards the circular economy
Figure 5: Qualitative opportunity prioritisation of focus sectors in the Denmark pilot
Figure 6: Ten circular economy opportunities in five focus sectors
Figure 7: Illustrative status of circular economy in Denmark today and
potential by 2035
Figure 8: Short-term and long-term scenarios used in the Denmark pilot
Figure 9: Estimated potential impact of further transitioning to the circular
economy in Denmark
Figure 10: Breakdown of potential economic impact by quantified opportunity
Figure 11: Barrier matrix for the ten prioritised opportunities in Denmark
Figure 12: Main sources of food waste in global food value chain –
production and consumption
Figure 13: Examples of what remanufacturing and new business models
could look like for pumps in Denmark
Figure 14: Estimated potential adoption rates and value creation in
wind turbines and pumps in the Denmark pilot
Figure 15: Share of plastic packaging collected for recycling in Denmark
Figure 16: Share of purchased goods in Danish hospitals that could be
covered by performance models
15
20
27
29
30
32
33
34
36
35
38
40
42
50
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70
75
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Figure A1: Summary of methods and data used in the sector selection
in the Denmark pilot
Figure A2: Overview of scoring of ‘Role in national economy’ in the Denmark pilot
Figure A3: Overview of scoring of ‘Circularity potential’ in the Denmark pilot
Figure B1: Qualitative assessment of potential of opportunities for the
Construction & Real Estate sector in the Denmark pilot
Figure B2: Schematic overview of sector-specific impact quantification
Figure B3: Value capture in cascading bio-refineries
Figure B4: Reduction of avoidable food waste
Figure B5: Industrialised production and 3D printing of building modules;
reuse and high-value recycling of components and materials
Figure B6: Sharing and multi-purposing of buildings
Figure B7: Remanufacturing and new business models
Figure B8: Increased recycling of plastic packaging
Figure B9: Performance models in procurement in the hospital sector
Figure B10: Key sources for assumptions & estimates for each circular economy
opportunity
Figure B11: Pork and Dairy – Price ‘delta’ per sector and waste stream
Figure B12: Pork and Dairy – volume allocation per sector and waste stream
Figure C1: Overview of a Computable general equilibrium (CGE) model
Figure C2: Sectoral and geographical aggregates in the CGE Model
in the Denmark pilot
Figure C3: Generic structure of production functions in the CGE Model
Figure C4: Potential approaches and trade-offs for representing circularity
within a CGE framework
Figure C5: Overview of a ‘hybrid’ CGE approach
Figure C6: Data sources used in the baseline calibration and CGE modelling in the
Denmark pilot
Figure D1: Prioritisation of policy options – ‘Value capture in cascading
bio-refineries
Figure D2: Snapshot and description of the policy assessment tool
Figure D3: Worked example of the implementation of the scoring methodology.
Figure E1: Circular economy – an industrial system that is restorative and
regenerative by design
Figure E2: The economic opportunity of the circular economy
Figure E3: Estimated potential contribution of the circular economy to
economic growth, job creation and reduction of greenhouse gas emissions
95
96
97
98
100
102
103
104
105
106
107
107
108
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111
112
113
114
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116
118
120
122
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128
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
FOREWORD
FROM DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS
Flemming Besenbacher
Chairman of the Supervisory Board of Carlsberg A/S
How can we create prosperity for a growing world
population while strengthening the systems that support
us? How can we achieve continued economic development
while preserving the resource base that is fuelling this
economy? The growing interest around these questions
suggests it is time to rethink the way we operate. The
circular economy holds the promise of reconciling these seemingly opposing
objectives and creating long-term value. It is my firm belief that the ‘take-make-
waste’ economy is about to be replaced by a circular, restorative approach
where we no longer consider anything to be ‘waste’.
The circular economy is of particular interest to Carlsberg because our products
depend on well-functioning natural systems and a stable supply of raw
materials. We are working in this area through our partnership platform – the
Carlsberg Circular Community – to develop innovations and practical solutions
optimised for the circular economy.
This toolkit represents a valuable blueprint for policymakers who want to
stimulate the progression from a linear to a circular economy. It rightfully
positions the circular economy as a unique opportunity for dialogue and
collaboration between private and public entities to achieve the common
goal of long-term value creation.
I therefore encourage governments across the world to apply this toolkit and
work closely with businesses to unleash the circular economy in their country
and unlock its true potential. I also urge companies to continue to lead the
way to a more resilient operating model, decoupled from resource constraints.
Carlsberg is determined to do so.
FLEMMING BESENBACHER
JUNE 2015
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FORORD
Flemming Besenbacher
Bestyrelsesformand for Carlsberg A/S
Hvordan kan vi skabe velstand for en voksende global
befolkning, mens vi samtidig styrker de systemer, som
understøtter os? Hvordan kan vi opnå fortsat økonomisk
udvikling, mens vi samtidig bevarer de ressourcer, der
er grundlaget for vores økonomiske fremskridt? Den
voksende interesse i disse spørgsmål indikerer, at det er tid
til at tænke nye tanker om den måde, som tingene fungerer på. Den cirkulære
økonomi giver løfter om at kunne forene disse tilsyneladende modsatrettede
målsætninger og skabe værdi på langt sigt. Det er min faste overbevisning,
at det er tid til at erstatte ‘brug og smid-væk’ økonomien med en cirkulær,
genoprettende tilgang, hvor ‘affald’ som koncept ikke længere eksisterer.
Den cirkulære økonomi er af særlig interesse for Carlsberg, fordi vores
produkter er afhængige af velfungerende systemer i naturen og en stabil
forsyning af råvarer. Vi arbejder inden for dette område igennem vores
partnerskabsplatform – the Carlsberg Circular Community – for at udvikle
innovative og praktiske løsninger, der er optimeret til den cirkulære økonomi.
Dette ’toolkit’ udgør en værdifuld formular for politikere, som ønsker at
stimulere, at vi bevæger os fremad fra en lineær til en cirkulær økonomi. Det
placerer med rette den cirkulære økonomi som en unik mulighed for dialog og
samarbejde mellem private og offentlige virksomheder for at opnå et fælles mål
om at skabe værdi på langt sigt.
Jeg opfordrer derfor regeringer verden rundt til at anvende dette ’toolkit’ og
arbejde tæt sammen med erhvervslivet for at få åbnet op for mulighederne
i den cirkulære økonomi i deres lande og få låst op for det sande potentiale
heri. Jeg opfordrer også virksomhederne til at føre an frem imod en mere
modstandsdygtig model for den måde, vi gør tingene på, hvor vi ikke længere
er begrænsede af ressourcemæssige hensyn. Carlsberg er fast besluttet på at
gå denne vej.
FLEMMING BESENBACHER
JUNI 2015
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
GLOBAL PARTNERS OF THE
ELLEN MACARTHUR FOUNDATION
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DISCLAIMER
This report has been produced by a team from the Ellen MacArthur Foundation,
which takes full responsibility for the report’s contents and conclusions. While the key
contributors and contributors listed in the acknowledgements provided significant input
to the development of this report, their participation does not necessarily equate to
endorsement of the report’s contents or conclusions. The McKinsey Center for Business
and Environment provided analytical support. NERA Economic Consulting provided
support for the macroeconomic and policy analysis for this report.
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ACKNOWLEDGEMENTS
PROJECT FUNDER
ELLEN MACARTHUR FOUNDATION
PROJECT TEAM
Andrew Morlet
Chief Executive
Jocelyn Blériot
Executive Officer,
Lead, Communications and Policy
Stephanie Hubold
Lead, Gov. & Cities Programme
Rob Opsomer
Project Manager
Dr. Mats Linder
Analyst
Ian Banks
Analyst
KEY CONTRIBUTORS
DANISH BUSINESS AUTHORITY
Anders Hoffmann
Deputy Director General
Dorte Vigsø
Chief Advisor
Jes Lind Bejer
Special Advisor
Markus Bjerre
Head of Section
Stine Nynne Larsen
Special Advisor
DANISH ENVIRONMENTAL
PROTECTION AGENCY
Claus Torp
Deputy Director General
Mikkel Stenbæk Hansen
Deputy Head of Department
Lisbet Poll Hansen
Deputy Head of Department
Birgitte Kjær
Technical Advisor
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CONTRIBUTORS
3GF, DANISH MINISTRY OF FOREIGN
AFFAIRS
Eva Grambye
Special Envoy, Head of Department
AARHUS UNIVERSITY HOSPITAL
Thomas Møller
Environmental Manager
AALBORG UNIVERSITY
Lene Lange
Professor
ACCIÓ GOVERNMENT OF CATALONIA
AXIOMA SOLUCIONES
Ignacio Canal
Assistant Manager
CARLSBERG GROUP
Simon Boas
Director Corporate Communications
and CSR
CONFEDERATION OF DANISH
INDUSTRY
Karin Klitgaard
Director, Environmental Policy
Nina Leth-Espensen
Advisor
DANISH AGRICULTURE AND FOOD
COUNCIL
Mads Helleberg Dorff Christiansen
Chief Policy Advisor
DANISH CHAMBER OF COMMERCE
Jakob Zeuthen
Head of Environmental Policy
DANISH CROWN A/S
Charlotte Thy
Environmental Manager
DANISH METALWORKERS’ UNION
Rasmus Holm-Nielsen
Consultant
DANISH REGIONS
Morten Rasmussen
Team Leader Procurement and
Health Innovation
DANISH WIND INDUSTRIES
ASSOCIATION
Jacob Lau Holst
Chief Operating Officer
DC INGREDIENTS
Jens Fabricius
VP Business Development
DE FORENEDE DAMPVASKERIER A/S
Nynne Jordal Dujardin
Environmental Manager
DUTCH MINISTRY OF INFRASTRUCTURE
AND THE ENVIRONMENT
Kees Veerman
Policy Coordinator
EUROPEAN BANK FOR
RECONSTRUCTION AND
DEVELOPMENT
Dr. Nigel Jollands
Senior Policy Manager
ELLEN MACARTHUR FOUNDATION
Ella Jamsin
Research Manager
Ken Webster
Head of Innovation
ECOXPAC
Martin Pedersen
Chief Executive Officer
Michael Michelsen
Global Business Manager
Kristian Søllner
Chief Technical Officer
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GRUNDFOS
Pernille Blach Hansen
Group Vice President
Jørgen Bjelskou
Group Public Affairs Director
Anna Pattis
Lead Sustainable Product Specialist
Nils Thorup
Chief Technical Advisor
Peter Meulengracht Jensen
Environmental Project Manager
HANSEN AGENDA
Ditte Lysgaard Vind
Senior Consultant
Ida Auken
Member of the World Economic Forum
Meta-Council on the Circular Economy
2014-2016; Member of Danish Parliament
Søren Gade
Former Member of Danish Parliament,
The Liberal Party
LONDON WASTE AND RECYCLING
BOARD (LWARB)
Wayne Hubbard
Chief Operating Officer
MARKS & SPENCER
Kevin Vyse
Primary Foods Packaging Technologist &
Packaging Innovation Lead
MATACHANA GROUP
Marino Alonso
Marketing Director
NCC CONSTRUCTION
Vibeke Grupe Larsen
Senior manager, Sustainability
NOVOZYMES A/S
Anders Lyngaa Kristoffersen
Head of Public Affairs Denmark
OUROBOROS AS
Jasper Steinhausen
Business Developer & Owner
PHILIPS NORDIC
Jens Ole Pedersen
Business to Government Manager Philips
Healthcare Nordics
RAGN-SELLS
Johan Börje
Market Director
SCOTTISH GOVERNMENT
Callum Blackburn
Policy Manager – Circular Economy
SIEMENS WINDPOWER
Karin Borg
Division EHS Manager
Jonas Pagh Jensen
Division EHS Specialist
SUEZ ENVIRONMENT
Henry Saint-Bris
Senior VP Marketing & Institutional
relations
Christophe Scius
European Affairs Manager
Frederic Grivel
VP Marketing
TEKNOLOGISK INSTITUT/GENVIND
PROJECT
Mads Kogsgaard Hansen
Head of Section, Centre for Plastics
Technology
THE ECONOMIC MODEL DREAM
Dr. Peter Stephensen
Research Director
THE ROYAL SWEDISH ACADEMY OF
ENGINEERING SCIENCES
Caroline Ankarcrona
Project Manager for “Resource
efficient business models – increased
competitiveness”
UNITED FEDERATION OF DANISH
WORKERS
Jesper Lund-Larsen
Political Advisor
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UNITED NATIONS DEVELOPMENT
PROGRAMME, INFORMAL
INTERAGENCY TASK TEAM ON
SUSTAINABLE PROCUREMENT IN THE
HEALTH SECTOR (IIATT-SPHS).
Dr. Christoph Hamelmann
Coordinator
Mirjana Milic
Associate Coordinator
UNIVERSITY COLLEGE LONDON
(UCL) INSTITUTE FOR SUSTAINABLE
RESOURCES
Professor Paul Ekins OBE,
Director; Professor of Resources and
Environmental Policy
UNIVERSITY OF COPENHAGEN
Professor Peter Birch Sørensen,
Department of Economics
UNIVERSITY OF SHEFFIELD
Professor SC Lenny Koh
Director of Advanced Resource
Efficiency Centre (AREC)
VESTAS WIND SYSTEMS A/S
Klaus Rønde
Senior Manager, Management Systems &
HSE Analysis
Pia Christoffersen
HSE Specialist, QSE EMEA Region
Peter Garrett
Life Cycle Assessment Specialist,
Management Systems & HSE Analysis
WRAP
Steve Creed
Director Business Growth
PRODUCTION
Ruth Sheppard
Editor
ELLEN MACARTHUR FOUNDATION
Sarah Churchill-Slough
Design
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EXECUTIVE SUMMARY
In its research to date, the Ellen MacArthur Foundation has demonstrated that the
circular economy can be a significant value creation opportunity. As many policymakers
and regulators become interested in this promising model, they look for concrete
guidance on how to create enabling framework conditions and, as appropriate, set
direction to unlock its economic and environmental opportunities. The Ellen MacArthur
Foundation therefore developed the report Delivering the circular economy – a toolkit
for policymakers – published in June 2015 – which takes a country and policymaker
perspective, and aims at identifying circular economy opportunities, barriers, and policy
interventions to overcome these barriers. In the context of this toolkit (referred to as the
‘toolkit report’ throughout the text), an extensive case study was performed in Denmark,
which is the focus of this report.
Delivering the circular economy – a toolkit for policymakers
is the result of a
collaboration led by the Ellen MacArthur Foundation, with the Danish Business Authority
and the Danish Environmental Protection Agency as key contributors. The toolkit
report and the Denmark case study were developed in collaboration with Danish and
international stakeholders, including leading policymakers, businesses and academics.
The McKinsey Center for Business and Environment provided analytical support. NERA
Economic Consulting provided support for the macroeconomic and policy analysis
presented herein. The MAVA Foundation funded the project.
THE OPPORTUNITY FOR DENMARK
Denmark is internationally recognised for innovative initiatives in circular
economy and sustainability. Yet, the pilot study identified significant
opportunities to further the transition towards a circular economy.
Denmark has many leading companies pioneering circular economy solutions, a long
and rich tradition of innovative policies that stimulate the circular economy, as well as a
long-term strategic commitment to energy efficiency and renewable energy. Denmark
outperforms EU28 on a majority of selected resource and innovation metrics, such as
share of renewable energy or Eco-innovation index. Still, significant value is left on the
table across the economy, which could be unlocked by, e.g. improved utilisation of assets
and better use of waste or by-products as a resource. For example, one third of all waste
is incinerated for heat and power generation before extracting its full potential value as a
resource, and the materials that are looped back into the value chains are predominantly
recycled for material value instead of being used in higher-value cycles, such as reuse or
remanufacturing.
Even in a country with a starting position as advanced as Denmark’s, a
transition towards the circular economy can bring about lasting benefits of
a more innovative, resilient and productive economy. Modelling conducted
in this study suggests that by 2035 it could lead to an increase in GDP by
0.8–1.4%, the creation of an additional 7,000–13,000 job equivalents, a
3–7% reduction in carbon footprint, 5–50% reduction in virgin resource
consumption for selected materials and an increase in net exports by 3–6 %.
These positive effects on the Danish economy are based on five selected sectors,
covering 25% of the economy. It is assumed in the modelling that the share of renewable
energy in the circular economy scenario increases at the same pace as in the baseline
scenario, meaning that no further shift towards renewable energy is included in the
estimated benefits.
Ten circular economy opportunities were identified in five focus sectors, and
the largest economic potential was found in Construction & Real Estate and in
Food & Beverage.
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The ten opportunities and their estimated economic impact by 2035 are shown in Figure
A.
1
Summaries of ten circular economy opportunities, their key barriers and policy
options identified, are given in the five sector boxes.
The economic impact of circular economy estimated for Denmark could, if the right
enabling conditions are established, mostly be captured within the next 20 years. But
even as circular economy opportunities take time to realise, it is estimated that up to
20% of the net value created by 2035 could be realised already by 2020.
Figure A: 10 circular economy opportunities in the Denmark case study
NET VALUE
CREATED
EUR MILLION, 2035
300 - 500
SECTOR
OPPORTUNITY
FOOD AND
BEVERAGE
1
2
Value capture in
cascading
bio-refineries
Reduction of
avoidable
food waste
Industrialised production
and 3D printing
of
building modules
Reuse and high-value
recycling
of components
and materials
Sharing
and multi-
purposing of buildings
Remanufacturing
and
new business models
Increased
recycling
of
plastic packaging
Bio-based
packaging
where beneficial
Performance models
in
procurement
Waste reduction
and
recycling
150 - 250
CONSTRUCTION
AND REAL
ESTATE
3
4
5
450 - 600
100 - 150
300 - 450
MACHINERY
PLASTIC
PACKAGING
6
7
8
150 - 250
Not assessed
Not assessed
HOSPITALS
9
10
70 - 90
Not assessed
HOW POLICYMAKERS CAN ENABLE THE OPPORTUNITIES
While the majority of the ten circular economy opportunities identified in
Denmark have a sound underlying profitability, there are often non-financial
barriers limiting further scale-up or holding back development pace. Both
policymakers and industry players can play important roles in helping
businesses overcome these barriers. To this end, close collaboration is needed
between governmental bodies, as well as with businesses and other society
stakeholders.
The key barriers include unintended consequences of existing regulations (e.g.
definitions of waste that hinder trade and transport of products for remanufacturing),
social factors such as a lack of experience among companies and policymakers to detect
and capture circular economy opportunities, and market failures such as imperfect
information (e.g. for businesses to repair, disassemble and remanufacture products)
1
Three opportunities were not quantified economically due to lack of input data and high degrees of uncer-
tainty. The sector-specific impact was used as input for a general equilibrium, macroeconomic model to
assess the impact on the whole economy. It is therefore not directly comparable to the estimated econo-
my-wide impact for Denmark.
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
and unaccounted, negative externalities (e.g. carbon emissions). In addition to creating
enabling conditions, policymakers can, as appropriate, set direction for a transition to
the circular economy.
As businesses are already starting the transition, the circular economy offers an
opportunity for policymakers to collaborate with businesses. An important conclusion
from the Denmark case study is that there is a need for cooperation between different
government departments (including business/industry, finance and environment) so
that no new unintended policy barriers are created and – like the business solution
– the policy response is designed to maximise system effectiveness. Other society
stakeholders, including citizens and consumers, labour unions, environmental
organisations and the scientific and educational community, should also be engaged.
In several cases, EU-level policy interventions would need to complement
national Danish policies, as the value chains of many sectors extend across
borders.
Product policy and promoting the market for secondary raw materials are just two
examples that could be coordinated at the European level in order to simplify and
reduce the cost of doing (circular) business.
FOOD & BEVERAGE
Value capture in cascading bio-
refineries, which extract a variety
of nutraceutical and chemical
products from by-product and
waste streams, could lead to a net
value of EUR 300–500 (50–80)
million p.a. by 2035 (2020).
Key barriers include:
•
•
•
access to capital to build and
scale up capacity;
availability of mature technology;
unintended consequences of
existing regulation.
Reduction of avoidable food
waste, by building awareness
and knowledge for consumers,
leveraging best practices for
businesses, smart technologies
and creating markets for second-
tier foods, could lead to a net
value of EUR 150–250 (30–40)
million p.a. by 2035 (2020).
Key barriers include:
•
•
•
•
consumers’ custom and habit;
businesses capabilities and skills;
imperfect information;
split incentives among players in
the value chain.
Identified policy options include:
•
•
setting long-term strategic targets
for bio-refineries;
supporting capacity building for
existing technologies and create
markets;
supporting technological
development.
Identified policy options include:
•
•
•
•
informing and educating
consumers;
setting up quantitative food
waste targets;
support capability building;
introducing fiscal incentives.
•
 ERU, Alm.del - 2015-16 - Bilag 93: 'Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making', fra Erhvervs- og Vækstministeriet
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CONSTRUCTION & REAL ESTATE
Industrialised production and 3D printing
of building modules, reducing time
and material cost of construction and
renovation, could lead to a net value of
EUR 450–600 (40–60) million p.a. by
2035 (2020).
Key barriers include:
•
•
•
inadequately defined legal frameworks;
immature 3D printing technology;
custom and habit and capabilities and
skills in the industry.
•
•
custom and habit;
capabilities and skills.
Identified policy options include:
•
•
•
augmenting building codes;
running industry-wide training
programmes;
creating support for material inventory
software and databanks.
Identified policy options include:
•
•
•
augmenting building codes;
supporting the development of module
production facilities;
setting a clear legal framework for 3D
printing materials.
Sharing and multi-purposing of
buildings to increase the utility of
existing floor space could lead to a
net value of EUR 300–450 (100–140)
million p.a. by 2035 (2020).
Key barriers include:
•
•
inadequately defined legal
frameworks;
unintended consequences of existing
regulation.
Reuse and high-value recycling of
components and materials, enabled by,
e.g., design for disassembly and new
business models, could lead to a net value
of EUR 100–150 (10–12) million p.a. by
2035 (2020).
Key barriers include:
•
split incentives and lack of information
across the construction value chain;
Identified policy options include:
•
•
•
clarifying the existing legislation;
providing financial incentives or
support to new business models;
creating portals for public building
availability.
MACHINERY
Remanufacturing and new business
models based on performance contracts
and reverse logistics could lead to a net
value of EUR 150–200 (50–100) million
p.a. by 2035 (2020). In addition, similar
opportunities of EUR 100–400 (50–
150) million p.a. could be captured in
adjacent sectors through extrapolation
of these activities.
Key barriers include
•
•
•
lack of capabilities and skills;
imperfect information about
existing opportunities;
unintended consequences of
existing regulation.
Identified policy options include
•
supporting remanufacturing
pilots and conducting information
campaigns;
amending existing regulatory
frameworks;
adopting an overarching
government strategy on
remanufacturing.
•
•
 ERU, Alm.del - 2015-16 - Bilag 93: 'Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making', fra Erhvervs- og Vækstministeriet
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
PACKAGING
Increased recycling of plastic
packaging, driven by better packaging
design, higher collection rates, and
improved separation technology, could
lead to a reduction in the demand
for virgin plastic material by 70–100
thousand tonnes p.a. by 2035.
Key barriers include:
•
low profitability in the reverse
value chain (driven by unaccounted
externalities and price volatility);
collection and separation technology;
split incentives across the value chain.
Bio-based packaging where
beneficial, leading to an
innovation-driven shift to from
petro-based plastics to bio-based
alternatives for selected packaging
applications.
Key barriers include:
•
•
•
technologic maturity
profitability (driven by unaccounted
externalities);
inadequately defined legal
frameworks.
•
•
Identified policy options include:
•
•
•
•
improving the collection infrastructure;
increasing national recycling targets;
standardising collection and
separation systems;
increasing incineration taxes.
Identified policy options include:
•
•
•
funding of innovation and B2B
collaboration;
investing in improved end-of-use
pathways of bio-based packaging;
working to clarify the EU regulatory
framework.
HOSPITALS
Performance models in procurement of
hospital equipment, such as advanced
diagnostic, IT or laboratory equipment,
could lead to a net value of EUR 70–90
(10–15) million p.a. by 2035 (2020).
Key barriers include:
•
•
•
insufficient capabilities and skills due
to lack of experience;
imperfect information;
custom and habit in hospital
operations.
Waste reduction and recycling in
hospitals, through systematic and
centrally managed initiatives.
Key barriers include:
•
•
•
insufficient capabilities and skills
due to lack of experience;
custom and habit in hospital
operations;
imperfect information
Identified policy options include:
•
piloting of waste reduction and
recycling management integrated in
staff training;
setting waste minimisation and
recycling targets;
increasing fiscal incentives to avoid
waste generation.
Identified policy options include:
•
•
•
setting up guidelines and targets;
capability building;
defining procurement rules.
•
•
 ERU, Alm.del - 2015-16 - Bilag 93: 'Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making', fra Erhvervs- og Vækstministeriet
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RESUMÉ
Ellen MacArthur Foundation har med sin forskning dokumenteret, at cirkulær økonomi
har et stort potentiale for at skabe forretningsmæssig værdi i virksomheder. Flere og
flere politikere og embedsmænd er interesserede i cirkulær økonomi og efterspørger
konkret vejledning til, hvordan de kan skabe de rette rammevilkår, der muliggør en
omstilling til cirkulær økonomi. Og til hvordan der opstilles en vision og en retning for at
udnytte de økonomiske og miljømæssige muligheder, som cirkulær økonomi indeholder.
Til dette formål har Ellen MacArthur Foundation udarbejdet rapporten Delivering
the circular economy – a toolkit for policymakers, som blev offentliggjort i juni 2015.
Rapportens perspektiv er på lande- og myndighedsniveau og sigter imod at identificere
økonomiske muligheder og barrierer i den cirkulære økonomi samt politiske initiativer,
der kan fjerne disse barrierer. Som en del af denne rapport (omtales i det følgende som
‘toolkit-rapporten’) er der udført et omfattende case studie i Danmark. Nærværende
rapport fokuserer på dette case studie.
Rapporten Delivering the circular economy – a toolkit for policymakers er resultatet af
et samarbejde under ledelse af Ellen MacArthur Foundation og med Erhvervsstyrelsen
og Miljøstyrelsen som vigtige bidragsydere. Toolkit-rapporten og case studiet, der er
lavet om Danmark, er udarbejdet med bidrag fra danske og udenlandske interessenter,
herunder førende erhvervsfolk, embedsmænd og forskere. Endvidere har McKinsey
Center for Business and Environment bidraget til analysen, og NERA Economic
Consulting har bidraget til den makroøkonomiske analyse samt analysen af politiske
virkemidler. MAVA Foundation har finansieret projektet.
MULIGHEDERNE FOR DANMARK
Danmark er internationalt anerkendt for innovative initiativer inden for
cirkulær økonomi og bæredygtighed. Alligevel har case studiet af dansk
økonomi påvist et betydeligt potentiale ved at tage yderligere skridt hen
imod en cirkulær økonomi.
Danmark har mange virksomheder, der ligger i front med at udvikle løsninger inden for
den cirkulære økonomi. Dette skyldes bl.a. en lang tradition for innovativ politikskabelse
i Danmark, som stimulerer grøn omstilling, samt et langsigtet og strategisk engagement
i at øge energieffektiviteten og producere vedvarende energi. Danmark præsterer bedre
end EU28 på de fleste udvalgte ressource- og innovationsindikatorer, såsom andelen af
vedvarende energi og eco-innovationsindekset. Alligevel er der stadig muligheder for
at skabe betydelig værdi i økonomien, f.eks. ved at forbedre udnyttelsen af aktiver og
skabe en bedre ressourceudnyttelse af affald og biprodukter. I Danmark. går en tredjedel
af alt affald til forbrænding, hvorved der produceres varme og el, men dette sker, før
den fulde værdi af affaldet er blevet udnyttet som en materialeressource. Når materialer
tilbageføres i værdikæden, sker det primært ved genanvendelse, snarere end ved højere
værdiudnyttelse, såsom ved genbrug eller genfremstilling.
Selvom Danmark har taget flere initiativer, som peger i retning af en
omstilling til cirkulær økonomi, er der stadig et stort potentiale med varige
effekter ved at skabe en mere innovativ, modstandsdygtig og produktiv
økonomi. De modeller, der er anvendt i denne analyse, viser, at Danmark i
2035 kan opnå en stigning i BNP på 0,8–1,4 %, tillige med skabelse af, hvad
der svarer til yderligere 7.000–13.000 job, 3–7 % reduktion i Danmarks
CO2-aftryk, 5–50 % reduktion i forbruget af nye ressourcer for udvalgte
materialer, samt en stigning i nettoeksporten på 3–6 %.
Disse positive effekter på den danske økonomi er baseret på fem udvalgte sektorer,
som tilsammen dækker 25 % af økonomien. I modelleringen antages det, at andelen af
vedvarende energi i et cirkulært scenarie stiger i samme takt som i baseline-scenariet,
 ERU, Alm.del - 2015-16 - Bilag 93: 'Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making', fra Erhvervs- og Vækstministeriet
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
dvs. at yderligere stigninger i andelen af vedvarende energi ikke er medregnet i
resultaterne. Resultatet af denne analyse understøttes af et stigende antal internationale
forskningsresultater, som ligeledes peger på, at effekten af en omstilling til en cirkulær
økonomi sandsynligvis vil være positiv i forhold til økonomisk vækst, jobskabelse og
miljøet.
Der er fundet ti særligt oplagte muligheder inden for den cirkulære
økonomi i Danmark i fem sektorer; det største økonomiske potentiale er
fundet inden for Byggeindustrien og Bygninger samlet set, samt inden for
Fødevareindustrien.
De ti muligheder og deres beregnede økonomiske potentiale frem mod 2035 vises i
figur A. De fem sektorbokse giver en opsummering af de ti muligheder inden for den
cirkulære økonomi, de væsentligste barrierer samt mulige politiske virkemidler.
Det økonomiske potentiale af cirkulær økonomi, som beregnes for Danmark, kan
i overvejende grad opnås inden for de næste 20 år, såfremt der skabes de rette
rammevilkår. Det tager tid at realisere de muligheder, som en cirkulær økonomi giver,
men det anslås, at op til 20 % af den nettoværdi, der vil være skabt i 2035, allerede vil
kunne opnås i 2020.
Figur A: 10 muligheder i den cirkulære økonomi i case studiet af Danmark
POTENTIALE
(NETTOVÆRDI)
DKK MIA., 2035
Øget kaskadeudnyttelse i
bio-raffinaderier
Reduktion af
madspild
Industrialiseret
produktion og 3D print
af
bygningsmoduler
Genbrug og højværdi-
genanvendelse
af
komponenter og materialer
Deling
og multi-brug af
bygninger
Genfremstilling
og nye
forretningsmodeller
Øget
genanvendelse
af
plastikemballage
Bio-baseret
emballage
Servicebaserede modeller
for indkøb
Affaldsreduktion
og
genanvendelse
2,3 - 3,8
SEKTOR
MULIGHED
FØDEVARE-
INDUSTRIEN
1
2
1,1 - 1,9
BYGGE-
INDUSTRIEN OG
BYGNINGER
3
4
5
3,4 - 4,5
0,8 - 1,1
2,3 - 3,4
MASKIN-
INDUSTRIEN
PLAST-
EMBALLAGE
6
7
8
1,1 - 1,9
Ikke vurderet
Ikke vurderet
HOSPITALER
9
10
0,5 - 0,7
Ikke vurderet
HVORDAN POLITIKERNE KAN SIKRE UDNYTTELSE AF MULIGHEDERNE
Selv om de fleste af de ti særlige muligheder i den cirkulære økonomi, som
er identificeret for Danmark, har en sund underliggende profitabilitet, så er
der dog ofte ikke-finansielle barrierer, som begrænser større udbredelse eller
bremser udviklingen. Både myndighederne og industrien kan spille en vigtig
rolle, når det drejer sig om at fjerne barriererne for virksomhederne. Der er
brug for et tæt samarbejde mellem forskellige offentlige myndigheder såvel
som virksomheder og andre interessenter i samfundet.
 ERU, Alm.del - 2015-16 - Bilag 93: 'Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making', fra Erhvervs- og Vækstministeriet
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De væsentligste barrierer omfatter utilsigtede konsekvenser af eksisterende
regulering (f.eks. definitioner af affald, som hindrer handel og transport af produkter
til genfremstilling), sociale faktorer, såsom mangel på erfaring blandt virksomheder
og myndigheder, når det drejer sig om at opdage og udnytte muligheder i en cirkulær
økonomi, samt markedsmæssige fejl, såsom ufuldstændig information (f.eks. til
virksomheder om at reparere, adskille og genfremstille produkter), og ikke medregnede
negative eksternaliteter (f.eks. drivhusgas-udledninger). Ud over at skabe de rette
rammevilkår, kan politikerne via målsætninger sætte retning henimod en overgang til en
cirkulær økonomi.
Da mange virksomheder allerede har påbegyndt omstillingen til en cirkulær økonomi,
er der gode muligheder for, at myndighederne kan samarbejde med erhvervslivet på
dette felt. En af de vigtige konklusioner fra det danske case studie er, at der er behov
for at samarbejde mellem de forskellige ministerier (erhvervs- og vækst, finans og miljø-
og fødevarer), så der ikke skabes nye utilsigtede barrierer, og således at styringsmidler
– ligesom de forretningsmæssige løsninger – udformes til at maksimere systemets
effektivitet. Andre samfundsaktører, såsom borgere og forbrugere, fagforeninger,
miljøorganisationer samt forskere og uddannelsessektoren, bør også involveres.
I flere tilfælde vil der være behov for, at fælles EU politik supplerer de
nationale virkemidler, da værdikæderne i mange sektorer går på tværs af
lande.
Produktpolitik og fremme af markedet for sekundære råvarer er blot to eksempler, som
kan koordineres på europæisk niveau for at forenkle og reducere omkostningerne ved at
gøre (cirkulære) forretninger.
FØDEVAREINDUSTRIEN
Øget kaskadeudnyttelse i bio-
raffinaderier, som udvinder en
række nutraceutiske og kemiske
produkter fra biprodukter og affald,
kan medføre en nettoværdi på DKK
2,3 - 3,8 mia. (400 – 600 mio.) pr.
år i 2035 (2020).
De væsentligste barrierer omfatter
•
•
•
adgang til kapital til at bygge og
opskalere kapacitet;
tilgængelighed af moden
teknologi;
utilsigtede konsekvenser af
nuværende regulering
Reduktion af madspild, ved at
opbygge bevidsthed og viden hos
forbrugerne, udbrede best practice
i virksomheder, anvende smart
teknologi, samt skabe markeder
for anden klasses fødevarer, kan
medføre en nettoværdi på DKK 1,1
– 1,9 mia. (200 – 300 mio.) pr. år i
2035 (2020).
De væsentligste barrierer omfatter:
•
•
•
•
forbrugernes vaner og adfærd;
erhvervslivets kapacitet og
færdigheder;
ufuldstændig information i
værdikæden
forskellige incitamenter blandt
aktørerne i værdikæden
Mulige politiske virkemidler omfatter:
•
fastsættelse af langsigtede,
strategiske mål for bio-
raffinaderier;
støtte til kapacitetsopbygning
for eksisterende teknologier og
skabelse af markeder;
støtte til teknologisk udvikling
•
Mulige politiske virkemidler
omfatter:
•
•
•
•
information og uddannelse af
forbrugerne;
fastsættelse af kvantitative mål
for madspild;
støtte til kapacitetsopbygning;
indførelse af økonomiske
incitamenter
•
 ERU, Alm.del - 2015-16 - Bilag 93: 'Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making', fra Erhvervs- og Vækstministeriet
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BYGGEINDUSTRIEN & BYGNINGER
Industrialiseret produktion og 3D print af
bygningsmoduler, nedsættelse af tids- og
materialeomkostninger ved byggeri og
renovering, kan medføre en nettoværdi på
DKK 3,4 – 4,5 mia. (300 – 500 mio.) pr. år
i 2035 (2020).
De væsentligste barrierer omfatter:
•
•
•
•
en utilstrækkeligt defineret
lovgivningsmæssig ramme
umoden teknologi
vaner og adfærd samt industriens
kapacitet
evner og færdigheder.
•
•
vaner og adfærd samt kapacitet
evner og færdigheder.
Mulige politiske virkemidler omfatter:
•
•
videreudvikling af byggeregulativer
gennemførelse af
uddannelsesprogrammer i hele
branchen samt støtte til etablering
af materialeopgørelser (software og
databanker).
Mulige politiske virkemidler omfatter:
•
•
•
videreudvikling af byggeregulativer
som støtter udvikling af
modulproduktionsfaciliteter
samt fastlæggelse af en tydelig
lovgivningsmæssig ramme for brug af
materialer til 3D printning.
Deling og blandet brug af bygninger
for at øge anvendeligheden af den
nuværende bygningsmasse kan
medføre en nettoværdi på DKK 2,3 –
3,4 mia. (800 – 1.100 mio.) pr. år i 2035
(2020).
De væsentligste barrierer omfatter:
•
en utilstrækkeligt defineret
lovgivningsmæssig ramme samt
utilsigtede konsekvenser af
nuværende lovgivning.
Genbrug og højværdi-genanvendelse
af komponenter og materialer,
muliggjort f.eks. ved at designe med
henblik på senere adskillelse, samt nye
forretningsmodeller, kan medføre en
nettoværdi på DKK 0,8 - 1,1 mia. (80 – 90
mio.) pr. år i 2035 (2020).
De væsentligste barrierer omfatter:
•
forskellige incitamenter og mangel på
information på tværs af værdikæden i
byggeriet
Mulige politiske virkemidler omfatter:
•
•
tydeliggørelse af den nuværende
lovgivning
tilvejebringelse af økonomiske
incitamenter eller støtte til nye
forretningsmodeller samt etablering
af portaler over kapacitetsadgang til
offentlige bygninger.
MASKININDUSTRIEN
Genfremstilling og nye
forretningsmodeller baseret
på performance-kontrakter/
servicekontrakter og returlogistik kan
medføre en nettoværdi på DKK 1,1 – 1,9
mia. (400 – 800 mio.) pr. år i 2035
(2020). Ved ekstrapolering af disse
aktiviteter i tilsvarende sektorer kan
lignende muligheder give DKK 0,8 – 3,0
mia. (400 - 800 mio.) pr. år.
De væsentligste barrierer omfatter:
•
•
mangel på kapacitet og færdigheder
utilstrækkelig information om
nuværende muligheder samt
utilsigtede konsekvenser af
nuværende regulering.
Mulige politiske virkemidler omfatter:
•
støtte til pilotforsøg
med genfremstilling
samt gennemførelse af
informationskampagner og
ændring af de eksisterende
regelsæt samt vedtagelse af en
overordnet regeringsstrategi
for genfremstilling. strategy on
remanufacturing.
 ERU, Alm.del - 2015-16 - Bilag 93: 'Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making', fra Erhvervs- og Vækstministeriet
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DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •
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EMBALLAGE
Øget genanvendelse af plastemballage
ved bedre emballagedesign, højere
indsamlingsprocenter og forbedret
sorteringsteknologi kan medføre
en reduktion i behovet for nyt
plastmateriale på 70–100 000 tons pr.
år i 2035.
De væsentligste barrierer omfatter:
•
lav indtjeningsevne i værdikæden
for genanvendelse (pga. af ikke
medregnede eksternaliteter samt
svingende priser)
indsamlings- og sorteringsteknologi
samt forskellige incitamenter for
aktører i værdikæden.
Biobaseret emballage, hvor
det er fordelagtigt, medfører
et innovationsdrevet omstilling fra
fossilbaseret plast til biobaserede
alternativer for udvalgte
emballageanvendelser.
De væsentligste barrierer omfatter:
•
•
teknologiens modenhed
indtjeningsevne (pga. af ikke
medregnede eksternaliteter) samt et
utilstrækkeligt defineret regelsæt.
•
Mulige politiske virkemidler omfatter:
•
•
finansiering af innovation og B2B-
samarbejde
investering i forbedrede
slutbrugsveje for biobaseret
emballage samt arbejde med
klarheden af EU’s regelsæt.
Mulige politiske virkemidler omfatter:
•
•
•
en forbedring af
indsamlingsinfrastrukturen
øgede nationale genanvendelsesmål
standardiserede indsamlings- og
sorteringssystemer samt øgede
afgifter på affaldsforbrænding.
HOSPITALER
Servicebaseret indkøb Fra indkøb
af produkter til serviceaftaler for
hospitalsudstyr, såsom avanceret
diagnostisk udstyr, IT eller
laboratorieudstyr, kan medføre en
nettoværdi på DKK 0,5 – 0,7 mia. (80 -
110 mio.) pr. år i 2035 (2020).
De væsentligste barrierer omfatter:
•
•
utilstrækkelig kapacitet og
færdigheder pga. manglende erfaring
ufuldkommen information i
værdikæden samt vaner og adfærd.
Affaldsreduktion og genanvendelse
på hospitaler gennem systematiske
og centralt styrede initiativer.
De væsentligste barrierer omfatter:
•
utilstrækkelige evner og
færdigheder grundet mangel på
erfaring
samt vaner og adfærd og
ufuldkommen information i
værdikæden
•
Mulige politiske midler omfatter:
•
pilotforsøg med affaldsreduktion og
genanvendelse som en integreret
del af personalets uddannelse
fastsættelse af mål for
affaldsminimering og
genanvendelse samt øgede
økonomiske incitamenter til at
undgå generering af affald.
Mulige politiske virkemidler omfatter:
•
•
•
udarbejdelse af retningslinjer
fastsættelse af mål
opbygning af kapacitet samt
definering af regler for indkøb.
•
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
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INTRODUCTION
The Denmark case study focused on five sectors: food & beverage,
construction & real estate, machinery, plastic packaging and hospitals. This
report covers the core findings for these sectors, as well as an integrated
national perspective.
The findings for Denmark resulted from an intense analytical phase, going through all
steps of the methodology as laid out in the toolkit report. While these findings cannot be
directly transposed to other countries, they might serve as a source of inspiration for the
identification of opportunities, barriers and policy options. It was evident early on that
key stakeholder involvement is crucial for the success of a study such as this one. It has
included consultations with more than 25 businesses, a group of senior policymakers,
industry associations and other society stakeholders, and a series of international
experts. It was especially crucial to involve businesses throughout the project in order to:
(i)
get insights and knowledge to identify the most relevant circular economy
opportunities and barriers in each focus sector;
create early alignment on common direction for the country and the focus
sectors;
(ii)
(iii) further demonstrate circular economy benefits to businesses and build
capabilities for implementation.
As the circular economy is a new notion to both policymakers and (certain) companies,
business involvement is even more important than in other policy areas.
Thanks to the support and engagement of these stakeholders, the findings in this report
give a good directional view on circular economy opportunities for Denmark. However,
being the result of a pilot phase covering five major sectors in just a few months, the
findings below do not aim to be as detailed as a typical impact assessment for one
opportunity or policy. Similarly, the set of identified barriers would likely need to be
analysed further. The set of opportunities is not exhaustive – significant opportunities
may exist in addition to those identified here.
Each of the deep dives in chapters 2–6 covers the current state of the circular economy,
the key circular economy opportunities and related barriers, and potential policy options
to overcome these barriers.
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
1
NATIONAL PERSPECTIVE
Even in a country with a starting position as advanced as Denmark, there are
significant opportunities to further transition towards the circular economy.
Ten circular economy opportunities in five focus sectors were identified as
most promising for Denmark. Modelling conducted in this study suggests
that, by 2035, these could unlock, relative to a ‘business as usual’ scenario:
•
•
•
•
•
an increase in GDP by 0.8–1.4%;
between 7,000 and 13,000 additional job equivalents;
1
a reduction of the country’s carbon footprint by 3–7%;
2
a reduction of consumption of selected resources
3
by 5–50%;
an increase in net exports by 3–6%.
Each of these opportunities is limited, to varying degrees, by a number of
barriers. Potential policy options to overcome these barriers have been
identified. To enable a systemic transition towards the circular economy,
Danish policymakers might also consider setting economy-wide direction
for the circular economy, broader changes to the fiscal system, and a wider
knowledge-building and education effort. These potential policy options
should not be considered as recommendations; Danish policymakers would
need to assess in the necessary detail their expected costs, benefits and
feasibility.
DENMARK TODAY
Leading Danish companies, including large multinationals as well as SMEs, are pioneering
circular economy solutions. The following are just three out of many inspiring examples.
•
Shipping company Maersk has introduced product passports for their container
ships, actively working with the Korean shipyard DSME and approximately 75
suppliers of parts. The passport, which will be updated throughout the life of the
ship, is a database listing the material composition of the main parts of the ship,
and documents approximately 95% (by weight) of the materials used to build the
ships. It will enable better recovery of parts and materials used in the construc-
tion and maintenance of the vessels.
4
Brewing company Carlsberg is using the Cradle-to-Cradle® (C2C) design frame-
work
5
to develop C2C-certified packaging, and has set up the Carlsberg Circular
Community, aiming to rethink the design and production of traditional packaging
material and develop materials which can be recycled and reused indefinitely
while keeping quality and value.
6
Baby clothing company Vigga offers a circular subscription model for baby
clothes. The baby clothes, made from organic fabrics, are returned to Vigga once
outgrown, where they are dry cleaned in an environmentally friendly way and
•
•
1
2
3
4
5
6
Employment impact modelled through conversion of labour bill to job equivalents via a wage curve approach
(elasticity = 0.2). Percentage change is computed vs. 2013 total full-time employment.
Measured as change in global carbon emissions divided by ‘business as usual’ Denmark carbon emissions.
For steel and plastic, in selected sectors in Denmark. Includes resources embedded in imported products/
components.
Maersk. www.maersk.com/en/hardware/triple-e/the-hard-facts/cradle-to-cradle
Created by William McDonough and Professor Michael Braungart. www.c2ccertified.org
Carlsberg. www.carlsberggroup.com/csr/ReportingonProgress/SustainablePackaging/Pages/default.aspx
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Figure 1: Circularity baselining in the Denmark pilot
SCOPE
2.1
+8%
Resource productivity
2
GDP EUR / kg domestic material
consumption
1.9
INDICATOR
DENMARK
1
EU-28
1
RESOURCE
PRODUCTIVITY
60%
53%
CIRCULAR
ACTIVITIES
Recycling rate, excluding major mineral
waste & adjusted for trade
3
tonnes recycled/tonnes treated (percent)
136
100
+14%
Eco-innovation index
Index with 16 indicators (e.g. green
investments, employment, patents)
40
+36%
69
-42%
WASTE
GENERATION
Waste generated per GDP output,
excluding major mineral waste
tonnes / EUR million
747
481
+55%
Municipal waste generated per
capita
4
tonnes per capita
26%
14%
+84%
ENERGY AND
GREENHOUSE
GAS EMISSIONS
Share of renewable energy
Percent of gross final energy
consumption
GHG emissions per GDP output
tonnes CO2e/EUR million
225
343
-34%
DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •
27
1 2012 values if not stated otherwise
2 Comparability of this indicator is dependent on sector structure.
3 Recycling of domestically generated waste (incl. exported waste, excl. imported waste)
4 2013 data
SOURCE: Resource Efficiency Scoreboard 2014 Highlights, European commission (2014); Eurostat; Statistics Denmark, Danish EPA
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
made ready for another baby to optimise the use during the lifetime of the baby
clothes.
7
A circularity and policy baselining exercise conducted in the pilot reveals that Denmark
has an advanced starting position compared to other European countries (Figure 1
8
).
This is thanks to a long and rich tradition of innovating policies that stimulate resource
efficiency and the circular economy. It introduced the very first deposit-refund scheme
for beverage containers in the 1980s. It has incrementally increased landfill taxes since
they were introduced in 1987.
9
In 2011, it set the target to be fully independent from fossil
fuels by 2050. More recently, Denmark has laid out a comprehensive waste management
strategy in ‘Denmark Without Waste I/II’, focused on moving from incineration to
recycling and waste prevention, respectively. It has established the Task Force for
Resource Efficiency, the National Bioeconomy Panel, the Green Industrial Symbiosis
programme, and the Rethink Resources innovation centre. Denmark participates in
international initiatives such as the Ellen MacArthur Foundation’s CE100 programme. A
high-level description of the policy landscape in Denmark is given in Figure 2.
Denmark is internationally recognised as a front runner in the circular economy. A case
in point is the Danish Business Authority winning the 2015 ‘Ecolab Award for Circular
Economy Cities/Regions’ at the World Economic Forum in Davos.
10
In terms of opportunity identification, Figure 3 highlights that Denmark is already one
of the world leaders in the domains of energy efficiency and the adoption of renewable
energy, and has even more ambitious targets in place. Therefore, these areas were
deprioritised when assessing circular economy opportunities.
Yet even Denmark has significant opportunities to further transition towards the circular
economy. Across the economy, significant material value is left on the table as most
waste streams and by-products are used for relatively low-value applications. Of the 93%
waste diverted from landfill, only two thirds is recycled – the rest is incinerated.
11
In the construction sector, 87% of materials is recycled, but mainly for low-quality
applications,
12
and there is only an estimated <1% reuse of building components and
materials. In the machinery sector, >95% of its most important material (steel) is
recycled, yet there is an estimated <1% remanufacturing.
13
Nearly 100% of industrial
organic waste is being valorised, but mainly in low-value applications such as
incineration, direct fertilisation, or animal feed, while only ~3% of waste is used in biogas
production and there is <1% cascading bio-refining.
14
In addition, the headline figures quoted above hide pockets of opportunities. Municipal
waste per capita is the highest in the EU (~750 kg/capita vs. ~480 kg/capita EU28
average).
15
There is an estimated 80-90 kg annual avoidable food waste per household.
16
Only ~15% plastic packaging is collected for recycling from households, of which only
half actually gets recycled in new resin.
17
7
8
9
10
11
12
13
14
www.vigga.us
See section 2.1.1 in the toolkit report for more details.
Danish Environmental Protection Agency,
From land filling to recovery – Danish waste management from the
1970s until today
(2013).
https://thecirculars.org
Eurostat.
Statistics Denmark; interviews with the Danish Environmental Protection Agency and sector experts.
Statistics Denmark; interviews with sector experts.
L. Lange, A. Remmen,
Bioeconomy scoping analysis
(Aalborg University, 2014); interviews with sector ex-
perts; Danish Government,
Denmark Without Waste I. Recycle more – incinerate less
(2013); Danish Energy
Agency,
Biogas i Danmark – status, barrierer og perspektiver
(2014).
Eurostat. There are some discrepancies in how this metric is calculated in different member states.
Danish Environmental Protection Agency,
Kortlægning af dagsrenovation i Danmark – Med fokus på etage-
boliger og madspild
(2014).
Danish EPA; Statistics Denmark.
15
16
17
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Figure 2: Policy landscape in the Denmark pilot
EXAMPLES OF EXISTING INTERVENTIONS
EXAMPLES OF POSSIBLE ADDITIONAL
INTERVENTIONS (AS OBSERVED AT START OF THE
PROJECT IN WINTER 2014-15 AND NOT TAKING
INTO ACCOUNT SUBSEQUENT ANALYSIS)
•
•
Systems thinking integrated in curricula
Further pilot projects to demonstrate circular economy
potential to businesses
POLICY
INTERVENTION TYPES
EDUCATION,
INFORMATION &
AWARENESS
•
Consumer information campaigns, e.g. ‘Use more, waste less’ and ‘Stop
Wasting Food’
•
•
•
•
‘Genbyg Skive’ pilot project to re-use building materials to create business
opportunities and reduce waste
Rethink Resources, an innovation centre to support resource efficiency in
companies
Four new partnerships (food, textile, construction and packaging) as part
of the Danish Waste Prevention Strategy
COLLABORATION
PLATFORMS
Green Industrial Symbiosis programme
-
BUSINESS SUPPORT
SCHEMES
•
•
Maabjerg Energy Concept (MEC) bio-refinery part funded by Innovation
Fund Denmark (EUR 40m)
Fund for Green Business Development (EUR 27m 2013–2018) to support
innovation and new business models
•
Dutch ‘Green Deal’ inspired programme to provide on-demand
support to companies in implementing circular economy
opportunities
•
•
Strategy on waste prevention also contains an initiative to develop
guidelines for circular public procurement
PUBLIC
PROCUREMENT &
INFRASTRUCTURE
Government Strategy on Intelligent Public Procurement contains
initiatives to support circular procurement practices
•
Guidelines on the circularity of materials and products
integrated into public procurement policy
REGULATORY
FRAMEWORKS
•
•
•
Ambitious energy efficiency and GHG emissions targets, e.g. 40% GHG
reduction by 2020 vs. 20% at EU level,
Ambitious targets for recycling/incineration/landfill, updated every 6
years, e.g. recycle 50% of household waste by 2022
Taskforce for increased resource efficiency to review existing regulations
affecting circular economy practices
•
•
New metrics introduced to measure economic performance, e.g.
complements to GDP such as natural capital
Engagement at EU level to adapt existing or introduce new
regulations relevant to the circular economy, e.g. product policy
FISCAL FRAMEWORKS
•
•
•
•
Taxes on extraction and import of raw materials, vehicle registration and
water supply
High and incrementally increased taxes on incineration / landfill to
promote recycling and waste prevention
Highest energy taxes in Europe (70% above EU27) and CO2 taxes
Tax cuts designed to promote use of low-carbon energy
DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •
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•
Investigation into effects of tax shift from labour to resources
SOURCE: European Commission, Tax reforms in EU Member States 2013; IEA, Energy Policies of Denmark: 2011 review; Nordic Council of Ministers, The use of economic instruments in
Nordic environmental policy 2010-2013; Danish legislative council, Waste management policy in Denmark, 2014; The Ex’Tax project, New era. New plan. Fiscal reforms for an inclusive, circular
economy, 2014.
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Figure 3: Results of sector prioritisation in Denmark pilot
CIRCULARITY POTENTIAL
Construction
Food and beverages
Basic metals and
fabricated products
Machinery
Electronic products
Hospitals
Water supply, sewerage
Electricity, gas
Packaging
(not sized)
Rubber and plastic
products
Agriculture, forestry
and fishing
Pharmaceuticals
Mining and quarrying
ROLE IN NATIONAL ECONOMY
Producing sectors
Prioritised sectors
Non-producing sector
Size = Gross value added
NOTE: Only producing sectors (24% of national GVA) and hospitals (3.5% of national GVA) considered
SOURCE: Statistics Denmark (2011 data); Danish Business Authority; Danish Environmental Protection Agency;
Ellen MacArthur Foundation
SECTOR SELECTION
To focus the analytical work to the areas in the Danish economy with the highest circular
economy potential, a structured sector selection approach was developed to select
five sectors. Two dimensions were used to prioritise sectors based on both their role
in the national economy and the circularity potential. The sectors were then assessed
according to a ‘score’ for each dimension, which was computed by scoring a number of
sub-dimensions:
•
Role in the national economy: size (and growth) measured by share of GVA
(gross value added), contribution to employment (and growth), international
competitiveness.
Circularity potential: material and energy intensity, volume of waste generated,
share of waste landfilled/incinerated, high-level estimate of scope for improved
circularity.
•
These sub-dimensions, and their relative weights in the scoring, are explained in further
detail in Appendix A.
Subsequently, one to two product categories or sub-sectors were selected in each focus
sector to drive the identification and quantification of circular economy opportunities.
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They were selected based on their importance for sector value creation in Denmark, as
well as the relevance for circular economy opportunities. The five selected focus sectors
and their product categories are:
•
Food & beverage, a producing sector. The analysis in this sector focused on the
pork and dairy processing industry, but also included a deep dive on the con-
sumer side.
Construction & real estate, a producing sector. The analysis in this sector focused
on the construction and renovation of buildings, but also included a deep dive on
real estate utilisation (sharing).
Machinery, a producing sector. The analysis in this sector focused on pumps and
wind turbines.
Packaging, a cross-cutting sector spanning consumer goods companies, whole-
salers, retailers, and consumers. The analysis in this sector focused on plastic
packaging.
Hospitals, a public, consuming, service sector. The analysis in this sector focused
on public procurement, and is important as a proxy to understand opportunities
in the large public sector in Denmark.
18
The energy sector, while critical for the transition to the circular economy, has
not been selected as a focus sector in this study, as Denmark is already working
towards a target to base all energy consumption, including the transport sector,
on renewables by 2050.
19
•
•
•
•
•
The fact that some sectors were deprioritised in this study does not mean that there
are no circular economy opportunities. But as in most projects, the scope of the
Denmark case study prohibited deep-dive analysis into all aspects of the economy. It
should also be noted that only producing sectors, as well as hospitals, were consid-
ered in the sector selection exercise. While most resource related circular economy
opportunities are arguably concentrated in these sectors, other opportunities may
also be interesting. Other public sectors (in total representing 26% of the national
economy) or the transport sector (one of the top energy consumers in any country)
could be interesting candidates for further analysis, despite being outside the scope
of this study.
CIRCULAR ECONOMY OPPORTUNITIES AND THEIR POTENTIAL IMPACT
To identify and prioritise opportunities within the five selected focus sectors, the
ReSOLVE framework
20
(shown in Figure 4 and described in detail in Appendix E)
was employed. This exercise led to a qualitative mapping of which type of activities
could have the largest impact in the respective sector (see Figure 5), and guided the
prioritisation of ten circular economy opportunities in each sector. These opportunities
are shown in Figure 6, and are detailed in Chapters 2–6, which each cover one sector.
18
19
20
The public sector represents 26% of the national economy. Data from Statistics Denmark.
The Danish Government,
The Danish Climate Policy Plan
(2013).
Ellen MacArthur Foundation, SUN and McKinsey Center for Business and Environment, Growth Within: A
Circular Economy Vision for a Competitive Europe (2015).
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
Figure 4: The ReSOLVE framework: six action areas for businesses and countries
wanting to move towards the circular economy
•
•
•
Shift to renewable energy and materials
Reclaim, retain, and restore health of eco-
systems
Return recovered biological resources to
the biosphere
•
•
•
Share assets (e.g. cars, rooms, appliances)
Reuse/secondhand
Prolong life through maintenance, design
for durability, upgradability, etc.
•
•
•
Increase performance/efficiency of
product
Remove waste in production and supply
chain
Leverage big data, automation, remote
sensing and steering
Remanufacture products or components
Recycle materials
Digest anaerobically
Extract biochemicals from organic waste
•
•
•
•
•
•
Dematerialise directly (e.g. books, CDs,
DVDs, travel)
Dematerialise indirectly (e.g. online
shopping)
•
XCHANGE
Replace old with advanced non-renewable
materials
Apply new technologies (e.g. 3D printing)
Choose new product/service (e.g. multi-
modal transport)
•
•
SOURCE: Ellen MacArthur Foundation, SUN and McKinsey Center for Business and Environment,
Growth Within: A
Circular Economy Vision for a Competitive Europe
(2015). Based on S. Heck, M. Rogers, P. Carroll, Resource Revolution
(2015).
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Figure 5: Qualitative opportunity prioritisation of focus sectors in the Denmark pilot
Low potential
High potential
Prioritised for fur-
ther assessment
Indirectly included
or enabler of key
sector opportunities
QUALITATIVE ASSESSMENT OF POTENTIAL IN DENMARK PILOT
1
FOOD & BEV.
CONSTRUCTION
MACHINERY
PACKAGING
HOSPITALS
XCHANGE
1 Assessment based on focus subsector, product category or material stream in each sector. Food & beverage: Waste/by-products from
pork / dairy processing, residual biomass from agriculture, organic waste from households, retail & hospitality. Construction: New buildings.
Machinery: Manufacturing of pumps and wind turbines. Packaging: Plastic packaging. Hospitals: Purchasing of goods.
SOURCE: Ellen MacArthur Foundation
These ten identified opportunities are already being pursued to some extent today, inside
or outside Denmark. There is however significant potential to scale up. Doing so could bring
Denmark from the – dependent on the sector – early or advanced transitioning economy it is
today to an advanced transitioning and in some areas almost fully circular economy by 2035
(see Figure 7 on page 36-37).
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
Figure 6: Ten circular economy opportunities in five focus sectors
FOOD AND
BEVERAGE
1
2
Value capture in cascading bio-refineries
Reduction of avoidable food waste
CONSTRUCTION
AND REAL
ESTATE
3
4
5
Industrialised production and 3D printing of
building modules
Reuse and high-value recycling of components and
materials
Sharing and multi-purposing of buildings
MACHINERY
6
7
8
Remanufacturing and new business models
PLASTIC
PACKAGING
Increased recycling of plastic packaging
Bio-based packaging where beneficial
HOSPITALS
9
10
Performance models in procurement
Waste reduction and recycling
SOURCE: Ellen MacArthur Foundation
The impact quantification of the identified opportunities was conducted by estimating
three key factors:
(i)
(ii)
The adoption rate of the opportunity relative to ‘business as usual’
The addressable value pool for the deep-dive sub-sector, e.g., ‘number of units
produced’ or ‘volume of waste’
(iii) The net value created per unit in the deep-dive sub-sector, considering impact
on both revenues and cost.
To ensure a consistent ambition level when detailing these opportunities and assessing
their impact, a short-term scenario of five years (2020) and a long-term scenario of 20
years (2035 were defined), each for which an adoption rate and the net value creation
were estimated, see Figure 8. The year 2035 was selected to illustrate as much of the
‘full’ potential as possible, without going so far into the future that businesses and
other stakeholders would find it hard to assess concrete opportunities. The scenario
description served offered a common backdrop to define and assess the different
identified opportunities, by articulating how the business environment and consumer
behaviour, as well as technology, could evolve going forward.
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Furthermore, a ‘conservative’ and an ‘ambitious’ version of these scenarios were
defined to illustrate the range of impact the circular economy development could have.
These two levels differentiate assumptions on the scalability of impact from the deep
dives into sector subcategories to the rest of the sector, and of the five focus sectors
to adjacent producing sectors. The impact estimated for pumps and windmills, for
example, is scaled up to the full machinery sector. The impact for the machinery sector
is then, in turn, scaled up to the adjacent sectors electronics, other manufacturing, basic
metals and fabricated metal products, and mining. In the conservative scenario, such
scale-up is significantly discounted – for example, when scaling up the results from the
construction of buildings to infrastructure construction, these results are reduced by
80%. In the ambitious scenario, higher scale-up rates are used. A detailed description of
the approach of quantifying deep-dive sub-sectors and scaling up to the full sector is all
its elements is given in Appendix B. A driver tree representation of the methodology can
be found in Figure B2.
Figure 8: Short-term and long-term scenarios used in the Denmark pilot
Short-term (2020)
BUSINESS &
CONSUMER
BEHAVIOUR
•
Increased acceptance of performance
based business models in businesses
and the public sector, but still for
niche product categories (e.g. ~10%
of imaging / radiation equipment in
hospitals, ~10% of machinery products)
Households are comfortable using
new separation systems introduced by
municipalities as part of the “Denmark
Without Waste” strategy (e.g. increase
in collection rate of household plastic
packaging waste by 15 percentage
points)
Significant remaining margins for
improvement in waste reduction
Rapidly increasing interest in
sharing business models (e.g. shared
residential and office space)
Long-term (2035)
•
Broad acceptance of access over
ownership business models in
businesses and public sector (e.g.
~30% of a broad range of products
in hospitals, ~30-70% of machinery
products)
Fully optimised waste collection and
separation infrastructure provided by
municipalities and waste managers
(collection of 70-80% of plastics for
recycling)
Avoidable food waste reduction
approaching theoretical limits due to
improved knowledge and use of best
practices among consumers, businesses
and public institutions (e.g. hospitals)
Sharing has become the new norm
for traditionally underutilised assets
(buildings, cars, and durables)
Key circular economy technologies
existing today at R&D or early
commercial stage have reached
maturity due to accelerated innovation
Increasing remanufacturing of
machinery components for use
in “as new” products enabled by
increasing importance of software for
performance
•
•
•
•
•
•
TECHNOLOGY
•
Key circular economy technologies (e.g.
cascading bio-refineries, bio-based
alternatives to plastics, 3D printing and
design for disassembly in construction,
remanufacturing techniques), existing
today at late R&D or early commercial
stage, have been successfully piloted
•
•
Source: Expert interviews; DBA; Danish EPA; Ellen MacArthur Foundation.
Overall, the underlying assumptions for both scenarios can be considered relatively
conservative. The scenarios rely, for example, only on technologies currently at
commercial stage or late R&D. In addition, the analysis focused on the producing
sectors and hospitals only, representing, in total, 25% of the Danish economy
21
. No
direct circularity effects have been modelled for the service sector (except hospitals),
which represents (excluding hospitals) over 70% of the Danish economy. The Danish
21
Based on 2011 gross value added provided by Statistics Denmark.
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
Figure 7: Illustrative status of circular economy in Denmark today and potential by 2035
2015
2035
LINEAR ECONOMY
•
•
•
Linear flows (landfill, incineration)
Efficiency; waste avoidance
Non-renewable energy
FOOD AND
BEVERAGE
•
Near 100% of industrial organic waste valorised, but mainly in
low-value applications (e.g. energy recovery, animal feed); ~3% of
waste used in advanced AD, <1% cascaded bio-refining
80–90 kg/capita avoidable food waste p.a.
•
BUILT
ENVIRONMENT
•
•
•
87% of construction & demolition waste recycled yet with low
quality; <1% reuse
10–15% materials wasted during construction
First sharing platforms (e.g. AirBnB)
MACHINERY
•
•
•
Very high recycling rates; <1% remanufacturing
Lifetimes already (being) optimised using e.g. predictive
maintenance
<1% performance contracts
PLASTIC
PACKAGING
•
•
~30% recycling (rest incinerated)
Plastic packaging largely petro-based
HOSPITALS
•
•
•
High levels of waste
15–30% recycling
Performance models only adopted for textiles
ENERGY (NOT
FOCUS IN PILOT)
•
•
>40% renewables in electricity
26% renewables in final energy consumption
DENMARK (BASED
ON SECTORS
ABOVE)
2015
2035
SOURCE: Statistics Denmark; Eurostat; Danish Climate Policy Plan; expert interviews; Ellen MacArthur Foundation
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CIRCULAR ECONOMY
TRANSITION ECONOMY
•
•
Low-value circular flows (e.g.
recycling, AD)
Mix of renewable and non-re-
newable energy
•
•
•
High-value circular flows (e.g. reuse, reman,
cascaded value extraction for organics)
Circular business models (e.g. sharing, leasing)
Renewable energy
•
•
~90% of organic waste in advanced AD and cascaded bio-refining
40–50 kg/capita avoidable food waste p.a.
•
•
•
15% of building materials and components
reused; recycling with higher quality
<1% waste in construction process
Widespread building sharing
•
•
15–35% remanufacturing
10–15% performance contracts
•
•
~75% recycling
Bio-based materials
replacing petro-based
plastics in selected products
•
•
•
Avoidable waste designed out
>80% recycling (of non-toxic
waste)
40% performance models
adoption for addressable
equipment
•
•
•
100% renewables in electricity and heating
Oil for heating and coal phased out
Fossil fuels remain in e.g. transport
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
energy mix was assumed to be the same in the ‘business as usual’ and circular economy
scenarios – which limits the size of the potential CO
2
reduction. More details on key
macroeconomic model assumptions and data sources can be found in Appendix C.
In order to analyse the economy-wide impact, including potential knock-on effects
on other sectors of the Danish economy, the quantified impact of the sector-specific
circular economy opportunities was used as input to a computable general equilibrium
model (see Section 2.3.1 and Appendix C in the toolkit report for further details). As
seen in Figure 9, this analysis shows that relative to a ‘business as usual’ scenario, these
opportunities could produce significant positive economic and environmental results
by 2035. While such estimates by necessity rely on a number of assumptions and
recognising that the methodology used to estimate them will continue to be developed,
these findings support conclusions from a growing body of research (see Figure E3)
that the impact of a circular economy transition on economic growth, job creation and
carbon emissions is likely positive. For a detailed description of the impact assessment
methodology, see Appendix B.
Figure 9: Estimated potential impact of further transitioning to the circular economy
in Denmark
Economy-wide impact by 2035. Absolute and percentage change relative to the
‘business as usual’ scenario.
GDP
EUR billion (2015 prices)
Employment
1
Job equivalents
CO
2
footprint
2
Million tonnes of CO2
x%
1 Employment impact modelled through conversion of labour bill to job equivalents via a wage curve approach
(elasticity = 0.2). Percentage change is vs. 2013 total full-time employment (Source: Statistics Denmark)
2 Change in Global CO2 emissions vs. Denmark baseline 2035 emissions; other GHG emissions are not included.
SOURCE: Ellen MacArthur Foundation; NERA Economic Consulting
While such estimates by necessity rely on a number of assumptions and recognising that
the methodology used to estimate them will continue to be developed, these findings
support conclusions from a growing body of research (see Figure 4 in Chapter 1.1 of the
main report) that the impact of a circular economy transition on economic growth, job
creation and carbon emissions is likely positive.
CONSERVATIVE
AMBITIOUS
3.6
0.8%
7,300
0.4%
-0.8
-2.5%
6.2
1.4%
13,300
0.6%
-2.3
-6.9%
Percentage change 2035 vs.
‘business as usual’ scenario
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Positive changes relative to the ‘business as usual’ scenario were identified in five key
areas:
Economic growth (measured as change in Gross Domestic Product):
Economic
modelling suggests that the identified circular economy opportunities could expand
Denmark’s GDP by between +0.8% (in the conservative scenario) and +1.4% (in
the ambitious scenario) by 2035. This increase in national economic growth would
be achieved mainly through a combination of increased revenues from emerging
circular activities and lower cost of production through more productive utilisation of
inputs. These changes in input and output of economic production activities affect
economy-wide supply, demand and prices, rippling through the other sectors of the
Danish economy and resulting in a series of indirect effects that add to the overall
growth. Such effects include changed activity levels in the supply chains, and greater
consumption and savings resulting from an increase in household income, in turn
resulting from greater remuneration to labour. Together, these effects add up to a
positive change in GDP (and contribute to other macro impacts described below).
Employment (measured as job equivalents estimated via a wage curve approach):
Total remuneration to labour increases both as a result of general expansion of economic
activity, and as a result of the increased labour intensity resulting from certain circular
economy opportunities (e.g. remanufacturing). Although the impact assessment model
used in the Denmark pilot does not explicitly calculate how this higher remuneration
is distributed between wage increases and new jobs, it is possible to estimate this
distribution using a ‘wage curve’ approach and an assumption on long-run labour supply
elasticity (elasticity = 0.2). Through such a calculation, it is estimated that the direct and
indirect effects of circularity could bring positive impacts to employment by adding
between 7,000 (in the conservative scenario) and 13,000 (in the ambitious scenario) full-
time job equivalents to the economy by 2035.
22
Carbon footprint (measured as change in global emissions as a result of Denmark’s
more circular economy):
Increased circularity and the associated reduction in resource
consumption would lower the carbon intensity of Denmark’s own producing sectors,
reduce Denmark’s imports of high-carbon-embodied goods, and increase Denmark’s
exports of lower-carbon-embodied goods. These changes would directly affect the
carbon emissions of Denmark and its trading partners, and indirectly also those of its
non-trading partners. This could reduce global carbon emissions in a magnitude equal
to between 3% (in the conservative scenario) and 7% (in the ambitious scenario) of
Denmark’s ‘business as usual’ carbon emissions by 2035. This reduction excludes the
effects resulting from a shift to renewable energy.
Resource use:
By 2035, increased remanufacturing in the machinery sector could
reduce demand for 60,000–90,000 tons of iron/steel annually (6–10% of total
consumption in that sector).
23
In plastic packaging, demand for virgin plastic could be
reduced by 80,000–100,000 tons annually due to increased recycling (40–50% of total
in that sector
24
).
International trade balance:
In a circular economy, Denmark’s use of goods and
services would be more productive than it would be otherwise. That is, Denmark would
be able to produce goods and services, primarily those in the focus sectors, at a lower
cost. This cost advantage from greater circularity would improve cost-competitiveness
internationally, which would result in higher exports and erode the attractiveness of
imports, reducing their volume. Such trade effects could ripple across to other countries,
resulting in a shift in Denmark’s trading patterns with the rest of the world. By 2035,
22
Employment impacts are computed assuming a wage curve and a long-run labour supply elasticity of 0.2.
This methodology is similar to the approach adopted by the Danish Economic Council (DØRS) when inter-
preting employment impacts within a CGE with full employment assumption. The chosen elasticity value is an
average for European countries.
Total steel demand provided by Statistics Denmark. Steel savings estimated based on the adoption rate of
component remanufacturing in the machinery sector (Chapter 3.4), informed by material composition pro-
vided by industry reports and sector experts.
Measured by annual plastic packaging waste generated. Danish Environmental Protection Agency,
Statistik
for emballageforsyning og indsamling af emballageaffald 2012
(2015 rev.).
23
24
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
net exports (i.e. exports minus imports) could expand, relative to the ‘business as usual’
scenario, by 3% (in the conservative scenario) and 6% (in the ambitious scenario).
Even though most of the identified circular economy opportunities by nature take
time to realise, there are benefits in the short term. By 2020, adoption of the identified
circular economy opportunities could increase GDP by EUR 400 million (0.1%), and
create 1,300–1,400 new jobs. The model estimates a slight rebound effect in CO2
emissions, with a 1.0%–2.0% increase by 2020. However, this should be understood in
relation to a baseline scenario that factors in a significant decline in the use of fossil
energy in Denmark, following the national target to reduce GHG emissions 40% by 2020
vs. 1990 levels
Figure 10 shows a breakdown of these results along the seven quantified circular
economy opportunities. Three circular economy opportunities have not been quantified.
The economic impacts of the two packaging opportunities and the opportunity related
to waste reduction and recycling in hospitals have not been quantified as it is expected
that their magnitude would be limited when compared to the full Danish economy.
Figure 10: Breakdown of potential economic impact by quantified opportunity
CIRCULAR ECONOMY
OPPORTUNITY
Industrialised production and 3D
printing of building modules
ESTIMATED ANNUAL VALUE CREATED BY 2035
1
33%
Value capture in cascading bio-
refineries
17%
Remanufacturing and new business
models
2
17%
Sharing and multi-purposing of
buildings
16%
Reuse and high-value recycling of
components and materials
7%
Reduction of avoidable food waste
7%
Performance models in
procurement
3%
Total
100%
1 Average between conservative and ambitious scenario. This sector-specific impact does not include indirect
effects, e.g. on supply chains, that are captured in the economy-wide CGE modelling.
2 Including scaling from machinery sector (including pumps, wind turbines and other machinery products) to
adjacent manufacturing sectors (electronic products, basic metals and fabricated products, other manufacturing,
mining and quarrying)
SOURCE: Ellen MacArthur Foundation
 ERU, Alm.del - 2015-16 - Bilag 93: 'Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making', fra Erhvervs- og Vækstministeriet
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BARRIERS AND POTENTIAL POLICY OPTIONS
While most circular economy opportunities identified in Denmark have sound underlying
profitability, there are often non-financial barriers limiting further scale-up or reducing
their pace. An overview of the barriers to each of the opportunities in the Denmark pilot
is provided in Figure 11.
The social factor barriers of capabilities and skills and custom and habit are widespread,
as the behavioural changes needed to realise many of the opportunities go against
ingrained patterns of behaviour and skill-sets on the part both of consumers and
businesses. Imperfect information was also often found to be a barrier: businesses can
be unaware of potentially profitable new opportunities, or the information necessary to
realise them is unevenly distributed.
Technology can be a critical barrier as well, especially for the more technology-
dependent opportunities such as cascading bio-refineries, 3D printing of building
components, and bio-based packaging.
Externalities feature as a barrier to many opportunities, though they do not threaten
the fundamental profitability of most, with the exception of packaging. In this sector,
without the additional factoring in of externalities, the profitability of both recycling
and bio-based packaging is highly dependent on the price of the alternative – petro-
based plastic, which is in turn determined by global oil prices. A similar reasoning
applies to bio-refineries, although cascading bio-refineries could alleviate this concern
by diversifying revenue streams beyond alternatives to petro-based fuels, chemicals and
plastics.
The barrier of unintended consequences from existing legislation limiting circular
economy opportunities is present for example in bio-refining where food safety
regulations prevent the use of certain animal products as feedstock. Such barriers can be
in the complexity and cost of adhering to regulations as well as in actual prohibition of
certain activities. The devil is in the detail here, and more detailed analysis of unintended
consequences would be required to determine the exact magnitude of this barrier for
the different opportunities in Denmark.
Potential policy options that could overcome the barriers for each of these opportunities
have been identified. These options cover a broad range of policy intervention types,
and are detailed in the sector deep dive chapters below. They should not be considered
as recommendations, rather as an input to Danish policymakers’ discussions about if
and how to shift to a circular economy. Policymakers would need to assess in detail their
expected costs, benefits and feasibility.
To enable a systemic transition towards the circular economy, Danish policymakers
could also reflect on setting an economy-wide direction for the circular economy,
broader changes to the fiscal system, and a wider knowledge-building and education
effort. While many circular economy opportunities already have a sound underlying
profitability, a number of international organisations, such as the European Commission,
the OECD, the IMF, and the International Labour Organization, have suggested further
opportunities could be unlocked by shifting fiscal incentives towards labour from
resources. However, the effects of such a shift would need to be carefully analysed,
especially considering Denmark is a small and export-oriented country. Complementing
today’s flow-based metrics such as GDP as a measure of economic success with
measures of a country’s stock of assets could be an instrument for policymakers to
account for the restoration and regeneration of natural capital.
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
Figure 11: Barrier matrix for the ten prioritised
opportunities in Denmark
Critical barrier (‘make or break’)
Very important barrier (to scale-up / acceleration of lever)
Important barrier (to scale-up / acceleration of lever)
Limited or no barrier
CIRCULAR ECONOMY OPPORTUNITIES
BARRIERS
ECONOMICS
MARKET FAILURES
REGULATORY
FAILURES
SOCIAL
FACTORS
Value capture
in cascading
bio-refineries
Reduction
of avoidable
food waste
Industrialised
production
and 3D
printing of
building
modules
Not profitable for businesses
1
even if other
barriers are overcome
Capital intensive and/or uncertain payback
times
Technology not yet fully available at scale
Externalities (true costs) not fully refletcted in
market prices
Insufficient public goods / infrastructure
2
provided by the market or the state
Insufficient competition / markets leading to
lower quantity and higher prices than is socially
desirable
Imperfect information that negatively
affects market decisions, such as asymmetric
information
Split incentives (agency problem) when two
parties to a transaction have different goals
Transaction costs such as the costs of finding
and bargaining with customers or suppliers
Inadequately defined legal frameworks
that govern areas such as the use of new
technologies
Poorly defined targets and objectives which
provide either insufficient or skewed direction
to industry
Implementation and enforcement failures
leading to the effects of regulations being
diluted or altered
Unintended consequences of existing
regulations that hamper circular practices
Capabilities and skills lacking either in-house or
in the market at reasonable cost
Custom and habit: ingrained patterns of
behaviour by consumers and businesses
1 At market prices excluding the full pricing of externalities such as greenhouse gas emissions, ecosystem degradation and resource depletion
2 Infrastructure defined as fundamental physical and organisational structures and facilities, such as transportation, communication, water and
energy supplies and waste treatment
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Reuse and
high value
recycling of
components
and materials
Sharing
and multi-
purposing of
buildings
Remanufac-
turing and
new business
models
Increased
recycling
of plastic
packaging
Bio-based
packaging
where
beneficial
Performance
models in
procurement
Waste
reduction and
recycling in
hospitals
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2 FOOD & BEVERAGE
The Danish food and beverage industry has developed a track record
of minimising processing waste and finding productive use for its by-
products and remaining waste streams – but mostly in relatively low-value
applications. It therefore has a significant opportunity to increase the value
extraction from its by-products and waste streams by using cascading
bio-refineries. While anaerobic digestion and other basic bio-refining
technologies exist today, the technology to derive – in cascaded applications
– high-value compounds is still an estimated five years away. If technological
development continues and plant capacity is built up, modelling suggest that
these cascading bio-refineries could yield, by 2035, a potential net value of
EUR 300–500 million annually. In parallel, reducing the levels of avoidable
food waste from 80–90 kg/capita to 40–50 kg/capita, enabled through
building awareness and capabilities among households and businesses and
improving technologies across the value chain, could save Danish households
and businesses an estimated EUR 150–250 million annually by 2035.
Operating in a highly competitive international context, the Danish food and beverage
industry has developed a track record of minimising processing waste and finding
productive use for its by-products and remaining waste streams. However, most of these
applications are relatively low-value, such as the production of animal feed or energy
extraction. The Danish food and beverage processing industry therefore has a significant
opportunity to increase the value extraction from its by-products and waste streams in
cascading bio-refineries.
The retail and hospitality sectors and households, on the other hand, generate large
quantities of avoidable food waste. Considering that Danish households spent over EUR
23 billion on food and beverages in 2013, or 20% of their total consumption,
25
significant
value could be captured by reducing avoidable food waste.
2.1 Value capture in cascading bio-refineries
Opportunity:
Develop cascading bio-refineries that capture the full value of by-
product and waste streams by extracting several different products.
EUR 300–500 (50-80) million p.a.
2035 (2020)
economic
potential:
Key barriers:
Capital to build and scale up capacity; technology; unintended
consequences of existing regulation.
Long-term strategic targets for bio-refineries; support capacity for
current technologies and create markets; support technological
development.
Sample policy
options:
Home to international players such as Carlsberg, Danish Crown, and Arla, the Danish
food and beverage sector is a cornerstone of Danish industry, representing 25% of
the total product exports, and 7.7% of the gross value added by the Danish producing
sectors.
26
The Danish food-processing industry is already a leader in resource productivity, both in
terms of minimising waste and valorising by-products:
25
26
Eurostat,
Final consumption expenditure of households by consumption purpose
(2013).
Based on gross value added in 2011, reported by Statistics Denmark. Producing sectors include agriculture,
forestry and fishing; mining and quarrying; construction; electricity and gas; manufacturing.
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45
•
At Carlsberg, ~95% of brewery by-products are sold as fodder supplements, and
the company is currently looking into biogas generation for additional value ex-
traction.
Danish Crown ‘does not think in terms of waste at all’ according to environmental
manager Charlotte Thy. ‘It’s in our DNA to find applications for all our by-prod-
ucts’. Slaughterhouses today have a multitude of ways to valorise all parts of the
animal. For example, bones, trotters and excess blood can be sold as animal feed,
and even manure left in the intestines is collected and used for biogas genera-
tion.
Arla has used whey, a by-product of cheese making, to produce high-protein
products since the 1980s.
•
•
Other organic waste, such as wastewater from industries and households, and food
waste, is used to extract energy using anaerobic digestion (biogas), combined heat and
power, or direct district heating. Denmark had an estimated 1.2 GWh biogas capacity
in 2012. The biogas plants treat 3% of Denmark’s organic waste as well as wastewater
and manure. Most of the capacity was built before 2000, but in 2012 Denmark adopted
a new support model and subsidy scheme for the production and use of biogas. The
Danish Energy Agency now estimates that biogas capacity will increase to 2.8 GWh by
2020.
27
THE OPPORTUNITY FOR DENMARK
There is still a large opportunity to capture as most of the abovementioned applications
extract only a fraction of the value residing in the various organic by-products and waste
streams. According to an Aalborg University report, Denmark has a strong position in
bioeconomy R&D, but it is insufficiently leveraged since new valorisation technologies
have not yet been piloted to the extent required to accelerate them to commercial
scale.
28
It has been argued for some years that advanced, cascading ‘bio-refineries’
29
could
unlock this value by deriving valuable products from organic waste and by-products,
in many ways emulating the conventional petroleum refinery.
30
The core principle is
to cascade waste/by-product streams through a series of value-creating steps. The
cascade could consecutively produce, for example, high-value biochemicals and
nutraceuticals, followed by bulk biochemicals, and still be able to produce biofuels and/
or biogas with the remaining biomass. The extraction of nitrogen, phosphorus and
potassium (NPK)
31
and the return of digestate to soils (restoration) ensures that the
process also helps preserve natural capital.
To ensure viability of full value capture through a set of cascaded operations,
development of the more advanced technologies that extract complementary products
from the by-products or waste needs to accelerate. There are many promising examples
of this group of technologies developed today. The following are selected examples; see
also Notes 129 and 131):
•
Use newly engineered enzymes to convert keratin-rich parts such as hairs, bris-
tles or feathers to high-protein feed ingredients.
Extract proteins and other food ingredients from under-utilised residues from
plants (press cake from oil seed, potato peelings, brewers’ spent grain) or ani-
•
27
28
29
Danish Energy Agency,
Biogas i Danmark – status, barrierer og perspektiver
(2014).
Lange, L., Remmen, A., Aalborg University,
Bioeconomy scoping analysis
(2014).
A bio-refinery can be defined as a plant that is designed to convert an organic feedstock into several value
streams by cascading the material through a series of extraction and/or conversion operations. This is not to
be confused with pure-play biofuel or combined heat and power plants that also use an organic feedstock.
For more details, please see Ellen MacArthur Foundation,
Towards the Circular Economy I
(2012), p.52.
For example, the EU-led P-REX project seeks to demonstrate phosphorous recovery from municipal waste-
water at scale. www.p-rex.eu
30
31
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
mals (by-catch and side streams from fisheries).
•
Extract or synthesise nutraceuticals from pig blood and similar chemically rich
by-products.
Use microbes to synthesise bioplastics from sewage sludge or wastewater, such
as in the Danish multi-stakeholder project at special ingredient manufacturer
KMC’s water treatment plant.
32
•
Aside from developing the technologies needed, it is challenging to make them all come
together in an integrated way, and also make them work in concert with more basic
technologies like anaerobic digestion. One of the few plants today operating in line with
the definition of an advanced, cascading bio-refinery (see Note 130) is the Borregaard
plant in Norway.
33
The plant, which used to make paper and cellulose, now produces
a variety of fine chemicals for both food and chemical industries, cellulose-derived
materials and biofuels, mostly based on feedstock from the forest industry. While
Borregaard is not directly comparable to a bio-refinery based on organic waste, such
developments are underway: for example, Veolia has launched a project in collaboration
with UK-based Bakkavor Group to transform a wastewater treatment plant in Belgium
to a fully cascading bio-refinery that produces pharma-grade chemicals, bioplastics,
fertilisers, energy and clean water.
34
With the necessary investments in technology and capacity available, Denmark could
become a leader in cascading bio-refining:
•
By 2020, Danish businesses could have set up the first new bio-refineries to max-
imise the valorisation of existing waste streams using mature technologies (e.g.
enzymatic protein extraction from animal by-products and chemical extraction
from wastewater). Continuing extension of biogas and biofuel capacity could
serve as platforms for emerging, more advanced technologies. Recognising
that such technologies take time to develop at scale, it is estimated that 20% of
the organic waste and by-products are available for additional value creation in
the short term, and that 60% of the added value would come from extending
and improving biofuel and biogas production with 40% provided by extracting
bio(chemicals).
By 2035, Danish businesses could become technology frontrunners in by-prod-
uct (waste) valorisation in cascading bio-refineries, using by then mature ad-
vanced technologies for high-value extraction of biochemicals and nutraceuti-
cals. By this time an estimated 90% of the waste streams could be processed in
new applications, and 60% of the total value added could come from extracting
bio(chemicals), with 40% coming from producing biofuel and biogas (either di-
rectly or by the cascading of material streams from higher-value applications).
•
By assuming a relatively conservative estimate of additional value extraction from
existing waste and by-product streams, the impact assessment suggests that cascading
bio-refineries could create an annual value of EUR 300–500 (50-80) million
35
 in Denmark
by 2035 (2020). This estimate builds on the work of The Netherlands Organisation for
Applied Scientific Research (TNO), which has mapped the potential value increase of 34
organic waste and by-product streams that could be achieved by up-cycling to higher-
32
33
34
35
State of Green,
Producing more with less. Danish strongholds in bioeconomy & resource-efficient production
(2015).
www.borregaard.com
Veolia and Bakkavor presentation at The Water Event, 2013. www.thewaterevent.com/files/collaboration_
and_partnership_delivering_sustainable_solutions_to_water.pdf
This
sector-specific
impact does not include indirect effects, e.g. on supply chains, captured in the econo-
my-wide CGE modelling.
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value applications, and estimated that up to 25–30% additional value.
36
 These estimates
have been applied to the Danish context with input from industry experts and Denmark-
specific data. The findings give a directional view of the magnitude of this opportunity
for Denmark. They rely by necessity on a number of assumptions, the most important of
which are detailed in Appendix B.
DENMARK IS WELL POSITIONED TO CAPTURE THE OPPORTUNITY
Denmark would be well positioned to develop and expand to such next-generation
cascading bio-refineries. With a large agriculture and food processing industry, it has
significant access to feedstock. Denmark has a leading position in biotechnological
research and innovation, both in academia and in companies such as Novozymes,
Chr. Hansen and Daka. It was pointed out in interviews with academics and industry
representatives that the biochemical technologies needed to unlock significantly larger
value are only about five years from maturity, but investments are needed to take them
from the lab to the market: numerous technologies are also already available, but due to
a fragmented market nobody has yet connected the dots to create more integrated bio-
refining systems.
There is already a focus on this new ‘bioeconomy’ in Denmark, and the government
has appointed The National Bioeconomy Panel, which consists of experts from
academia, industry and public bodies, to evaluate strategic options. In March 2015, the
panel published a recommendation to support second-generation biofuel generation
by introducing a 2.5% mixing requirement in petrol, and to support the use of
yellow biomass
37
to produce biochemicals, biomaterials and biofuels through public
procurement, increased research funding or other economic support.
38
The construction
of a second-generation bioethanol plant in Maabjerg (The ‘Maabjerg Energy Concept’ or
MEC plant), projected to come online in January 2016, further illustrates that there is a
willingness to invest from both private and public stakeholders.
39
While the increased valorisation of existing waste and by-products is the focus of this
analysis, there are several other ways to derive additional value in the bioeconomy. As
highlighted during an interview by Mads Helleberg Dorff Christiansen from the Danish
Agriculture & Food Council, there is large potential to continue the optimisation of input
factors, such as crops with higher resilience and yield, improved livestock breeding,
elimination of fertiliser leakage, and better feed. Another option is to deliberately modify
plants to produce more auxiliary biomass to be used in bio-refineries. According to a
study from the University of Copenhagen, it would be possible to produce an additional
10 million tonnes of biomass without significantly altering regular land use or output
from agriculture and forestry sectors.
40
The report claims that products worth between
EUR 1.9 and 3.5 billion could be generated from processing this biomass (mainly for
fuel), while generating 12,000 to 21,000 new jobs.
BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting the
‘value capture in cascading bio-refineries’ opportunity (see Figure 11; also Section
2.2.4 of the toolkit report for the barriers framework). Although there were some
variations in emphasis from the sector experts interviewed in the course of this study,
36
The Netherlands Organisation for Applied Research,
Opportunities for a circular economy in the Netherlands
(2013). It was estimated that new valorisation technologies could generate an additional EUR 1 billion annual-
ly in the Netherlands, compared to the current value of waste streams of EUR 3.5 billion.
Yellow biomass includes straw, haulm and dry crop residues.
The National Bioeconomy Panel,
Anbefalinger: Det gule guld – halmressourcens uudnyttede potentiale
(2015).
Adding to the existing 800,000–900,000 tonnes capacity to convert biomass into biogas, the new plant is
expected to convert 300,000 tonnes of yellow biomass to 80 million litres of bioethanol. The total invest-
ment of ~EUR 300 million comes from key industrial stakeholders such as DONG and Novozymes, but also
from the EU (EUR 39 million) and Innovation Fund Denmark (EUR 40 million).
Gylling, M. et al., Department of Food and Resource Economics, University of Copenhagen,
The + 10 million
tonnes study: increasing the sustainable production of biomass for biorefineries
(2013). The potential also
includes better collection of biomass from farmland, road verges, waterweed and cover crops.
37
38
39
40
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
the central message was clear: the largest barriers preventing an acceleration of next-
generation bio-refineries are technology and capital. The full value of organic waste
and by-products cannot be extracted unless emerging technologies are supported
to reach beyond R&D stage to commercial deployment. This study did not encounter
any bio-refineries that use microbial or enzymatic processes to produce bio-based
materials such as plastics at industrial scale, indicating that such technology is still
at the development stage. Building an efficient bio-refinery operation is also capital
intensive. The financing of the MEC plant at EUR 300 million would – if they were to take
it on alone – represent 9–12% of the balance sheet of leading companies in the sector.
Payback depends partially on the ability to use current technologies (such as bioethanol
and biogas) as platforms, and then add to the biochemical cascade more advanced
technologies when they become commercially viable. While the revenue streams from
the high-value, low-volume products such as nutraceuticals combined with bulk biofuels
or other chemicals could ensure profitability, the competitiveness of the products would
be increased if the prices of alternatives derived from petro-based resources reflected
their true costs (externalities).
Unintended consequences of existing regulations also stand in the way of the bio-
refinery opportunity. It is important to keep in mind the complex and internationalised
regulatory landscape for the food & beverage sector. Denmark, like other European
member states, has only limited control over legislation governing raw material and
product handling, as well as waste treatment, which is set at EU level. The most
prominent example is the more extensive restrictions on animal by-products being
rendered into animal feed, following the breakout of bovine spongiform encephalopathy
(BSE) in the 1990s. This animal by-product legislation restricts some animal parts from
being used in bio-refining. Several sector experts indicate that sometimes Denmark has
chosen to implement this legislation more strictly than its peers.
While parts of the legislation governing food safety and waste treatment may have the
unintended consequence of preventing advancement of new bio-refining operations,
interviews indicate that in many cases it is more the complexity of the regulatory
framework than the restrictions themselves that act as a barrier. The complexity creates
uncertainty and imposes the significant administrative costs of understanding how
to comply and going through the process of acquiring the required permits. It should
therefore be noted that the regulatory situation in the case of each potential bio-refining
value-generation opportunity needs to be investigated closely.
To address these barriers, the following policy options could be further investigated.
They are the result of an initial assessment of how cost-effectively different policy
options might overcome the identified barriers (see Section 2.3.4 in the main report and
Appendix D):
•
As a starting point, including bio-refineries in the government’s long term
strategic plans.
This could guide and reassure investors—even more so if ac-
companied by a policy package to deliver the strategy.
41
In the short term, providing capital to deploy commercial-scale versions of
mature
bio-refinery technologies.
Promising policies include providing low-cost
loans or loan guarantees for the deployment of mature bio-refining technologies
for example through existing Danish business support schemes, and financing at
market rates that is better tailored to investors’ needs (as provided for example
by the UK Green Investment Bank in municipal energy efficiency). Public-private
•
41
In the G7 Germany, the USA and Japan have specific national bioeconomy strategies with targets. While
France, the UK, Italy and Canada do not have a dedicated strategies they provide support for the biobased
economy on the ground. Though some of these strategies and other programmes provide specific support
to biorefineries, none places cascading bio-refining at their core. For more detail, see German Bioeconomy
Council, Bioeconomy Policy: Synopsis and Analysis of Strategies in the G7 (2012).
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partnerships to finance the deployment of mature bio-refining technologies also
hold promise. An interesting example is the Closed Looped Fund NY that pro-
vides zero- or low-interest loans to municipalities or companies, albeit more ac-
tive in developing recycling infrastructure.
42
•
In addition, creating markets
for bio-refinery output. Pricing externalities, set-
ting targets (e.g. a minimum target for second-generation fuels within the EU’s
biofuels target) could contribute to such market development.
In the longer term, stimulating development of advanced, high-value bio-re-
fining technologies.
The government could set up or fund cross-institutional
R&D clusters to accelerate the move into high-value chemicals, nutraceuticals,
pharmaceuticals etc. These could take on various forms, like the UK Catapults,
a powerful example of public private partnerships in R&D, or the German Fraun-
hofer Institute, which plays an important role in European innovation with its
long-term perspective and clearly defined mission to support application orient-
ed research
43
Complementing these measures with a business advice service.
The primary
goal would be to help bio-refinery entrepreneurs navigate a relatively complex
regulatory and policy environment, but it might also help the bio-refinery com-
munity shape this environment.
Identifying and communicating necessary changes to EU policy
(or its na-
tional implementation) to address the unintended consequences of some safe-
ty-focused regulations that unnecessarily restrict the trade in bio-refinery feed-
stock or products.
•
•
•
2.2 Reduction of avoidable food waste
Opportunity:
Reduce avoidable food waste by building awareness and knowledge
for consumers, leveraging technology and best practices for
businesses, and creating markets for second-tier (refused) food.
EUR 150-250 (30-40) million p.a.
2035 (2020)
economic
potential:
Key barriers:
Consumer custom and habit; business capabilities and skills;
imperfect information; split incentives.
Consumer information and education; quantitative food waste
targets; capability building; fiscal incentives.
Sample policy
options:
A significant opportunity lies in preventing the very generation of organic waste.
44
On average, 35% of food output is wasted along the value chain, and while developed
economies like Denmark are comparatively good at reducing waste in food processing,
there is a high waste volume generated by end consumers (see Figure 12). Denmark
generates an estimated 80–90 kg/capita of avoidable food waste per year.
45
42
43
44
www.closedloopfund.com/about/
UK Catapults: See e.g. www.catapult.org.uk/; Fraunhofer Institute: See e.g. www.fraunhofer.de/en/publica-
tions/fraunhofer-annual-report.html
Known as the ‘Lansink’s ladder’, the principle – to avoid waste over reuse, reuse over recycle, recycle over
energy recovery, and energy recovery over disposal – has been part of the European Waste Framework Di-
rective since 2008.
Danish Environmental Protection Agency,
Kortlægning af dagsrenovation i Danmark – Med fokus på etage-
boliger og madspild
(2014).
45
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
Figure 12: Main sources of food waste in global food value chain – production and
consumption
Focus of Denmark Pilot
Material waste
Per cent of total production
Developed
countries
Agriculture
9
91
Processing
9
7
82
4
78
12
Retail
6
2803
0006
9
Consumer
SOURCE: FAO ‘Global Food Losses and Food Waste – Extent, causes and prevention’, Rome 2011; adapted from
Ellen MacArthur Foundation, Towards the circular economy II (2013)
For this reason, the opportunity assessment for avoiding waste in the food and beverage
sector focuses on the end-consumer-facing part of the value chain (including retail
and hospitality).
46
The awareness of this issue has increased rapidly over the past five
years, and waste minimisation is now an integral part of the government’s ‘Denmark
Without Waste’ strategy.
47
There have already been multiple information and awareness
campaigns to reduce food waste among consumers, but much remains to be done.
The Danish EPA has estimated that 56% of the food waste generated by households, and
79% on average in the retail and hospitality sectors, is avoidable.
48
Danish households
generate approximately 55% of the avoidable food waste,
49
and even if the value lost
from discarded food is significant,
50
customers have a tendency to choose convenient
solutions. While businesses have spent a long time minimising food waste, there is still
large potential for improvement.
THE OPPORTUNITY FOR DENMARK
Consumers and businesses could save significant value by minimising avoidable food
waste. A study by SITRA in Finland found that the savings from reducing food waste
would be in the range of EUR 150–200 million annually.
51
Translated to the size of the
46
While Danish food processing companies are generally regarded as proficient in preventing waste, the Danish
Environmental Protection Agency notes that there are still losses from agriculture. Waste prevention in the
agricultural sector was not however in the scope of the Denmark pilot.
Danish Government,
Danmark uden affald II. Strategi for affaldsforebygglese
(2015).
Danish Environmental Protection Agency, Kortlægning af dagsrenovation i Danmark –
Med fokus på etage-
bol- iger og madspild (2014); Danish Environmental Protection Agency, Kortlægning af madaffald i servicese-
ktor- en: Detaljhandel, restauranter og storkøkkener
(2014).
Around 25% is generated by the retail sector and around 20% from the hospitality sector, based on data from
Note 149.
A UK study estimated that the value of unconsumed food and drink amounted to USD 770 per household a
year. WRAP,
Waste arising in the supply of food and drink to households
(2011).
SITRA,
Assessing the circular economy potential for Finland
(2015).
47
48
49
50
51
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Danish economy, this corresponds to a prevention of roughly 30–50% (30–40 kg/capita)
of total avoidable food waste,
52
and an estimated saving of EUR 150–250 million annually
by 2035.
53
These findings give a directional view of the magnitude of this opportunity
for Denmark. They rely by necessity on a number of assumptions, the most important
of which are detailed in Appendix B. The savings would be achieved by a number of
activities, including:
•
Right-sizing the shopping basket.
Consumers could prevent waste by pur-
chasing less unnecessary ‘big packs’ or ‘3 for 2’ deals, which would seem to save
money upfront but could create more waste. A related issue is the practice of
paying per unit for fresh produce (the current practice in Denmark, as opposed
to paying by weight), which incentivises the consumer to buy the largest item
– generating waste both on the consumer side (consumers buy a larger item
than they need), and further back in the value chain, as smaller items could get
deselected or even wasted without being sold
54
. Restaurants could avoid excess
purchases by relentless data tracking and planning, which would require invest-
ing in capability building but would not necessarily make procurement more time
consuming.
Better knowledge about food preservation.
Despite not seeing themselves as
‘food wasters’
55
, consumers often throw away useful food, either because they
prepare too much for a meal, or because they believe the food is spoiled. Date
labelling is required on packaged food to protect consumers, but many people
throw away food that has passed the date even though it has been well refriger-
ated or appropriately stored and remains fresh, due to lack of knowledge of what
the labelling actually means. This behaviour also affects food retailers, as they
are forced to remove products approaching the ‘best before’ date. The EU has
encouraged the discounted sale of such products since 2012 but market accep-
tance is low. Better knowledge about the preservation of food and when it can
be safely used could lead to significant waste volumes being avoided.
Leveraging best practices.
A range of methods exists to reduce the significant
volume of food waste occurring in the grocery store and along the value chain.
Best practices include using data-driven optimisation of ordering and pricing,
56
and increasing shelf life by improving packaging techniques.
57
In the hospitality
sector, preventing leftover waste could be achieved by using data to optimise the
size of servings and avoiding unnecessary volumes on buffets.
Smart technology.
‘Intelligent packaging’, able to transmit information about
the food contained within, is a packaging improvement that has been anticipat-
ed for some time, and is now beginning to enter the market. In 2012 TetraPak
launched a milk carton able to record the time spent at room temperature and
change colour when too much exposure has been recorded. While indicators of
time and temperature are only a proxy for real identification of changes in the
content, packaging manufacturers are increasing by using chemical indicators for
oxygen or carbon dioxide levels, as well as microbial activity.
58
•
•
•
52
53
54
55
56
In comparison, WRAP has estimated that directed efforts in the UK have reduced consumer food waste by
15–80%. WRAP,
Strategies to achieve economic and environmental gains by reducing food waste
(2015).
This
sector-specific
impact does not include indirect effects, e.g. on supply chains, that are captured in the
economy-wide CGE modelling. By 2020, the savings could amount to EUR 30–40 million annually.
Halloran, A. et al., Food Policy 49,
Addressing food waste reduction in Denmark
(2014).
Beck C. et al., FDB, Vallensbæk,
Forbrugere: Vi smider ikke mad ud!
(2011).
International retailers like Tesco and CO-OP are already using big data to forecast local demand and adapt
replenishment of fresh food. Planet Retail,
The Challenge of Food Waste: Retailers step up to the next level of
inventory management
(September 2011).
For a more extensive analysis of waste prevention technologies in the food value chain, see Ellen MacArthur
Foundation,
Towards the Circular Economy II
(2013). These activities have not been central to the circular
economy opportunities assessed for Denmark as they are already advanced and assumed to continue devel-
oping even without policy interventions.
Swedish National Food Agency, www.livsmedelsverket.se
57
58
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
•
Create markets for second-tier food.
Grocers in developed economies such as
Denmark are expected to present produce that is always fresh, plentiful and at-
tractive, when in reality the size and appearance of produce always varies within
a production batch. Although it is only a second-tier solution, supporting a mar-
ket for this food, rather than discarding it, could significantly reduce waste pro-
duced along the value chain. In addition, products going off the shelf when they
approach their ‘best before’ date could be sold at a discount, donated, or used to
produce cheap, ready-made meals.
BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting the
‘reduction in avoidable food waste’ opportunity (see Figure 8; also see Section 2.2.4 of
the toolkit report for the barriers framework). Custom and habit is the largest barrier
limiting the reduction of avoidable food waste in Denmark. Interviews with retail store
managers confirm that consumers often reject food in stores with shorter use dates if
longer dates are available, often reject ‘odd-looking’ produce, and are usually unaware of
the level and impact/consequences of the food waste they generate. Food waste experts
at the Danish Environmental Protection Agency indicate that a lack of capabilities and
skills is also very important; there is insufficient knowledge and experience among the
general public about how to buy, store, evaluate the freshness of, and prepare food in
such a way that minimise waste and left-overs.  
There are also market failures: consumers face imperfect information on the true
freshness of food since they are often unaware of the difference between ‘best before’
and ‘use by’ dates and also underestimate the tolerances that producers/retailers
put around these dates. There are also split incentives: retailers have an incentive
to sell more food and use, for example, ‘3 for 2’ offers on fresh produce. Producers
have an incentive to shorten ‘best before’ dates to reduce liability and encourage the
consumption or disposal of their product as early as possible to increase turnover.
The final market failure is of externalities: if the full environmental cost of agriculture
and food production was reflected in food prices, the incentive to reduce waste would
increase.
59
Any potential solution to this barrier would of course need to take into
account distributional effects. There is finally the regulatory failure of poorly defined
targets and objectives; for example, the ‘Denmark Without Waste’ strategy covers
avoidable food waste, but does not contain quantified targets to reduce it.
60
To address these barriers, the following policy options could be further investigated.
These options are the result of an initial assessment of how cost-effectively different
policy options might overcome the identified barriers (see Section 2.3.4 of the main
report and Appendix D):
•
Informing and educating consumers
using information campaigns on the im-
portance of avoiding food waste; a communication campaign to educate con-
sumers about best-before and use-by labelling; and augmenting the national
school curriculum with knowledge about nutrition, food preservation, judging the
freshness of food, seasonality, and appropriate ingredient and portion sizing.
Creating the right framing conditions to avoid food waste in retail.
This
could include adjusting regulations so as not to discourage the donation of food
due to liability concerns; encouraging such donations, as was recently voted into
law in France or by setting up brokering platforms to facilitate matching donors
and beneficiaries, and clarifying the information on best before dates for food
and beverages to further facilitate such donations (as has happened in Belgium
61
)
•
59
60
61
See for example, Nordic Council,
Initiatives on prevention of food waste in the retail and wholesale trades
(2011).
Danish Government,
Denmark Without Waste I. Recycle more – incinerate less
(2013), p.12.
Agence fédérale pour la Sécurité de la Chaîne alimentaire,
Circulaire relative aux dispositions applicables aux
banques alimentaires et associations caritatives
(2013).
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•
Stimulating the capability building through training programmes
to ensure
that procurement, retail and kitchen staff possesses the necessary skills and tools
to minimize food waste.
Introducing fiscal incentives
such as variable charging schemes for house-
hold waste. A small number of small- and mid-size Danish municipalities have
implemented weight-based charging. Experiences in other countries show that
fee-differentiated collection schemes are also feasible in larger cities with more
multi-family buildings, and Switzerland has made such schemes mandatory in all
municipalities.
62
Setting national or EU-level quantitative food waste targets.
This would pro-
vide overarching guidance to consumers and businesses on the government’s
objectives, and would likely be a very useful complement to some of the other
policies.
Influencing other levels of policy-making, such as
o
o
Informing and shaping EU marketing standards to avoid food waste
arising as an unintended consequence of such regulations.
Motivating supermarkets to reduce waste (e.g. shifting more fresh
produce sales to weight-based models). League tables at local authority
level have proven their value in shifting practices regarding other
environmental/social challenges and could work here as long as it does
not require sharing confidential data.
•
•
•
3 CONSTRUCTION & REAL ESTATE
Identified as one of the sectors with the highest potential for circular
economy at an early stage of the Denmark pilot, there are three main
opportunities for the construction and real estate sector to become more
circular. Industrialised production processes, modularisation and 3D
printing could reduce both building times and structural waste if technology
development continues and traditional industry habits are overcome. Reuse
and high-quality recycling of building components and materials could
reduce the need for new materials and decrease construction and demolition
waste, if the split incentives created by a fragmented market are addressed.
Sharing, multi-purposing and repurposing of buildings furthermore could
reduce the demand for new buildings through better utilisation of existing
floor space. Modelling suggests that the annual potential value unlocked by
2035 if these three opportunities are realised could amount to EUR 450–600
million, 100–150 million, and 300–450 million, respectively.
The European construction sector is fragmented, with many small firms, low labour
productivity, and limited vertical integration along the value chain – especially in
Denmark. There are different incentive structures for different players, and no systematic
application of operational best practices, significant material waste and limited reuse
of building components and materials.
63
In addition, utilisation of existing floor space is
low; only 35–40% of office space is utilised during working hours in Europe.
64
The Danish
62
63
64
Ecotec,
Financing and Incentive Schemes for Municipal Waste Management Case Studies – Final Report to
Directorate General Environment, European Commission
(2002).
Josephson, P.-E. & Saukkoriipi, L., Chalmers University of Technology,
Waste in construction projects: call for a
new approach
(2007)
Norm Miller, Workplace Trends in Office Space: Implications for Future Office Demand, University of San
Diego, 2014; GSA Office of Governmentwide Policy, Workspace Utilization and Allocation Benchmark (2011);
Flexibility.co.uk, Shrinking the office.
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
construction sector has experienced slower productivity growth than leading peers
(1% p.a. vs. 2% p.a. for e.g. Belgium and Austria between 1993 and 2007), and is also
very fragmented.
65
The Danish Productivity Commission has pointed out that there is a
need to increase productivity, especially in the construction sector, in order to maintain
competitiveness.
66
The Danish government highlighted similar points in their building
policy strategy, announced in November 2014.
67
While none of these issues can be fixed with one silver bullet, the Danish construction
and real estate industries could apply a few different approaches that together could
transform the built environment:
68
•
Applying
industrial production
processes to reduce waste during construction
and renovation, including
modular
construction of building components or, go-
ing even one step further,
3D printing
building modules.
Expanding the
reuse and high-quality recycling of building components and
materials
by applying design for disassembly techniques, material passports,
innovative business models, and setting up a reverse logistics ecosystem.
Increasing the utility of existing assets by unleashing the
sharing economy
(peer-to-peer renting, better urban planning),
multi-purposing
buildings such
as schools, and
repurposing
buildings through the modular design of interior
building components.
•
•
There are several other circular economy opportunities that could both unlock value and
save resources in the construction sector. They were deprioritised in the present study
primarily because in Denmark they are already the way to being realised (as for energy
65
66
67
68
According to Statistics Denmark, there were more than 2,000 enterprises with <50 employees in the con-
struction sector in 2012, and fewer than 200 enterprises with 50+ employees.
Danish Productivity Commission,
Slutrapport: Det handler om velstand og velfærd
(2014).
Danish Ministry of Climate, Energy and Building,
Towards a stronger construction sector in Denmark
(2014).
The opportunity assessment builds on the ‘built environment’ deep dive in Ellen MacArthur Foundation,
Stiftungsfonds für Umweltökonomie und Nachhaltigkeit (SUN) and McKinsey Center for Business and Envi-
ronment,
Growth Within: A Circular Economy Vision for a Competitive Europe
(2015).
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use optimisation), or because the level of detail required for a meaningful analysis was
beyond the scope of this study (as for substitution of materials
69
). Below follows a (non-
exhaustive) overview:
•
Energy use optimisation.
New buildings could be designed and constructed as
low-energy houses that consume up to 90% less energy than existing building
stock.
70
Retrofitting old buildings could reduce their energy consumption by 20–
30%.
71
This opportunity has gained high priority in the EU: the European Energy
Performance of Buildings Directive (EPBD) requires new buildings to be ‘nearly
zero-energy’ by 2020. In Denmark this requirement is implemented through the
building class 2020 in the building regulation. The class will be mandatory by
2020 at the latest.
72
The Danish Energy Agency recently released a tool to calcu-
late the total cost of buildings including their energy use, creating transparency
and a clearer incentive for construction companies to build for optimisation of
total cost of ownership (TCO) across the whole life cycle, not only construction
costs.
73
Substituting materials,
or facilitated separation of hazardous components.
Substituting materials that are difficult to reuse and recycle, or make it difficult
to reuse or recycle other materials, with non-toxic, renewable alternatives is an
important part of making buildings more circular. Buildings traditionally contain
a complex mixture of compounds that are often difficult to separate, making
material reuse and recycling difficult. Working to reduce hazardous materials or
additives, for example toxic additives in PVC
74
– or at least making them easier to
separate – is therefore crucial to enable better material recovery at a building’s
end of use. Furthermore it would improve indoor air quality with improved pro-
ductivity and health benefits for the users of the building.
•
3.1 Industrialised production and 3D printing of building
modules
Opportunity:
Use industrial manufacturing methods, modularisation and 3D
printing to reduce time and cost of construction and renovation.
EUR 450-600 (40-60) million p.a.
2035 (2020)
economic
potential:
Key barriers:
Inadequately defined legal frameworks; immature technology;
custom and habit and capabilities and skills in the industry.
Augmented building codes; support for module production facilities;
legal framework for 3D printing materials.
Sample policy
options:
69
70
Countries with high-performing material science or engineering programs may of course choose to draw
upon relevant insights around material substitution into its visioning or assessment work.
The houses are low energy consumers because they use, for example, natural air circulation, better exposi-
tion, and reinforced insulation to reduce energy requirements for space heating or cooling. Note that, from
an LCA perspective, so called ‘passive houses’ could be more energy intense than conventional low-energy
houses, and that the total embedded energy should be taken into account when optimising the energy use
during construction and usage. See for example www.passivehouseacademy.com/index.php/news-blogs/
what-is-passive-house; www.ecobuildingpulse.com/awards/ehda-grand-award-volkshouse_o
A case that has received much attention is the retrofit of the Empire State Building in New York. The project,
guided by the Rocky Mountain Institute, saved the Empire State Building USD 17.3 million and reduced energy
consumption by 38%. See www.rmi.org/retrofit_depot_get_connected_true_retrofit_stories##empire
Danish Government,
Strategy for energy renovation of buildings: The route to energy-efficient buildings in
tomorrow’s Denmark
(2014).
Ulrik Andersen, Ingeniøren,
Ny vejledning kan dræbe den faste anlægspris
(14 April 2015).
See for example www.vinylplus.eu/; www.naturalstep.org/en/pvc#PVC:_An_Evaluation_using_The_Natu-
ral_Step_Framework
71
72
73
74
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
THE OPPORTUNITY FOR DENMARK
Almost 75% of the average cost of a new house comes from the construction process.
75
Importantly from a circular economy perspective, fragmented construction, maintenance
and renovation processes – with multiple stakeholders, lack of full project oversight,
and use of traditional on-site techniques – also lead to two sizable types of resource
inefficiency:
•
•
Large reliance on virgin, finite materials that are assembled manually on-site.
10–15% of materials are wasted on-site
76
(through e.g. over-ordering, inadequate
storage, theft and poor coordination between stakeholders).
There is an increasing number of cases to show that industrial, off-site production of
modules for on-site assembly, coupled with increased coordination of all stakeholders
in the construction value chain, might greatly reduce today’s construction waste and
speed up the construction process considerably. As an example of this new approach,
the Chinese builder Broad Group took only 6.5 months to build a 30-story hotel, of
which only 15 days were spent actually erecting the building on-site. This was enabled
by building each floor in 16x4 m modules, which were then assembled by ~200 workers.
Total savings amounted to 10–30% vs. conventional construction.
77
Building interiors
could also be modularised at high net savings, as shown by Canadian manufacturer
DIRTT (‘Doing It Right This Time’). DIRTT provides customisable, modular architectural
interiors with standardised dimensions, which can be fitted in new buildings or within the
envelopes of old buildings.
78
Players with similar offerings in Europe are Alho, Huf Haus,
Baühu, and Caledonian Modular.
A more extreme, but according to many industry experts viable, approach to
industrialising and modularising building component manufacturing is 3D printing. Given
its exponential technological growth curve over the past years, it is likely that 3D printing
of building components will be technically and economically feasible in the near future.
Chinese construction company WinSun has demonstrated the revolution 3D printing
could bring to the construction sector by building full-size houses made out of only
3D-printed components. WinSun has claimed 80% labour savings and 30–60% material
savings.
79
Obviously, the material choice for 3D printing needs to be managed well to
ensure positive environmental impact. WinSun has taken a promising approach by using
a mixture of dry cement and construction waste, but it still needs to be verified that the
long-term indoor quality of using this mixture can be secured, and that the construction
waste does not contain hazardous materials that could leak into the environment. Before
3D printing of entire buildings is feasible at scale, the viability of producing smaller 3D
construction modules for interior and exterior use is rapidly increasing. In a similar vein,
Danish innovator Eentileen’s automated process cuts sustainably sourced plywood
based on a digital blueprint and significantly reduces waste and emissions.
80
By being an early adopter of these new building practices and techniques, Denmark
could become a leader in making a step change in construction material productivity:
75
76
77
Josephson, P.-E. & Saukkoriipi, L., Chalmers University of Technology,
Waste in construction projects: call for a
new approach
(2007).
Estimate, compiled from interviews with sector experts.
Ellen MacArthur Foundation, Stiftungsfonds für Umweltökonomie und Nachhaltigkeit (SUN) and McKinsey
Center for Business and Environment,
Growth Within: A Circular Economy Vision for a Competitive Europe
(2015). See also www.archdaily.com/289496/
www.dirtt.net/
Ellen MacArthur Foundation, Stiftungsfonds für Umweltökonomie und Nachhaltigkeit (SUN) and McKinsey
Center for Business and Environment,
Growth Within: A Circular Economy Vision for a Competitive Europe
(2015). See also www.yhbm.com/index.php?m=content&c=index&a=lists&catid=67
eentileen.dk/print
78
79
80
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•
By 2020,
the construction sector could have adopted industrialised production
processes for up to 5% of new buildings and major renovations, reducing waste
and generating up to 10% net material savings. While 3D printing is likely to re-
main at a conceptual stage, it is reasonable to assume that approximately 2% of
new building components could be 3D printed, for which around 25% material
and 40% labour savings could be achieved.
81
By 2035,
industrialised (non-3D printing) production of modular building com-
ponents could have taken as much as 50% of the total market, leading to 15%
material savings. 3D printing could grow to a sizable share of the market, ad-
dressing up to 25% of all building components.
•
If these opportunities are captured, modelling suggests that industrialised production
and 3D printing of modules could create an estimated annual value of EUR 450–600
(40–60) million by 2035 (2020).
82
These findings give a directional view of the
magnitude of this opportunity for Denmark. They rely by necessity on a number of
assumptions, the most important of which are detailed in Appendix B.
BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting the
‘industrialised production and 3D printing of building modules’ opportunity (see Figure
8; also see Section 2.2.4 in the main report for the barriers framework). The critical
barriers to unlocking this opportunity lie in the technology and legal framework around
3D printing. As discussed above, while the application of 3D-printing technology in
construction has progressed significantly in recent years, it is still at the early commercial
stage and would need further development to be economic at large scale, able to
compete with more standard methods. The WinSun 3D-printed houses referred to above
were completed in spring 2014 (ten individual houses) and in early 2015 (a five-storey
house and a villa).
83
Equally important is the lack of a strong legal framework to ensure
that the technology has a positive impact, both in terms of environmental and technical
performance and the health of occupants. According to industry and policy experts, it
cannot become a widely trusted approach while it is still open to the use of any material,
however non-circular or hazardous to the health of building occupants.
Experts in the industry were also of the opinion that important social barriers exist for
both industrial production of modules and 3D printing. Many players in the construction
industry are unwilling to change long-established operational practices, such as
rigid business models and extensive subcontracting, resulting in fragmented (over-
specialised) knowledge and capabilities. While this factor will to some extent be relevant
in any industry, consultation with experts indicated that the construction industry is
particularly bound by more traditional practices. On the consumer side homebuyers may
also be unwilling to trust non-traditional building approaches. The capital intensity of the
industrial facilities in which to produce modules would be a challenge for the industry in
Denmark, as it is made up by a large number of SMEs.
To address these barriers, the following policy options could be further investigated.
These options are the result of an initial assessment of how cost-effectively different
policy options might overcome the identified barriers (see Section 2.3.4 of the toolkit
report and Appendix D):
•
Complementing building codes with circularity ratings and targets:
o
Ratings indicating the circularity potential of materials and construction
techniques.
81
Estimated by taking half of WinSun’s reported savings, since there is still very little data to exemplify cost
savings. Actual savings will vary on a case-by-case basis and be dependent on the size and complexity of
components being 3D printed.
This
sector-specific
impact does not include indirect effects, e.g. on supply chains, that are captured in the
economy-wide CGE modelling.
Michelle Starr in CNET,
World’s first 3D-printed apartment building constructed in China
(20 January 2015).
82
83
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
o
Circular economy targets that set minimum requirements using a
scoring mechanism. Denmark and the UK have already introduced
energy efficiency and carbon ratings. This could be deployed to
stimulate circularity, for example with energy standards that incorporate
carbon/kWh scores for both the energy embedded in the materials
and that used during operations—with recycled materials scoring
considerably better than virgin ones.
If targets are set, it is important that technology neutrality is maintained
and the government is not prescribing the technologies, materials, or
techniques to be used. In general, interventions along these lines would
be expected to be most effective if introduced gradually, for example
with gradually increasing standards as has been the case for energy
efficiency within the Danish building regulations. In addition, these
interventions would likely have impact across the three circular economy
opportunities in the sector.
o
•
Supporting module production facilities.
The government might choose to
play a role in motivating the financial industry to move into this area as such pro-
duction facilities can yield good returns. If this is not an option or does not yield
results at the desired scale or speed, low-cost government loans could also start
addressing the access to capital barrier. If concessionary financing is undesirable,
government agencies might provide loans at market rates that have been de-
signed to meet the complex financing needs of nascent industries. For example,
the UK Green Investment Bank has recently developed innovative loan products
that are tailored to the specific needs of companies and local authorities wishing
to make investment in energy efficiency improvements, which is a similarly im-
mature market.
Creating legal framework for 3D printing materials.
Regulating input materi-
als for 3D printing is necessary to realise the full potential of the technology. The
timing is right to work on this, as the 3D printing industry is still young and sup-
ply chains are not yet mature and locked in. Given its complexity, developing this
internationally—at the EU level or beyond—would make most sense. Along with
material policies there is also a need for safety, quality, and environmental stan-
dards for the processes and technologies themselves.
Bringing together all stakeholders
in the construction value chain to work on
systemic solutions to address the lack of skills and established norms that stand
in the way of industrialising production. This could take the form of an indus-
try-wide partnership focused on knowledge sharing and collaboration, a project
with specific short-term objectives, or a private public partnership.
Supporting R&D.
Funding programmes to develop and bring to commercial
scale new techniques in the 3D printing of building components and explore
technological synergies between component printing and the on-going digitisa-
tion of construction. A technology challenge prize (as for example promoted by
Nesta in the UK
84
) could also be considered.
Launching public procurement pilots.
Such pilots could serve a triple purpose:
demonstrate the viability and benefits of existing circular materials and construc-
tion techniques, stimulate the development of new materials and techniques
(design competitions offer an alternative), and develop the necessary guidance
and procedures for procurement teams to be able to accommodate such new or
unfamiliar elements (e.g. adjustments to the typical pre-construction dialogues).
Funding for industry training programmes
tailored to the various actors along
the construction value chain (architects, engineers, entrepreneurs, construction
workers, etc.) covering off-site production and on-site assembly of components
as well as 3D printing techniques.
•
•
•
•
•
84
www.nesta.org.uk/project/big-green-challenge
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3.2 Reuse and high-value recycling of components and
materials
Opportunity:
Tighter ‘looping’ of building components through either reuse or
high-quality recycling, enabled by, e.g. design for disassembly and
new business models.
EUR 100-150 (10-12) million p.a.
2035 (2020)
economic
potential:
Key barriers:
Split incentives and lack of information across the construction value
chain; custom and habit; capabilities and skills.
Augmented building codes; industry-wide training programmes;
support for material inventory software.
Sample policy
options:
THE OPPORTUNITY FOR DENMARK
As in other Danish industrial sectors, the construction industry has achieved very
high industrial recycling rates, especially of valuable materials such as steel and other
metals. The overall recycling rate is 87%, but like in most markets the reuse of building
components (such as wall or floor segments) and lower-value materials (such as bricks)
is very limited. Three characteristics of the construction sector could help explain this
situation:
•
Strong safety concerns and a tightly regulated sector, leading to uncertainties
about both performance and health issues of reused or recycled materials and
components.
A fragmented value chain, with different incentives for initial investors, archi-
tects/engineers, (sub)contractors, owners and tenants, leading to limited uptake
of circular design. The fragmentation also makes it hard for new practices to gain
traction, such as deconstruction rather than demolition, which would salvage
more useful components and materials for reuse and high-value recycling.
Long-lived construction objects, meaning that those facing demolition or renova-
tion today were not designed with reuse of materials or components in mind.
•
•
Fortunately, there are a number of innovative design and operations examples on how to
enable increased looping of components:
•
Design for disassembly and reuse of components and materials.
The ‘tight-
est’ loop for building components would be to design for non-destructive dis-
assembly and full reuse of building components in new projects.
85
Although not
a new idea – the British Pavilion in the 1992 Seville Expo being one example
86
– there are still few buildings designed for disassembly (and reuse). Turntoo, the
Dutch company founded by architect Thomas Rau, has led the work of retrofit-
ting the Brummen Town Hall in the Netherlands, where the architects worked
together with the material suppliers to establish performance contracts where
the suppliers retained ownership of the materials.
87
The renovated town hall,
completed in 2013, is designed for disassembly and has an attached materi-
als passport to fully track the building’s material assets. In the same vein, the
85
86
87
Cl:aire, Subr:im Bulletin 05,
Avoiding Future Brownfield Sites through Design for Deconstruction and the
Reuse of Building Components
(November 2007).
www.steelconstruction.info/Recycling_and_reuse#What_is_recycling_and_reuse.3F
turntoo.com/en/projecten/town-hall-brummen/
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
C2C-designed Park 20/20 office complex, developed in the Netherlands by Delta
Development, is being built for disassembly and incorporates asset tracking for
future reuse.
88
Design for disassembly could also include design regular review
and upgrade, which would enable the use of some materials with a lower envi-
ronmental footprint, e.g. glulam beams as load-bearing construction elements.
•
Use of recycled materials.
Even though few buildings today have been con-
structed with deconstruction and reuse in mind, it is possible to recover signif-
icant quantities construction materials and use them for new buildings. The US
EPA’s buildings One and Two Potomac Yard in Arlington, VA, were built using
27% recycled content – including slag concrete aggregate, fly ash, and gypsum
wallboard.
89
Examples of companies including recycled industrial materials in
their products are insulation manufacturer Rockwool
90
as well as DIRTT
91
(see
above). A relevant case example from Denmark is the ‘Upcycle house’, built us-
ing processed recycled materials and reducing the overall CO
2
emissions by 86%
compared to the building of a benchmark house.
92
As the reuse of components
and recycling of materials proliferates and a new reverse cycle ecosystem emerg-
es, a market will emerge for material ‘brokers’ connecting suppliers with buyers,
as with the Scottish Material Brokearge Service.
93
There are two challenges to
be overcome when reusing/recycling materials from existing buildings: the chal-
lenge of hazardous chemicals (including those no longer permitted in building
materials today); and the technical performance of components/materials not
designed for reuse/recycling.
94
New business models.
The examples above introduce the concept of perfor-
mance contracts in the real estate sector: the property owner does not neces-
sarily own all materials and systems in the building and might instead buy utility
(e.g. lux-hours instead of light fixtures).
Deconstruction.
In Japan, Taisei Corporation has demonstrated that deconstruc-
tion is possible even for tall buildings such as The Grand Prince Hotel Akasaka.
A Taisei-developed approach deconstructed the 141-meter building from the top
down, reducing carbon emissions of the deconstruction process by 85%.
95
•
•
Employing these best practices in the construction and real estate sector, Denmark
could increasingly use recovered building components and materials in more valuable
cycles than downgrading recycling. Examples of value retention already exist; Skive
municipality runs a project to improve the reuse of old construction components by
incorporating new targets in the municipality’s 2015–24 waste management strategy and
creating an environment for new business models centred on material looping,
96
and
The Fund for Green Business Development has funded a partnership where innovative
public procurement is used to increase the reuse of building components and materials
88
89
90
91
92
93
See www.park2020.com/; urbanland.uli.org/sustainability/park-2020-amsterdam-born-recycled/. The office
park is expected to be completed by 2017.
US Environmental Protection Agency,
Using Recycled Industrial Materials in Buildings
(2008).
sustainability.rockwool.com/environment/recycling/
www.dirtt.net/leed/_docs/DIRTT-MaterialsAndProduction_v1-2.pdf. DIRTT pledges to add more recycled
content into their materials every year.
The Upcycle House was built In collaboration between Realdania Byg and Lendager Architects. www.archdai-
ly.com/458245/upcycle-house-lendager-arkitekter/
The Scottish Material Brokerage Service began operating in January 2015. Its aims are twofold: (i) to deliver
collaborative contracts for waste and recyclable materials from Scottish local authorities and other public
bodies of sufficient scale to help them achieve better value for money, and reduce risk from price volatility;
(ii) to create the business conditions for investment in domestic reprocessing by providing certainty in the
volume and duration of supply of valuable materials. See www.zerowastescotland.org.uk/brokerage
These challenges are currently investigated under the Danish Government’s strategy for construction. Danish
Ministry of Climate, Energy and Building,
Towards a stronger construction sector in Denmark
(2014).
See for example www.wired.co.uk/news/archive/2013-01/15/japan-eco-demolition; www.taisei.co.jp/english/
csr/hinsitu/jirei_hinsitu.html. No information was found on the potential for reuse of the deconstructed build-
ing components.
Skive municipality,
Afslutningsrapport Projekt Genbyg Skive
(2015).
94
95
96
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in new public building projects.
97
In addition, the Danish Eco-Innovation Program funds a
number of project around, among others, using more reusable and recyclable materials
in buildings.
98
Designing for disassembly could be enabled by better coordination and alignment
of incentives across the value chain. Digital material passports (already introduced
in Denmark by Maersk as described in Chapter 1) and leasing could become the new
norm, driven by a change in business models and emergence of material brokers who
link material supply and demand in the reverse supply chain. By 2035 (2020), looping
of materials could be increased to 15% (5%) by weight, resulting in 30% material cost
savings (adding 5% additional labour cost). At this adoption rate, modelling suggests
the construction sector could save EUR 100–150 (10-12) million annually.
99
These findings
give a directional view of the magnitude of this opportunity for Denmark. They rely
by necessity on a number of assumptions, the most important of which are detailed
in Appendix B.
BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting the ‘re-
use and high-value recycling of components and materials’ opportunity (see Figure 8;
also see Section 2.2.4 in the toolkit report for the barriers framework). A wide range of
barriers prevent increasing rates of component and material reuse in the construction
sector. Chief among them is the structure of the industry itself, which leads to split
incentives along the value chain. There is limited vertical integration and each player
– including the investor, architect, developer, engineer, (sub)contractor, owner and
tenant – naturally maximizes their own profits at the expense of the others. Since
designing for circularity requires some alignment of incentives to close the loop in the
value chain, not having such incentives makes the economic case for reuse difficult
to make. The fragmentation of the industry also leads to the barriers of transaction
costs and imperfect information: the flow of information and resources necessary to
provide a system of design for disassembly and reverse logistics is difficult to achieve.
Digital information on the materials used in component production that would be very
helpful at the point of refurbishment or demolition is lacking or unevenly distributed:
while Building Information Modelling approaches are developing, they are not yet in
widespread use.
100
While buildings can already be designed for disassembly, additional technological
progress in the production of circular, separable materials and components could
accelerate the concept’s applicability. Acceptance of such technological advances in
the industry could be aided by demonstration that new materials/components meet
required technical specifications and are as practical to work with as those that they
replace. It would also be helpful if the true environmental costs of using virgin, finite
materials were reflected in their market prices. Finally there are inertia factors – pointed
out by a range of industry experts – in the construction industry in the form of customs
and habits and a lack of the requisite capabilities and skills that make reuse difficult to
implement.
To address these barriers, the following policy options could be further investigated.
These options are the result of an initial assessment of how cost-effectively different
policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit
report and Appendix D):
•
Complementing building codes with ratings and targets
as laid out in Section
3.1.
97
98
99
groenomstilling.erhvervsstyrelsen.dk/cases/962460
ecoinnovation.dk/mudp-indsats-og-tilskud/miljoetemaer-udfordringer-og-teknologiske-muligheder/%C3%B-
8kologisk-og-baeredygtigt-byggeri/tilskudsprojekter/
This
sector-specific
impact does not include indirect effects, e.g. on supply chains, that are captured in the
economy-wide CGE modelling.
100 UK Government, Building Information Modelling (2012).
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
•
Funding industry-wide training programmes
how to develop loops in con-
struction, such as minimising and sorting construction waste targeting actors
along the entire value chain (i.e. everybody from architects to sub-contractors
working on the ground).
Supporting the creation of material inventory software
to keep track of the
materials used in construction, maintenance, and renovation projects from start
to finish and provide information on their lifetime impacts and opportunities for
looping. Such support could come in the form of a publicly funded design com-
petition.
Creating a ‘positive materials list’.
A comprehensive database of construction
materials that are favourable for circular design could help inform, educate, and
inspire developers, architects, and clients alike. The initiative could define the
criteria a material has to meet to get on the list and create an initial set of ma-
terials. It could also be expanded with commercially available branded products
– it would require the initiative to define a simple application process through
which companies can submit their products, and set up a review board. Such a
list could then be taken over at the EU level, so as to inform other member states
and create more consistency for companies in the industry.
Adjusting public procurement practices.
This would allow for more public con-
struction projects with higher resource efficiency by encouraging technological
standards that facilitate later repair, remanufacturing, or reuse (e.g. in lighting
or heating, ventilation and air conditioning); use of recycled or reused materials
and components; procurement of decommissioning services that focus on value
preservation; or mandating the inclusion of performance models or Total Cost
of Ownership (TCO) metrics. As a first step, an advisory mechanism on circular
public procurement practices could be set up. This could be complemented with
training programmes for public procurement teams. At a later stage the actual
procurement rules themselves might be adjusted.
•
•
•
3.3 Sharing and multi-purposing of buildings
Opportunity:
Increase utility of existing buildings through sharing, multi-
purposing and repurposing.
EUR 300-450 (100-140) million p.a.
2035 (2020)
economic
potential:
Key barriers:
Inadequately defined legal frameworks; unintended consequences of
existing regulations.
Clarifying the legislation; financial incentives or support; municipal
access portals.
Sample policy
options:
THE OPPORTUNITY FOR DENMARK
There is an increasing awareness that most buildings are under-utilised – 60–65% of
European office space is under-utilised even during working hours. Similarly, roughly half
of owner-occupied homes are ‘under-occupied’, with at least two bedrooms more than
needed.
101
These figures suggest a massive structural waste that could be reduced by
increasing the ‘utility’ of the floor space.
Airbnb has done just that. Launching its peer-to-peer platform for housing space
in 2008, Airbnb’s booking rates has grown by 80–90% in the last few years and is
101
No data available for Denmark; UK survey taken as proxy. UK Department for Communities and Local Gov-
ernments,
English Housing study. Headline report 2012–13
(2014).
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expected to overtake worldwide hotel listings in four to five years.
102
In May 2015,
Airbnb had approximately 15,000 listings in Denmark. Meanwhile, a number of not-for-
profit communities for sharing living space are growing rapidly, such as Hoffice
103
and
Couchsurfing.
104
In a time of rapid digitisation, it is not difficult to imagine a more virtualised and shared
office environment. Since office spaces are already under-utilised, business could
rethink the role of the office as central but temporary place for colleagues to meet while
spending a significant share of their time working remotely. This would entail increased
desk sharing and reduced need for floor space. Another option is to temporarily rent out
unused space, an idea Liquidspace capitalises on by connecting people in need of desks
or conference rooms with nearby suppliers, much like an Airbnb for office space.
105
Businesses are very aware of the potential cost savings from reducing office space. In a
2012 survey, over 70% of 500 corporate executives indicated that the gross square foot
per person in their organisations would drop to a point that is more than 55% below
the current industry average.
106
Two major technology companies, IBM and Cisco, have
gradually increased the staff-to-desk ratio by encouraging teleworking, saving EUR 100–
250 million a year.
107
A Scandinavian example is Microsoft Sweden, who reduced their
office space by 27%, while still adding 1,500 additional seats.
108
Increased repurposing of existing floor space would make it possible to better utilise old
buildings and change the use of freed-up office space to, e.g. residential housing, in a
cost-efficient way and reduce the need for demolition and renovation. This is particularly
relevant since ~80% of Europeans live in buildings that are at least 30 years old, which
risk slipping into costly obsolescence as changing lifestyles and shifting demographics
and age distribution drive construction of new buildings.
109
The repurposing concept
of companies like DIRTT – with interior building components that are modular and
standardised – allows for maximum efficiency in changing the use of a building.
Complementary to repurposing, which changes the
sequential
use of a building, public
buildings could be multi-purposed for
parallel
use of the floor space, meaning that
different activities can take place during a short and repetitive time cycle. Making
better use of schools or libraries for evening activities (e.g. classes and cultural events)
is probably the most accessible example – such multi-purposing is indeed extensively
implemented in Denmark. A more advanced practice would be to design more multi-
purposed buildings. This is already common practice for sports, cultural and conference
venues, but could in principle be implemented for smaller buildings as well. Public
spaces could be designed for both multi-purpose use
and
gradual repurposing to
optimise their economic value; an interesting example is the Boston Convention
& Exhibition Center whose parking structure has been designed to be gradually
transformed into retail and residential space.
110
So could office spaces; an example is the
Park 20/20 mentioned in Section 3.3.2, designed with shared and multi-purposed spaces
for meetings, videoconference and other functions.
By 2035, Danish companies could be expected to reduce their need for office space due
to shared desk policies and increased teleworking, which together with multi-purposing
102 www.airbnb.com; www.venturebeat.com
103 www.bloomberg.com/news/articles/2015-02-19/hoffice-co-working-puts-freelancers-in-each-other-s-homes;
hoffice.nu/en/. The concept can be seen as a hybrid in floor-space sharing, where higher utilisation of living
space leads to a reduced demand for office space.
104 www.couchsurfing.com/.
105 liquidspace.com/. Liquidspace has also partnered with Marriott to provide conference rooms and other func-
tions, thereby increasing traffic to the hotels.
106 Cushman & Wakefield,
Office space across the world
(2013).
107 GSA Office of Government-wide Policy,
Workspace utilisation and allocation benchmark
(2011).
108 vasakronan.se/artikel/det-digitala-arbetslivet-ar-har
109 architecturemps.com/seville
110 Franconi, E. & Bridgeland, B. Rocky Mountain Institute, presentation at Re:Thinking progress conference,
Circular Business Opportunities for the Built Environment
(14 April 2015).
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
of public buildings, repurposing of old buildings and freed-up office space, and the
accelerating sharing of residential floor space could increase the overall utilisation
of buildings by 60% (20%) by 2035 (2020). This could lead to a reduced demand
for new buildings by 9–10% (3–4%) by 2035 (2020), saving the Danish economy an
estimated EUR 300–400 (100-140) million.
111
These findings give a directional view of
the magnitude of this opportunity for Denmark. They rely by necessity on a number of
assumptions, the most important of which are detailed in Appendix B.
BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting the
‘sharing and multi-purposing of buildings’ opportunity (see Figure 8; see also Section
2.2.4 of the toolkit report for the barriers framework). The principal barriers to increasing
the sharing and multi-purposing of buildings are regulatory. There are the inadequately
defined legal frameworks, as well as unintended consequences of existing regulations,
for example:
•
Contractual restrictions on tenants/owners to their sub-letting of houses or flats
for short periods; for example in New York State it is illegal to rent out an apart-
ment for a period shorter than 30 days if a permanent resident of the apartment
is not present.
112
Uncertain compliance with other regulations; for example in Chicago, Airbnb has
begun to collect city hotel taxes from its hosts, but hotel associations still claim
they are not paying all taxes that hotels are obliged to pay.
113
When sharing is allowed it might be under-regulated; there is for example con-
cern in Los Angeles that Airbnb is starting to turn residential areas into ‘hotel
areas’, potentially competing with local residents for accommodation.
114
•
•
Denmark has partially addressed the lack of clear legal frameworks – it is currently
possible to sub-let apartments on Airbnb or similar sites for six weeks per year before
asking the local municipality for a permit. There are however several uncertainties
to address;
a
sector expert notes that the housing and office rental sector is highly
regulated, but that this existing legislation has not yet been fully adapted to account for
the concepts of sharing.
When it comes to market failures it is often not cost effective for building owners and
tenants to spend the time finding other individuals or organisations with which to
share their buildings. Factors exacerbating these transaction costs are the efforts and
costs involved in changing building insurance, handling security issues and the need for
changes to the building (e.g. locks). Furthermore, while some sharing platforms have
been successful, there might still be an inherent resistance in the public to changing
habits around the sharing of their own homes, and some businesses have deeply rooted
norms and traditions around the use of offices. Recent research
115
has confirmed the
results of a study made by The Industrial Society’s research from 2002
116
: that there are
limits to the attractiveness of shared office space to employees and that individual space
such as a desk or a workstation is still highly valued.
To address these barriers, the following policy options could be further investigated.
These options are the result of an initial assessment of how cost-effectively different
111
112
113
114
115
116
This
sector-specific
impact does not include indirect effects, e.g. on supply chains, that are captured in the
economy-wide CGE modelling.
James Surowiecki in The New Yorker,
Airbnb’s New York Problem
(8 October 2013).
Crain’s Chicago Business,
Hotels to Airbnb hosts: Pay up
(14 February 2015).
LA Times,
Airbnb and other short-term rentals worsen housing shortage, critics say
(11 March 2015)
Naomi Shragai, Financial Times,
Why building psychological walls has become a key skill at work,
(29 April
2015).
The Industrial Society,
The state of the office: The politics and geography of working space
(2002).
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policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit
report and Appendix D):
•
Clarifying the legislation
governing (participants in) sub-letting residential and
office space, and sharing business platforms (like Airbnb and Liquidspace) by de-
fining unambiguously who is entitled to practice it (private tenants, commercial
players) and which regulation they need to follow. Doing so could lower the risks
perceived by individuals and companies wanting to engage in such transactions.
Creating financial incentives or financial support
to local, regional and na-
tional public-sector entities such as schools and other public infrastructure could
help overcome hesitance towards renting out their properties when not in use
(without distorting competition), and possibly remove some practical barriers
such as locks that need to be added or changed. This could also have demon-
stration effects for private owners, facility managers in industrial and commercial
real estate, and landlords.
Setting up municipal access portals
that provide information on public build-
ing availability and matches users with providers. This could start out with public
buildings; private spaces could be added later, for instance in case a territory is
too small or not sufficiently densely populated to warrant a commercial interme-
diary.
•
•
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4 MACHINERY
The potential for Danish businesses to engage in remanufacturing and
refurbishment is significant. Since this opportunity requires the development
of new capabilities, business models and technologies, capturing it could
take time, but by 2035, modelling suggests these practices could create an
estimated potential net value of EUR 150–250 million annually.
Opportunity:
Remanufacturing of components and new business models based on
performance contracts and reverse logistics.
EUR 150-200 (50-100) million p.a. (plus additional potential in
adjacent sectors).
2035 (2020)
economic
potential:
Key barriers:
Lack of capabilities and skills; imperfect information of existing
opportunities; unintended consequences of existing regulations
Remanufacturing pilots and information campaigns; amendment
of existing regulatory frameworks; adoption of an overarching
government strategy.
Sample policy
options:
The Danish machinery sector is characterised by the presence of several large
manufacturers of long-lived industrial products, such as Grundfos (pumps), Vestas (wind
turbines), and Danfoss (thermostats, heating and power solutions) and >1,000 parts
manufacturers and service providers supporting these industries.
117
Across the board,
these companies have adopted the most common efficiency measures, such as waste
reduction in production processes, light-weighting components and products, and waste
reduction and energy efficiency in production processes.
Danish machine manufacturers are also proficient in recycling and are increasingly
looking into designing for recyclability. Grundfos, for example, notes that around 90%
of the components inside pumps are recyclable. In the wind turbine industry, almost
all parts are recycled. The last remaining challenge is the rotor blades, which consist of
epoxy-covered composites. A number of possible uses for old blades are currently being
pursued, guided for example by the Genvind project.
118
By contrast, discussions with sector experts revealed that there is only a limited number
of remanufacturing or refurbishment activities. Remanufacturing and refurbishment (Box
1) leads to higher value retention than materials recycling since a large part of the added
value of a product or component is maintained, and more steps along the value chain
are bypassed (c.f. Figure E1). Danish companies could thus exploit the largely untapped
potential in remanufacturing and refurbishment. In parallel, recycling and efficiency
optimisation is likely to continue to improve in the sector, as part of the trajectory
Denmark is already on.
117
118
According to Statistics Denmark, there were 26 companies with 250-plus employees in the machinery sector
in 2012, and just over 1,000 with fewer than 250 employees, of which half had 0–9 employees.
www.genvind.net
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Box 1: Remanufacturing and refurbishment
119
Component remanufacturing is defined as a process of disassembly and recovery
at the subassembly or component level. Functioning, reusable parts are taken
out of a used product and rebuilt into another. This process includes quality
assurance and potential enhancements or changes to the components. By
definition, the performance of the remanufactured component is equal to or
better than ‘as new’.
120
Product refurbishment involves returning a product to good working condition
by replacing or repairing major components that are faulty or close to failure
– and making ‘cosmetic changes’ to update the appearance of a product. The
replacement components could themselves be remanufactured. Any subsequent
warranty is generally less than issued for a new or remanufactured product, but
the warranty is likely to cover the whole product. Accordingly, the performance
may be less than ‘as new’.
REMANUFACTURING IS ALREADY A VIABLE BUSINESS CASE
There are numerous examples to show that there is a strong business case for
remanufacturing. The consultancy Levery-Pennell has calculated that for a case with
remanufactured items selling for 20% less than new items, and increased labour costs
for the remanufacturing process, the gross profit could still be up to 50% higher due
to the large reduction in input costs, and that the earnings could be even higher with a
performance-based business model.
121
Indeed, several large companies have already run
successful remanufacturing operations for quite some time:
•
Renault’s remanufacturing plant in Choisy-le-Roi, France, re-engineers different
mechanical sub-assemblies, from water pumps to engines, to be sold at 50% to
70% of their original price with a one-year warranty. The remanufacturing opera-
tion generates revenues of USD 270 million annually. Renault also redesigns com-
ponents (such as gearboxes) to increase the reuse ratio and make sorting easier
by standardising components. While more labour is required for remanufacturing
than making new parts, there is still a net profit because no capital expenses are
required for machinery, and much less cutting and machining to remanufacture
the components, resulting in waste minimisation and a better materials yield.
Renault has achieved reductions of 80% for energy, 88% for water and 77% for
waste from remanufacturing rather than making new components.
122
Caterpillar founded its CatReman business line in 1973. It now has global op-
erations with over 4,200 employees, and fully remanufactures a large range of
heavy-duty equipment to as-new state, including long-term warranties. Caterpil-
lar has reported that remanufactured components reduce resource consumption
by 60–85%.
123
Ricoh’s ‘comet circle’ is a well-known and established business model, including
remanufacturing and refurbishment of components, and recycling of materials.
124
•
•
119
For more details, see for example Ellen MacArthur Foundation,
Towards the circular economy I
(2012).
120 Nasr, N., Rochester Institute of Technology, presentation at Re:Thinking progress conference, Circular
Econo-
my and Remanufacturing
(14 April 2015).
121
Lavery, G., Pennell, N., Brown, S., Evans, S.,
The Next Manufacturing Revolution: Non-Labour Resource Produc-
tivity and its Potential for UK Manufacturing
(2013).
122 Ellen MacArthur Foundation,
The Circular Economy Applied to the Automotive Industry
(2013); group.renault.
com/en/commitments/environment/competitive-circular-economy/
123 Caterpillar Sustainability Report (2006).
124 https://www.ricoh.com/environment/management/concept.html
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
As ~70% of components in a printer or copier can be remanufactured,
125
these
products are well placed to be provided on an access-based contract. Ricoh al-
ready sells 60% of their products through service contracts, and remanufacturing
is an important lever to reach its ambitious target of reducing resource consump-
tion by 2050 to 12.5% of the 2000 levels.
Remanufacturing and refurbishment have been predicted to have a net positive
effect on GDP and employment, as well as boosting innovation.
126
The UK All-Party
Parliamentary Sustainable Resource Group has reported that remanufacturing could
contribute GBP 2.4 billion to the UK economy and create thousands of skilled jobs.
127
Zero Waste Scotland estimates that increased remanufacturing alone could add
0.1–0.4% to Scotland’s GDP and provide up to 5,700 new jobs by 2020.
128
However,
remanufacturing does pose a significant challenge to product design and is especially
difficult for manufacturers of long-lived products and/or in industries where the largest
efficiency gains are still driven by hardware improvements. Manufacturers often design
for optimised in-use efficiency rather than designing for remanufacturing.
129
Products
from companies like Grundfos and Vestas have anticipated lifetimes of 20 years or
more, during which time hardware technology can improve significantly. Few would
want to remanufacture equipment put on the market 20 years ago, as performance of
the hardware has increased manifold since then, and in the case of wind turbines the
size has increased significantly. Another consideration is that the content of hazardous
substances that have been phased out in new products could make a component or
product unwanted for remanufacturing.
But even when the hardware development is still significant, remanufactured or
refurbished equipment could be sold to secondary markets. There is already a growing
market for used and refurbished wind turbines,
130
and pump manufacturer KSB is looking
at selling refurbished products to secondary markets. As hardware technology matures
and efficiency improvements become increasingly driven by software it will become
increasingly viable to integrate remanufactured components into the next generation of
products. An industry expert notes that efforts to increase pump efficiency are likely to
shift gradually towards software upgrades over the next five years.
THE OPPORTUNITY FOR DENMARK
In brief, this analysis suggests a large potential for Danish businesses. Even if not all
machinery components are addressable for remanufacturing or refurbishment today,
applying these practices to a selection of durable components becomes increasingly
feasible but requires adaptations in the business model, product design, and the reverse
supply chain. Done right, remanufacturing or refurbishment could unlock significant
value.
As described in Section 2.2.1 in the toolkit report there are four principal building
blocks that a business can adopt to pursue a circular economy opportunity: product
design (and technology), business models, reverse cycle skills, and cross-sectoral
collaborations.
131
Figure 13 summarises the main transitions in the first three dimensions
to enable remanufacturing for liquid pumps, a hallmark product in the Danish machinery
125 N. Nasr, Rochester Institute of Technology,
Circular Economy and Remanufacturing,
presentation at Re:Think-
ing progress conference (14 April 2015).
126 See Ellen MacArthur Foundation,
Towards the Circular Economy I–III.
127 All-Party Parliamentary Sustainable Resource Group,
Remanufacturing. Towards a resource efficient economy
(2015).
128 Zero Waste Scotland,
Circular Economy Evidence Building Programme: Remanufacturing study
(2015).
129 It could indeed be more rational to design primarily to increase in-use energy efficiency. At the same time,
a life cycle assessment report by PE International on a Vestas V112 3.0 MW turbine showed that the ma-
jor life-cycle impact comes from the manufacturing stage, indicating significant potential to capture value
through remanufacturing. PE International,
Life Cycle Assessment of Electricity Production from a V112 Tur-
bine Wind Plant
(2011).
130 See for example hitwind.com/; www.windforprosperity.com/
131
Ellen MacArthur Foundation
Towards a Circular Economy I
(2012); p.61. Note that the need for cross-sectoral
collaborations, such as a focus on the circular economy in education and R&D, and wider acceptance for
alternative ownership models, is also highly relevant to capture the remanufacturing opportunity.
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sector. In the same vein as reverse logistics for remanufacturing, Grundfos is currently
piloting a take-back program for circulator pumps in Denmark, in order to support
the recyclability of components and materials. For wind turbines, it was pointed out
by a sector expert that there are typically over 2,000 parts that are already fairly
standardised, not subject to steep performance improvements and need replacement
before the end-of-use of the turbine itself; there are thus interesting opportunities to
shape both business model and product for gradually replacing and remanufacturing
such components.
Figure 13: Examples of what remanufacturing and new business models could look like
for pumps in Denmark
FROM
PRODUCT
DESIGN (AND
TECHNOLOGY)
•
Design focused
TO
•
•
Standardised and
on performance in
one lifecycle
improvements
through hardware
upgrades
•
Most product
modular design to
simplify disassembly,
remanufacturing and
lifetime extension
improvements through
software upgrades
•
Most product
BUSINESS
MODEL
•
Traditional
product sales with
service warranties
•
•
More focus on complete
solutions including
system optimisation
1
•
Sales of ‘pumping as a
service’ with repair and
product upgrade scheme
included
retention drive increased
efficiency improvement
during lifecycle
incentivised to return old
products for commission
remanufacturing
facilities with high
degree of automation
•
Manufacturer ownership
REVERSE
CYCLE SKILLS
•
Difficulty to
return dispersed
products
remanufacturing
skills and facilities
•
•
Third-party installers
•
Lack of
•
Large-scale
1 As for example in Grundfos collaboration with Heerlev University Hospital water-cleaning facility, http://www.
theguardian.com/sustainable-business/grundfos-partner-zone/2014/nov/11/new-water-treatment-technology-
reduces-risks-from-hospital-wastewater
SOURCE: Industry expert interviews; Ellen MacArthur Foundation
There are two categories of remanufacturing opportunities for Danish companies.
•
Remanufacture or refurbish components or whole products and sell to sec-
ondary markets.
This could be a developing market but might also be a local
secondary market. Remanufactured equipment could become new product line,
as in the case of CatReman.
Remanufacture components and use them in new products.
Since remanu-
facturing by definition restores a component to an ‘as new’ condition, it would
be viable to use components again in new products, provided the dimensionality
•
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
and design is consistent over product generations. This would save significant
costs as both the raw material value and most value added from manufacturing
the components are retained. This opportunity resembles Ricoh’s business model
for office printers.
By leveraging the circular economy building blocks and utilising both these
opportunities, the Danish machinery sector could gradually adopt remanufacturing and
refurbishment. A conservative estimate is that half of all product components could be
addressed for remanufacturing. Until 2020, they would likely focus on sales to secondary
markets, while by 2035, 15–50% of remanufactured components could be used in new
products rather than sold to a secondary market. Figure 14 gives an overview of the
estimated potential adoption rates and value creation estimated on a component level
for two machinery products, wind turbines and pumps. Overall, this would contribute to
net value creations of 1–3% as share of overall product costs by 2020, increasing to 4–9%
by 2035. These findings give a directional view of the magnitude of this opportunity for
Denmark. They rely by necessity on a number of assumptions, the most important of
which are detailed in Appendix B. It should be emphasised that the estimates take into
account the significant challenges of remanufacturing and refurbishment of long-lived
equipment, such as liquid pumps and wind turbines.
Figure 14: Estimated potential adoption rates and value creation in wind turbines and
pumps in the Denmark pilot
Ranges, adoption rates and value estimated on a per component basis
2020
Adoption rate per
addressable component
1
2-15% (0%)
2035
10-70% (2-15%)
Additional value created
per component
20-50%
25-50%
64% of components
addressable for
remanufacturing
(by value)
Net value created per
component
1-7%
2-25%
Adopotion rate per
addressable component1
5-10% (0%)
30-50% (10-15%)
Additional value created
per component
15-35%
25-40%
65% of components
addressable for
remanufacturing
(by value)
Net value created per
component
1-4%
5-15%
1 Adoption rates in brackets indicate ‘business as usual’ scenario
SOURCE: Expert interviews; Ellen MacArthur Foundation
Scaling up this value creation to the full machinery sector including pumps, wind turbine
and other machinery, it is estimated that businesses could create a net value of EUR 150–
250 million annually
132
by increased adoption of remanufacturing and/or refurbishment
and new business models. But they need to be prepared to challenge their perception
132 This
sector-specific
impact does not include indirect effects, e.g. on supply chains, that are captured in the
economy-wide CGE modelling.
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of both their business models and design to capture the opportunity. For example,
the product design requires taking into account resource use and costs over several
life cycles, and identifying sub-components that could be more standardised and
modularised. There are also large logistical challenges to bring widely dispersed, large
products back to a remanufacturing facility, and to bring heavily worn parts back to an
‘as new’ state.
Finding solutions to overcome all these challenges will require further investigation, but
it can be noted that there are a number of methods to restore worn metal components
to ‘as new’ condition, for example cold spraying and other additive processes.
133
The US defence industry performs significant remanufacturing of aircraft, ships and
ground systems, of which many have been over 20 years in operation. It is also widely
anticipated that increased digitisation is an important enabler, both to drive the
continued efficiency improvement and to automate the remanufacturing process, for
example through fault detection software.
BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting the
‘remanufacturing and new business models’ opportunity (see Figure 8; also see Section
2.2.4 in the toolkit report for the barriers framework). The critical barrier limiting the
industry from taking the remanufacturing opportunity is a lack of capabilities and skills:
industrial designers and engineers in the machinery sector often lack the knowledge and
experience necessary to run successful remanufacturing operations, which require the
ability to design for disassembly and set up reverse logistics systems. An industry player
highlighted the challenge to establish efficient and effective partnerships along the value
chain in order to ensure a reversed flow of products and components. While getting
the products into the market is a capability that has been developed for decades, the
capabilities for getting the products back are still in an immature state and also highly
dependent on the national market conditions.
The most important market failures are the transaction costs related to finding and
negotiating with new suppliers, since remanufacturing could significantly disrupt
material flows across the value chain; and the uneven distribution of knowledge among
manufacturers about the economic potential of remanufacturing and new business
models.
There is a steep technological development of hardware in many machinery categories,
which makes remanufacturing unfeasible in the short term, e.g. the size of wind turbines
is increasing rapidly, making the remanufacture of old parts for use in new products
unfeasible.
Even when they are fundamentally economic, some international remanufacturing
operations face a high administrative burden to comply with the regulations relevant
to being able to move remanufactured components across borders. The exact impact
in Denmark of such regulatory barriers would need to be further investigated for each
product type.
To address these barriers, the following policy options could be further investigated.
These options are the result of an initial assessment of how cost-effectively different
policy options might overcome the identified barriers (see Section 2.3.4 in the main
report and Appendix D):
•
Stimulating remanufacturing pilots
that allow businesses (in particular SMEs)
to gain experience with remanufacturing and make the benefits more tangible to
them. In this context, it is worth investigating the scope for funding such pilots
through the Danish Fund for Green Business Development.
Using these pilots in industry information campaigns
that highlight best
•
133 For example, the Golisano Institute for Sustainability at the Rochester Institute of Technology develops meth-
ods such as cold spraying and collaborates with companies to improve these technologies.
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practices in remanufacturing and refurbishing and also draw on international
case studies (such as Caterpillar’s CatReman business unit). The aim would be to
build business awareness of the benefits of remanufacturing (especially among
SMEs) and to accelerate the transition to performance models.
•
Encouraging the establishment of a training programme
to ensure that man-
ufacturing and procurement staff in key industries possesses the necessary skills
for businesses to fully benefit from the potential of remanufacturing.
Create a level playing field
between remanufactured and new products by
identifying unintended consequences of national, European and international
regulation that put remanufactured products at a disadvantage.
134
Potential ex-
amples are health and safety regulations and regulation prohibiting the sale of
remanufactured products as ‘new’.
In addition to reviewing existing regulation,
informing the development of new
tools at the EU level
that help to provide detailed information on the compo-
sition of products and how to dismantle them. Examples include guidance on
how to develop product passports and bills of material, product standards (e.g.
expansion of existing eco-design rules), or quality-standards and labels on the
reliability of remanufactured products.
Adopting an overarching government strategy for remanufacturing
and by
giving it a clear space in the overall industry/manufacturing strategy (and hence
with associated targets and milestones), to galvanise the industry and give it
clarity on the direction of future policy development.
Supporting the development of remanufacturing technology and design
through strategic funding and investigate the scope for further leveraging the
Eco-Innovation Program administered by the Danish Ministry of the Environment
for this purpose. The new Scottish Institute of Remanufacture is an example,
which is funded by the Scottish Funding Council, Zero Waste Scotland and a
range of business interests. Its focus is on delivering industry led research and
development projects in collaboration with academia.
•
•
•
•
134 In May 2015, the Basel convention adopted new technical guidelines on an interim basis to amend its regu-
lation on transboundary shipment of hazardous waste. While the main focus is on EEE, formulations such as
exempting materials ‘destined for failure analysis, and for repair and refurbishment’ from being classified as
waste signals an ambition to address unintended consequences.
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5 PACKAGING
Plastic packaging is a central challenge to the circular economy. Although
some of the potential solutions require multi-stakeholder alignment at
international level, two opportunities stand out in Denmark at the national
level: increased recycling and introduction of bio-based materials. By
addressing the need for improved collection systems and working together
with stakeholders on ways to increase standardisation, Denmark could
increase the recycling of packaging to 75% by 2035, saving both embedded
energy and carbon. In addition, Danish companies could develop a
competitive advantage in bio-based materials, if the need for accelerated
technological development and creating functional end-of-use pathways is
addressed.
In terms of value, consumer packaging is forecasted to have an annual growth of
~3–5% globally for the next few years.
135
The use of plastics for packaging applications
is forecasted to continue to grow at the expense of other materials.
136
Because of their
short period of use, packaging materials become waste relatively quickly after they have
entered the market. Recirculating plastic packaging is particularly challenging since it is
not only very dispersed and therefore relatively hard to collect – which is generally the
case for consumer packaging – but it also has a diverse make-up in comparison to, for
instance, board-based packaging; plastics also have low material value compared with
aluminium or tin-plated steel.
The plastic packaging value chain comprises firstly the design and production of
plastic material and packaging, and secondly the after-use phase of collection, waste
segregation, and reprocessing. The challenge with influencing the production elements
is that they are typically international, so potential regulations or standardisations
concerning materials or additives must be decided on an international level. The after-
use phase is more localised, and so is an easier area of direct influence for an individual
national policymaker. But after-use measures cannot be optimised in isolation; they
need to be made in concert with design and production standards. While the outcome
of applying this toolkit provides a set of options for national or regional policymakers,
another project - the Global Plastic Packaging Roadmap (GPPR, see Box 2) addresses
the systemic issues of the current linear plastics economy at a global level, by bringing
together international stakeholders involved in plastics and packaging design as well as
national stakeholders responsible for collection and recovery systems.
Thus, the Denmark pilot takes a national perspective on opportunities to increase
recycling by focusing on improving the after-use treatment (Section 5.1). The
opportunity to develop bio-based packaging (Section 5.2) should meanwhile be seen in
the context of driving technology and innovation rather than setting national regulations
for bio-based materials.
135 Annual growth over the 2013–2018 period, with constant 2012 prices and exchange rates. Forecast compiled
from Freedonia, Euromonitor, and Smithers PIRA.
136 Smithers PIRA (2014).
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Box 2: The Global Plastic Packaging Roadmap
Mobilized in 2014, as part of the MainStream Project, the Global Plastic Packaging
Roadmap (GPPR) initiative leverages the convening power of the World Economic
Forum, the analytical capabilities of McKinsey & Company, and the circular economy
innovation capabilities of the Ellen MacArthur Foundation. The vision of the Global
Plastic Packaging Roadmap (GPPR) is of an economy where plastic packaging
never becomes waste but re-enters the economy as defined, valuable, biological or
technical nutrients – a ‘new plastics economy’.
The GPPR provides an action plan towards this new plastics economy as an
economically and environmentally attractive alternative to the linear model.
The project is driven by a steering committee composed of nine global leading
company CEOs and more than 30 participant organizations across the entire
plastics value chain ranging from plastics manufacturers to brand owners and
retailers in FMCG to municipal waste collection and after-use treatment systems.
This integrative project setup allows for accelerating systemic change through
innovation and collaboration. The GPPR works collaboratively with a number of
existing initiatives focused on ocean plastics waste including the Global Oceans
Commission, Ocean Conservancy, the Prince’s Trust International Sustainability
Unit, governmental institutions and policymakers. The project’s unique focus on
systemic change will complement and inform these other initiatives.
Besides fostering innovation and collaboration across the value chain, the GPPR
project will also inform and influence policy on a corporate and governmental
level, by highlighting interventions that either hinder or accelerate the transition
towards the new plastics economy. First results from the GPPR will be published
in January 2016 at the World Economic Forum in Davos.
5.1 Increased recycling of plastic packaging
Opportunity:
Increased recycling of plastic packaging driven by better packaging
design, higher collection rates, and improved separation technology.
Not quantified.
2035 (2020)
economic
potential:
Key barriers:
Profitability, driven by unpriced externalities and price volatility;
collection and separation technology; split incentives.
Mandated improvement of collection infrastructure; increased
national recycling targets; standardised collection / separation
systems; increased incineration taxes.
Sample policy
options:
In Denmark, the volume of plastic packaging waste grew 2% p.a. over 10 years, to
184,000 tonnes in 2012, while the volume of other packaging waste, such as glass
and paper, declined at a rate of 1.3% p.a. over the same period.
137
While Denmark has
spearheaded many recycling initiatives, such as one of the first successful deposit-refund
systems for bottles, recycling rates are still low for plastic packaging (Figure 15). One
root cause may be the large waste incineration capacity in Denmark, using combined
heat and power plants to generate electricity and provide district heating. Since low
utilisation undermines incinerator economics, the incentive to switch packaging volumes
over to recycling has been limited. In the ‘Denmark Without Waste’ resource strategy,
137 By tonne. Danish Environmental Protection Agency,
Statistik for emballageforsyning og indsamling af embal-
lageaffald 2012
(2015 rev.).
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the Danish government expresses a goal to gradually move from incinerating valuable
materials – such as plastics – to recycling. Consequently, the estimated projected
incinerator capacity is flat.
138
Figure 15: Share of plastic packaging collected for recycling in Denmark
Percent, 2012
1
GLASS
97.7
PAPER AND
CARDBOARD
METAL
2
76.5
51.8
WOOD
3
40.4
PLASTICS
4
Businesses: 40-45%
29.4
Households: 14-15%
3
1 Indicates share of waste collected for recycling – actual recycling rates vary depending on material quality.
2 Danish EPA estimates that this is on the low side. Volumes are based on sales of beer and soft drinks, and
main uncertainty comes from extensive border trade with Germany. Main leakage point from households is
mixed garbage, which gets incinerated. Metal salvaged from incineration ashes is not included in this number.
3 Large share of wood incinerated in incinerators and some parts in household stoves.
4 Including PET bottle recycling in deposit-refund scheme.
SOURCE: Danish EPA; Statistics Denmark; Ellen MacArthur Foundation
THE OPPORTUNITY FOR DENMARK
Given this starting point, there is significant potential for Denmark to increase recycling
of plastic packaging.
•
By
2020,
Denmark could increase the amount of plastic packaging collected for
recycling to up to 40% (20% for households and 60% for businesses). This means
an overall improvement with 10 percentage points compared to current recycling
rate (5 percentage points for households and 20 percentage points for business-
es).
By
2035,
a ~75% recycling rate (65% for households and 85% for businesses) and
improved valorisation of the collected plastic waste could become feasible.
•
A transition towards increased recycling would centre on three key levers – design,
collection and sorting – each with a few different enabling mechanisms:
•
Higher collection rates for recycling.
This could mean more convenient collec-
tion schemes such as the kerbside collection of plastics or mixed recycling in-
stead of requiring drop-off at recycling centres, or finding better ways to collect
plastics that have been in contact with food.
139
Much could be achieved through
138 Danish Government,
Denmark Without Waste I. Recycle more – incinerate less
(2013); Danish Environmental
Protection Agency,
Danmark uden affald. Vejledning fra Miljøstyrelsen nr. 4
(2014).
139 One waste management expert notes that consumers typically dispose of plastic packaging that is ‘sticky’
from contact with food since there is no convenient, hygienic way of storing it with recyclables, and that
collecting this ‘sticky’ packaging is essential to increase collection rates significantly above current levels.
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better incentives for households to sort recyclables from mixed waste. Depos-
it schemes could be applied for a larger number of container types – if made
cost-efficient and associated with carefully implemented reverse vending supply
chains. On a regional level, higher collection rates could be achieved through
standardised collection systems that provide scale effects.
•
Improved sorting technology.
Better combinations of existing technologies
(mid- and near-range IR, colour, x-rays, electrostatic, and visual spectrometry)
lead to larger resin volumes extracted from the mixed waste or mixed recyclables
stream, at higher qualities.
140
In the absence of such equipment the burden rests
fully on households and businesses to deliver such volume and quality through
their own choices and actions (for example, carefully separating resins).
Design for recycling.
Plastics and packaging manufacturers could use purer
materials, for example without unnecessary coloration, to enable production of
recycled plastics with qualities comparable to those of virgin sources.
141
Well-con-
sidered chemical compositions may also facilitate the sorting of materials. For
example, black-coloured trays, popular for ready-made meals and other food ap-
plications, have been difficult to sort: the carbon black typically used to provide
the black colour cannot be detected by commonly used near-range IR sensors.
142
A multi-stakeholder effort led by WRAP and including Danish Faerch Plast has
now identified alternative, detectable colorants for PET and polypropylene food
trays. In a wider perspective, standardisation is instrumental for being able to
create broad alignment on elimination of structural plastic waste (such as too
many compounds or contamination of additives; also see Note 242).
•
By 2020, increased recycling could reduce demand of virgin plastic material by 20,000—
25,000 tonnes; by 2035 this could be 70,000–100,000 tonnes.
143
Compared to using the
same amount of virgin plastic material, recycled plastics require approximately 70% less
energy to produce: One tonne of recycled plastics saves roughly 10,000–12,000 kWh
of energy. By 2035, Denmark could therefore also save as much as 700–1,200 GWh of
energy p.a.
144
These findings give a directional view of the magnitude of this opportunity
for Denmark. They rely by necessity on a number of assumptions, of the most important
of which are detailed in Appendix B. In addition to energy savings, Denmark’s carbon
footprint would be reduced – but by how much would depend on what source of energy
is used to replace the heat and electricity generated from incineration.
BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting the
‘increased recycling of plastics packaging’ opportunity (see Figure 8; also see Section
2.2.4 of the toolkit report for the barriers framework). The main barrier to increased
plastic packaging recycling is the price pressure the relatively small plastics recycling
industry faces from producers of virgin or primary plastics whose large market share
grants them bargaining power. While the barrier at its core is one of unpriced negative
externalities of petro-based packaging, this market failure manifests itself in a lack of
profitability and capital. Plastics recyclers face volatile profit margins due to a largely
fixed cost structure and revenues that are highly dependent on oil prices. This makes
raising capital more difficult due to uncertain payback periods. A recent example of this
economic pressure is Closed Loop Recycling, Britain’s biggest recycler of plastic milk
140 See for example the pilot study conducted by the Plastic ZERO project.
Plastic ZERO. Public private collabo-
rations for avoiding plastic as a waste
(2014). www.plastic-zero.com/publications/publications-of-plastic-ze-
ro-(1).aspx
141
As noted above, this enabler is difficult to drive solely on a national level, and is best addressed through an
integrative approach engaging stakeholders at a multi-national level and across the entire value chain, such
as in the GPPR project.
142 WRAP,
Development of NIR Detectable Black Plastic Packaging
(2011).
143 Acknowledging that the recycling business is international, this assumes that the corresponding volume of
recycled plastic material replaces virgin plastic material in Denmark.
144 www.factsonpet.com/
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bottles with 80% market share, which in March 2015 warned of potential bankruptcy
citing the slump in global oil prices as a major reason. Since the price of recycled
plastics shadows that of petro-based plastics, the slump has caused prices for recycled
plastics to fall nearly 40% in the second half of 2014 and first quarter of 2015 (another
contributing factor is that milk is one of the main battlegrounds in the price war
currently being fought between major supermarkets, leaving no margin to pay slightly
more for recycled plastics).
145
Compounding these economic challenges is the lack of rollout in Denmark of two
types of technology: packaging designs that reduce the cost of recycling, and plastics
separation technologies at the recycling plant. Improving design (such as the detectable
colorant mentioned above) and deploying more advanced separation technology would
allow recyclers to separate plastics fractions more cost efficiently. Split incentives are
also present: producers of plastics lack the incentive to design for recycling since third
parties capture the value; and there is a well-documented overcapacity of municipal
incinerators in Denmark that reduces municipalities’ incentive to recycle plastics.
To address these barriers, the following policy options could be further investigated.
These options are the result of an initial assessment of how cost-effectively different
policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit
report and Appendix D):
•
Mandating the improvement of the collection infrastructure for household
plastic waste in municipalities.
Nordic country experience suggests that kerb-
side collection generates less contamination than the ‘bring’ approach.
Increasing the national target for the plastics recycling rate from 22.5% to
up to 60%.
This would move Denmark from the minimum level under current EU
law to the levels envisaged in the 2014 EC review of waste policy and legislation
presented as part of the EC’s circular economy proposals. This could also help
insure targets and objectives are well defined.
Standardising collection and separation systems across municipalities
to
pave the way for economies of scale and stronger sorting and treatment capa-
bilities at the national level. This could lead to a higher profitability of domestic
recycling operations.
Reviewing fiscal incentives around incineration of plastics.
This could both
tackle the externality barrier and accelerate the shift towards the complete recy-
cling of plastic waste. In Denmark the taxation rate is already high in comparison
with other European countries,
146
so policymakers might consider differentiating
the tax rate based on whether or not plastics are separated out before incinera-
tion. Catalonia has such a differentiated incineration tax rate for organics collec-
tion programmes.
147
Bringing together all stakeholders
in the plastics supply chain to work on sys-
temic solutions to address split incentives that affect plastic recycling. This could
take the form of a project with specific short term objectives, or a network, or a
private public partnership.
Working towards EU-wide rules and standards
o
on the plastics used in retail packaging solutions to better ensure
•
•
•
•
•
145 The Guardian,
UK’s biggest plastic milk bottle recycler on brink of collapse,
(26 March 2015).
146 D. Hogg, DG Environment , European Commission,
Incineration taxes : Green certificates—Seminar on use of
economic instruments and waste management
(2011).
147 Ibid.
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recyclability. Ultimately this could result in a EU-wide positive list of
material/format combinations for which recycling performance is
superior. 
o
for waste recovery and management procedures so as to create more
standardized outputs and allow better trade opportunities for the waste
processors.
on minimum shares of recycled material in plastic products (as in
California) in order to increase and stabilise market revenues for plastic
recycling.
o
•
Setting up league tables ranking neighbourhoods based on their recycling
performance.
In the UK for example the Department for Environment, Food and
Rural Affairs maintains such a league table and provides information to house-
holds on how their communities’ recycling rates compare to others. A study
made by the University of Guildford concluded that this type of feedback en-
couraged households to recycle more.
148
5.2 Bio-based packaging where beneficial
Opportunity:
Innovation-driven shift to bio-based alternatives for selected plastic
packaging applications.
Not quantified.
2035 (2020)
economic
potential:
Key barriers:
Technology; profitability driven by unpriced externalities;
inadequately defined legal frameworks.
Funding of innovation and B2B collaboration; investment in
improved end-of-use pathways; working to clarify the EU regulatory
framework.
Sample policy
options:
Bioplastics could potentially replace many applications of petroleum-based plastics.
Broadly they may meet one or both of the following definitions: (i) bio-based
149
materials, which have a biological source (in a renewable and sustainable form) and (ii)
biodegradable
150
materials, which have a biological fate, returning to the biosphere as
nutrients. In the context of the Denmark pilot, discussion centres mainly on bio-based
materials that could replace petro-based plastics. If they are used in applications most
likely to end up as uncontrolled waste in the environment – such as films, bags, or
closures – these materials should preferably be biodegradable.
The prevalence of bio-based plastics is still limited,
151
but growing. Nova-Institute
determined the tonnage-based share of bio-based structural polymers at 2% in 2013, up
from 1.5% a year earlier.
152
European Bioplastics, a trade association, even expects global
capacity to quadruple by 2018, mainly driven by rigid packaging applications.
153
148 See, for example www.letsrecycle.com/news/latest-news/localised-feedback-boosts-recycling-participation/
149 ‘Bio-based’ is defined here as any fibre or polymeric material derived from organic feedstock, e.g. paper or
polymers from cellulose, plastics such as PHBV, polyesters or PLA.
150 According to the EU packaging directive it is only allowed to market/state that a packaging is biodegradable
if it complies with the CEN-standard EN 13432. For the purposes of this report, it is assumed that the material
can be readily decomposed under composting or anaerobic digester conditions in a short, defined period of
time.
151
According to analysis based on SRI, FO Licht, Frost and Sullivan, and press clippings (2011), in 2010-11 less
than 2% of the chemical industry’s sales worldwide consisted of biopolymers and other bulk biomaterials
such as natural rubber and bio-based polyols.
152 Nova-Institute,
Bio-based Building Blocks and Polymers in the World
(2015).
153 European Bioplastics,
Bioplastics – facts and figures
(2013).
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There are two principal pathways for companies and regions to shift from a petro-based
plastic to a bio-based material, both facing a set of critical challenges.
•
Using a bio-based feedstock to make ‘drop-in’ monomers to produce the same
polymers as from a petroleum source, using the existing plastic value chain – this
is the market segment that is globally seeing the strongest growth, spearheaded
by partly bio-based PET which is forecasted to grow from ~600 000 tonnes in
2013 to ~7 million tonnes in 2020
.154
Drop-in bio-based resins or resin-precursors
(for example ethylene glycol monomers for PET) are functionally indistinguish-
able from their petro-based counterpart, but are difficult to produce cost-com-
petitively compared to petro-based counterparts at current prices (similar to the
challenges for biofuels).
Replacing the material altogether, either with a new plastic or an alternative
material with the same or similar properties. These materials face difficulties
matching the performance of petro-based plastics and have been largely limited
to very specific applications where new characteristics are desired, such as with
Ecovative’s mycelium-based and compostable packaging materials,
155
or dispos-
able tableware (which can both be composted or anaerobically digested).
•
Another challenge for bio-based alternatives is the considerable apparatus that is
already in place to produce and use petroleum-based plastic packaging. Accelerating
a switchover beyond the conventional investment cycle is therefore expensive and
complex. Consider, for example, one large fast-moving consumer goods (FMCG)
company that noted that it might take five to eight years to get a new product from
concept to shelf – a large share of which is packaging design.
There are nevertheless two strong arguments for making the shift towards bio-based
materials.
•
Responding to increasing material demand and price volatility.
The antici-
pated addition of 1.8 billion more middle-class consumers worldwide between
2010 and 2025 would lead to a 47% increase in demand for packaging. As long
as the plastic is sourced from a fossil feedstock, there will eventually be issues of
supply and cost unless resource extraction increases at the same pace – leading
to increasing risk from price volatility.
156
Bio-based materials would be less sen-
sitive to price volatility and contribute to securing the rising demand from con-
sumers.
Ensuring unavoidable leakage is bio-sourced.
The highly dispersed nature of
plastic packaging means that leakage to the biosphere is always likely – even
with excellent recycling – and leakage of petro-based plastic creates either a
net addition of CO
2
to the atmosphere or slow degrading waste in the landfill or
oceans. In Denmark, 10-11% of plastic bottles do not end up in the deposit-refund
system, while this number is 0–2% for refillable glass bottles.
157
But even low
leakage rates are problematic for a high turnover item like food and beverage
packaging.
158
Another example is the large variety of plastic packaging that is
disposed of as mixed garbage, thus having near 100% leakage. If there is (un-
avoidable) leakage, it is preferable that this material comes from a bio-based
feedstock so that the net carbon addition to the atmosphere is minimised upon
incineration, or is biodegradable if it is likely to leak into the biosphere without
incineration.
•
154 Nova-Institute,
Bio-based Building Blocks and Polymers in the World
(2015).
155 www.ecovativedesign.com/mushroom-materials/. Also see Ellen MacArthur Foundation,
Towards the Circular
Economy II
(2013), p.71.
156 World Bank; Ellen MacArthur Foundation,
Towards the Circular Economy III
(2014), p.25.
157 Danish Return System.
158 Take aluminium beverage cans for example, which have a 60-day life from can to (recycled) can. Even at a
70% recycling rate, all the original material would disappear from the economy after only one year.
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THE OPPORTUNITY FOR DENMARK
Denmark businesses could leverage both the drop-in and replacement pathways
described above to shift from petro-based plastics to bio-based materials. Some
international companies have shown that there are business cases for both options:
•
The Coca Cola Company launched its PlantBottle™ concept in 2012, where up to
30% of the plastic is made from drop-in, bio-based chemicals. Coca Cola now
also collaborates with, among others, renewable chemicals producer Gevo, which
intends to supply bio-based paraxylene for making PET. Going further, Coca Cola
aims at producing bottles from 100% residual biomass.
159
DSM has a number of bio-based plastics for non-packaging applications on the
market, for example Arnitel®, partially made using rapeseed oil and used for mak-
ing temperature-resistant pan liners; and EcoPaXX®, an engineering plastic made
from 70% biological feedstock, used for engine covers in cars.
160
In Denmark, ecoXpac is developing a cellulose fibre-based material that can be
moulded like plastics and is biodegradable. In a partnership with Carlsberg, In-
novation Fund Denmark and the Technical University of Denmark, they are using
the Cradle-2-Cradle® design principles, in the development of the the first bio-
based, biodegradablebeer bottle.
161
•
•
Bio-based materials have been controversial because of their potential impact on land
use and waste recovery systems, and indeed should be introduced where they are
beneficial from a
system perspective,
and aligned with design criteria that include:
1.
Minimise overall waste:
New materials should not increase other waste streams (i.e.
reduced gas/liquid barriers of bio-based materials may lead to higher food spillage,
biodegradable materials may cause reduced recycling rates and be too slow to
decompose).
Do not increase land use:
bio-based packaging materials should, where possible,
be derived from secondary organic material streams (e.g. fibre from residual
biomass, microorganisms growing on organic waste) in order not to compete with
food supply or further increase land use (although the biomass need for plastics
substitution is small – currently at 0.01% of the area globally under agricultural
cultivation;
162
given the current share of biopolymer at ~2% of total polymer volume
(see above), even a fully bio-sourced supply would occupy around 0.5%).
Do not leak nutrients from the bio-cycle to the technical cycle.
Since bio-based
materials are essentially taken from the bio-cycle to be used in the technical cycle,
it is important to avoid leakage of essential biological nutrients. This is typically
avoided by ensuring that produced materials are pure,
163
and that they are returned
to the biosphere either directly through composting or digestion, or indirectly
through incineration.
Consider existing end-of-use infrastructure:
If a new bio-based material is
introduced, it should not disrupt existing end-of-use treatment systems so that
overall costs increase. If a biodegradable alternative is introduced, there should
already be an end-of-use pathway for it, such as an operational collection system for
organic waste.
Avoid leakage of non-circular materials:
Product-by-product evaluation is
necessary to assess best end-of-use option. There is a fundamental question around
2.
3.
4.
5.
159 www.coca-cola.com/content-store/en_US/SC/PlantBottle/; www.gevo.com/?post_type=casestudy
160 www.dsm.com/products/arnitel/en_US/home.html; www.dsm.com/products/ecopaxx/en_US/home.html
161
www.ecoxpac.com
162 Food and Agriculture Organization of the United Nations (FAO); Institute for Bioplastics and Biocomposites
(IfBB), University of Applied Sciences and Arts, Hannover.
163
Polymers typically contain only carbon, hydrogen, oxygen and nitrogen.
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whether the packaging material should be looped within the technical cycle or
returned to the biological cycle (c.f. Figure E1).
•
Technical cycle.
Beverage containers that are relatively clean and easy to recog-
nise and could participate in deposit refund schemes with high recycling rates
may benefit from further focusing on recyclability, which could mean a petro-
leum feedstock is still preferable even if there is the option to use bio-based
drop-in chemicals.
Biological cycle.
Packaging typically incinerated as mixed waste (such as film
and sticky food containers) may benefit from being bio-based – or potentially
also biodegradable such that it can be disposed of together with food waste in
the organics bin (and be recovered in composters or anaerobic digesters).
•
Based on these design criteria, Denmark could start the shift to bio-based alternatives,
first for selected disposable packaging with high tendency of being incinerated as mixed
waste, and subsequently start introducing bio-based feedstock for plastic packaging
applications with high degree of recycling. The materials could be sourced from non-
food organic feedstock, for example residual wood fibre or plant biomass, or organic
waste. Apart from making Denmark more resource resilient, this innovation-driven
development could create a competitive advantage and opportunities to export new
products and technologies.
•
By
2020,
Denmark might seek to launch the first successful at-scale examples of
replacing petro-based plastics by new, advanced bio-based materials (as already
conceptualised by Carlsberg/ecoXpac). While little replacement of plastics pro-
tecting food is anticipated, Denmark could investigate pockets of opportunity
where petro-based plastics properties are overspecified and replace these with
a bio-based material with lower barriers. Due to the lead time required to build
capacity for production of drop-in monomers, e.g. in bio-refineries (see Section
2.1), the estimated increase in bio-based feedstock for existing plastic materials is
limited.
By
2035,
Denmark might seek to introduce bio-based drop-in chemicals at scale
for the production of recyclable plastic packaging (e.g. PET), leveraging an antic-
ipated bio-refining capacity (see Section 2.1). At the same time, Denmark could
introduce biodegradable alternatives to replace, in particular, petro-based food
packaging with low recycling rates, as well as creating a differentiated packaging
offering for exported FMCGs to prioritise biodegradable versions for developing
markets with low recycling rates.
•
BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting the
‘bio-based packaging where beneficial’ opportunity (see Figure 8; see also Section
2.2.4 of the toolkit report for the barriers framework). To enable bio-based materials to
successfully contribute to the new plastics economy (see Box 2), it is critical to ensure
that working pathways exist for them to be produced, to fulfil their role, to be accurately
separated, and to reach their intended fate at end-of-use. At this point there is still a
large need for technological innovation in all segments of such pathways. For example,
advanced bio-based materials with the right properties
164
to replace petro-based plastic
packaging and with limited negative effects, e.g. without competition with food crops,
are still mostly at the advanced R&D or early commercial stage.
The incentive to innovate further is lowered by the actual and potential low cost of
petro-based plastics, which are determined by global oil prices. Low prices of petro-
164 For example, good gas and liquid barrier properties are crucial for food packaging.
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based plastics neither reflect the true environmental costs of their production
165
nor the
cost of recycling them. This suppresses the potential prices that competing bio-based
alternatives can command, meaning that margins remain low except in cases of high-
price, low-volume products for specific applications. It gives rise to challenges to the
profitability of producing bio-based plastics, which is highly dependent on the oil price.
In addition, several stakeholders in the packaging value chain point out that moving
towards using bio-based materials could complicate the supply chain from the point of
view of packaging users because it adds more suppliers and types of material, thereby
increasing transaction costs.
Finally, many stakeholders suggest that legal frameworks need to be better defined. For
instance, ecoXpac indicated the benefits of a more transparent and speedy approval
process for innovative new materials for food packaging. In another example, the field of
bio-based materials could benefit from a Danish Act on excise duties that distinguishes
better between petro-based and bio-based materials, in line with its aim of promoting
environmentally benign types of packaging.
To address these barriers, the following policy options could be further investigated.
These options are the result of an initial assessment of how cost-effectively different
policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit
report and Appendix D):
•
Fund collaboration in the R&D and design phases.
With sufficient budget
available this could take the form of funding R&D platforms—the further devel-
opment of bio-based materials in collaboration with large CPG companies could
follow international best-practice models for public-private innovation (for exam-
ple the Fraunhofer Institute in Germany and UK’s Catapults). More modest col-
laboration support could bring together designers and engineers in formats that
draw inspiration from the packaging eco-design advisory services that Eco-Em-
ballages offers in France.
166
Investing in improving end-of-use pathways
for bio-based and biodegradable
materials (including plastics and food waste) in the collection/separation sys-
tems.
Working to clarify the EU regulatory framework for approving new materi-
als
for food packaging so as to minimise unintended consequences that could
hamper innovation and growth in the bioplastics industry.
Considering contributing to an EU-wide debate on taxation
of petroleum-de-
rived materials.
•
•
•
165 Whereas the emissions from producing ethylene from Brazilian sugarcane amount to 0.1 tonnes CO
2
e/tonne
of product (assuming no forest was cleared to cultivate the sugarcane), this rises to 2.1 tonnes for the same
product derived from Chinese naphtha.
166 See for example: www.ecoemballages.fr/; ec.europa.eu/environment/waste/prevention/pdf/Eco_Emballag-
es_Factsheet.pdf
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6 HOSPITALS
Hospitals constitute a large, public service in Denmark and as such procure
and consume large amounts of resources. The two key circular economy
opportunities identified are to adopt performance models in procurement,
and to become leaders in recycling and waste reduction. Modelling suggests
that performance models in procurement could save hospitals EUR 70-90
million by 2035. With a systematic effort Danish hospitals could become
leaders in recycling and minimisation of avoidable waste. For these
opportunities to be realised, it is important that necessary capabilities
are developed and existing custom and habits are addressed, for example
by supporting pilots and training programmes, and by creating national
guidelines and/or targets.
The healthcare sector in developed economies face a tremendous challenge over
the next decades. Healthcare costs are increasing, for example driven by an ageing
population, technological development and increased expectations from patients.
Although Denmark is the country with the lowest projected cost increase, its public
spend on healthcare is expected to rise from ~7% of GDP in 2008 to ~10% GDP by
2050.
167
Such projections obviously motivate investigations for cost reductions and
productivity improvement.
Hospitals are different from the ‘producing’ sectors discussed in Chapters 2–4 in that
their output is a service. Hospitals do, however, procure, use, and discard vast quantities
of goods and materials. For this sector this report therefore focuses on how hospitals
could use their scale and centralised management to maximise resource efficiency
through performance models, and minimise their waste through best practices in
prevention and recycling.
In 2013, Danish hospitals spent EUR ~2.4 billion on physical goods.
168
Based on what
types of products are already offered in the form of performance models, an estimated
38% of the total purchases could be addressable (Figure 16). This includes a range of
advanced equipment (e.g. MRI scanners, radiation treatment equipment, and laboratory
instruments) and also (semi-)durable goods (e.g. scalpels, cuffs, and surgical apparel). It
does not include the long tail of smaller product categories in ‘other medical equipment’,
so the estimate is likely on the conservative side.
There are also large quantities of structural waste in healthcare that could be addressed
using circular principles. Though these were not explicitly analysed in the Denmark pilot,
a few deserve mentioning:
•
Virtualisation.
Although the technology is not yet mature beyond the level of
isolated trials, it is anticipated that the efficiency of part of the healthcare system
could be significantly improved by leveraging connectivity and technology-driv-
en cost reduction of diagnosis. Two existing examples are the blood glucose
monitor for diabetic patients and the various ‘e-health’ applications; a plausible
development is that patients take a variety of samples at home using a connect-
ed table-top device, send the diagnostic outcome electronically, and consult phy-
sicians remotely using a videoconference application.
Preventive healthcare.
Increasing healthcare costs have prompted the idea of
governments reducing the need for costly healthcare interventions by increas-
ing the overall health of the population. Shifting the focus to disease prevention
could offer a tremendous opportunity, not only in terms of avoided investment
in hospital beds (and the materials associated with construction and usage/
management) but also in terms of reduced productivity loss in the society. The
•
167 The King’s Fund,
Spending on health and social care over the next 50 years. Why think long term?,
(2013).
168 Expenses for Denmark’s 5 major regions, data from Danish regions. Purchase of goods represents ~15% of
total hospital budgets; hospitals purchase services for an additional EUR 2,400 million.
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Alzira model from Valencia offers an early example: driven by the nature of the
public-private partnerships in the model, healthcare providers are incentivised
to focus on health promotion and in the long-term reduce the patients’ need for
healthcare.
169
It is also highly relevant to address the increasing caloric intake
that has been growing steadily in Europe other developed economics, and could
drive exceedingly high healthcare costs.
170
Figure 16: Share of purchased goods in Danish hospitals that could be covered by performance models
COST BREAKDOWN OF
PURCHASED GOODS
PERCENT
Diagnostic imaging and radiation equipment
Surgical equipment
Patient care and wound treatment
Medical apparel and textiles
Other medical equipment
Medical equipment and accessories
Laboratory, observation and test equipment
Food and beverage
IT equipment
Other
Total
Addressable for access over ownership models
Readily addressable / high potential
Addressable long-term/low-mid potential
Not addressable
38
62
12
9
9
4
26
60
13
7
4
ADDRESSABLE
FOR ACCESS
OVER OWNERSHIP
MODELS
1
2
3
15
100
100
3
1 Semi-durable equipment (e.g. scalpels, cuffs, sterile drapes) addressable in the longer term
2 Clothing and linen already widely addressed in Denmark
3 Not assessed; long tail of small product categories, although access over ownership models should be feasible in many cases
SOURCE: Statistics Denmark, Danish Regions
169 NHS European Office,
The search for low-cost integrated healthcare. The Alzira model – from the region of
Valencia
(2011).
170 Today, the average caloric intake exceeds 3,500 kcal per day, 40% above the recommended daily intake. In
addition, the diet has become more fatty, salty, and sweet over the past 40 years. EEA, 2008; Food Stand-
ards Agency; European Food Safety Authority; J. Schmidhuber,
The EU Diet – Evolution, Evaluation and
Impacts of the CAP
(FAO, Rome, 2008).
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6.1 Performance models in procurement
Opportunity:
Shift towards performance models in procurement of advanced and
(semi)durable equipment.
EUR 70–90 (10-15) million p.a.
2035 (2020)
economic
potential:
Key barriers:
Insufficient capabilities and skills due to lack of experience;
imperfect information; custom and habit.
Guidelines and targets; capability building; procurement rules.
Sample policy
options:
The central idea in ‘performance’
171
models is a contract in which the customer pays for
the use, or the performance, of a product rather than the product itself. The rationale is
that there is no inherent benefit in owning the product. On the contrary, ownership can
entail additional costs (upfront investment), risk (unpredicted repair, maintenance or
obsolescence), and end-of-use treatment costs.
THE OPPORTUNITY FOR DENMARK
Performance models are relevant for many of Danish hospitals’ purchasing categories,
whether it is leasing clothing and bed linens or contracting the full management of
scanning and radiation equipment. At the heart of each such model lies a mutual benefit
for suppliers and customers to reduce the total cost of ownership. While the customer is
able to reduce purchasing and maintenance costs, as well as maximise performance and
uptime, the supplier is able to secure sustainable revenue streams, maximise resource
utilisation, and drive efficiency during the use phase.
172
Importantly, performance models
also incentivise manufacturers to design more durable products that are easier to
maintain, repair and refurbish or remanufacture (see Chapter 4).
There are already multiple examples of suppliers providing performance that are relevant
to, or directed exclusively towards, hospitals. In the healthcare sector, suppliers like
Siemens, Philips and GE are already rolling out performance models for their equipment,
in addition to having existing refurbishment operations.
173
Some of the most well-known
examples outside the healthcare sector include Ricoh’s and Xerox’ service contracts for
high-volume printers, Desso’s carpet tile concept,
174
and Philips’ lighting services (selling
‘lux’ instead of lighting fixtures
175
).
The partnership between Stockholm County Council and Philips Healthcare for the Nya
Karolinska hospital has received a great deal of attention.
176
The 20-year comprehensive,
function-based delivery and service agreement covers the delivery, installation,
maintenance, updating and replacement of medical imaging equipment such as MRI
and ultrasound equipment, where the cost risk is carried by Philips and the upside
potential (e.g. future lowered prices) is shared. This coincides with Philips opening a
new, dedicated refurbishment and remanufacturing facility in Best, the Netherlands in
171
Performance models used to collectively denote performance contracts, leasing, asset centralisation con-
tracts and other models designed for supplier to help customer minimise total cost of ownership.
172 For a more in-depth discussion on performance-based business models, see Stahel, W. R., Palgrave McMillan,
The Performance Economy
(2006).
173 www.healthcare.siemens.com/refurbished-systems-medical-imaging-and-therapy; www.healthcare.philips.
com/main/products/refurbished_systems/; www3.gehealthcare.com/en/products/categories/goldseal_-_re-
furbished_systems/
174 www.desso-businesscarpets.com/corporate-responsibility/cradle-to-cradler/
175 By owning the energy bill, Philips is able to significantly reduce energy consumption and cost. www.ellen-
macarthurfoundation.org/case_studies/philips-and-turntoo.
176 Katharine Earley in The Guardian,
Hospital innovation partnership set to deliver high quality, sustainable pa-
tient care
(13 November 2014).
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2014, announced as ‘the next step in our circular economy journey’.
177
Allowing suppliers
to retain control over their equipment and making full use of parts and components
throughout their entire life cycle could generate substantial savings for the hospitals.
Jens Ole Pedersen at Philips Healthcare Nordics notes that hospitals could save
approximately 25% on TCO of the provided equipment.
Performance-based contractual models could cover more than technically advanced
equipment or installations. Uniforms, bed and bathroom linens are commonly procured
on a leasing contract. And even semi-durables, which are often used as one-way
disposable equipment, are addressable for performance models. In Catalonia, which
like Denmark focuses increasingly on the circular economy, Axioma Solucions provides
sterilised surgical clothing as a service, while Matachana Group provides sterilisation
solutions for equipment at hospitals’ facilities. Axioma Solucions notes that according
to an independent study, their ‘Steripak’ can be cycled 75 times and consequently has a
resource footprint one eighth that of corresponding one-way clothing, while being up to
15% more cost efficient.
178
Danish hospitals have not yet adopted performance models to a large extent. The only
category where there is a large penetration is in textiles; laundry services and leasing
are already widely adopted.
179
There is therefore a large opportunity to initiate such a
shift, and the timing to do so appears very good. There are currently 16 large hospital
projects in Denmark, seven greenfield projects and nine that are major renovations
or expansions.
180
Similar to the Nya Karolinska example, they could take a holistic,
performance-based approach to procurement of equipment. These new hospitals
will open within the next five to ten years, sufficient time to build a new procurement
organisation and culture, with less concern for legacy equipment or old habits.
Given the current starting point, Denmark could gradually shift purchasing of goods
towards performance models for the addressable share of the purchasing budget
(Figure 13):
•
By
2020,
hospitals could seek to adopt performance contracts for up to 10% of
selected product categories (diagnostic imaging and radiation equipment, IT
equipment, and laboratory, observation and test equipment).
By
2035,
overall adoption of performance models could have increased to as
much as 40%. In addition to product categories already addressed in the short
term, similar procurement models could also have begun to penetrate other du-
rable and semi-durable goods, such as selected surgical tools and apparel, where
the safety/hygiene issues with looping materials can be properly addressed.
•
With total estimated savings of 15–30%
181
compared to traditional procurement, applied
to an addressable cost base of 38% of total hospital procurement (see Figure 13),
modelling suggests Danish hospitals and equipment suppliers could by 2035 (2020)
save EUR 70–90 (10–15) million annually.
182
These findings give a directional view of
the magnitude of this opportunity for Denmark. They rely by necessity on a number of
assumptions, the most important of which are detailed in Appendix B. The estimate has
not included more ‘generic’ products, such as lighting, flooring or printers.
177 philips.exposure.co/behind-the-factory-doors
178 The resource efficiency study was conducted by the Autonomous University of Barcelona.
179 Interview with De Forenede Dampvaskerier. Global players like Berendsen plc are also active in this field;
www.berendsen.dk/hospital
180 Information provided by Danish Regions.
181
Savings rate depends on product category. Based on expert interviews with healthcare equipment providers
and case studies from performance contracts in other industries (e.g. white goods, automotive, printers).
182 Based on current procurement volumes. This
sector-specific
impact does not include indirect effects, e.g. on
supply chains, that are captured in the economy-wide CGE modelling. In addition, the distribution of savings
between hospitals and suppliers has not been modelled. It could be argued that it is skewed towards hospi-
tals in the short term since suppliers want to create incentives for hospitals to set up performance contracts,
but could equilibrate at a more even split in the long-term as the model gets established and consolidated.
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BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting the
‘performance models in hospital procurement’ opportunity (see Figure 8; see also
Section 2.2.4 of the toolkit report for the barriers framework). Sector experts from both
suppliers and hospitals have noted that the critical barrier to hospitals increasing their
use of performance models is that hospital procurement staff are not trained and have
limited experience of other forms of tenders such as performance contracts or assessing
offerings based on total cost of ownership (TCO) – as well as limited time to change
practices. Another social factor mentioned in interviews is the customary perception
that leasing is often more expensive than buying and the uneasiness that performance
contracts could allow increased private sector influence in public healthcare.
Furthermore, hospital management and procurement departments in many cases lack
information compared to equipment providers on the economic case for access over
ownership. These barriers combine to provide a powerful force of inertia in procurement
departments.
To address these barriers, the following policy options could be further investigated.
These options are the result of an initial assessment of how cost-effectively different
policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit
report and Appendix D):
•
Guidelines and targets.
o
Creating guidelines
for regions or hospitals for the procurement of
solutions rather than products, and how to work with target setting on
different levels. International examples may serve as ‘blueprints’, such as
the Philips–Nya Karolinska contract in Sweden. Through an innovative
contract structure, the hospital secures access to a pre-defined level of
functionality rather than the availability of specific equipment. Target
setting also occurs in regional procurement partnerships in Denmark,
e.g. the partnership for green procurement.
Stimulating shared/centralised procurement amongst hospitals
where appropriate, to reap economies of scale and leverage purchasing
power. This could take the shape of a centrally negotiated performance-
based contract across all regional hospitals, e.g. for lighting. The
resulting additional cost savings could further accelerate a large-scale
move towards such access-based contractual models.
Supporting measures to optimise equipment utilisation
such as
equipment loan programmes between hospitals could round out the
benefits from reshaping procurement procedures and skillsets.
o
o
•
Capability building.
o
Developing skillsets for circular economy-oriented procurement,
e.g.
§
Training staff
in optimal procurement design for access over
ownership (e.g. the hospital could provide specialist training
courses based on a nationally developed curriculum).
§
Initiating a performance model pilot to develop and apply
the total cost of ownership (TCO) concept
to allow a more
holistic view of cost in hospital procurement – thereby creating
a mindset as well as bidding rules that are more conducive
towards performance contracts.
§
Building a repository of case studies
from national and
international examples to build confidence around issues such
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as e.g. cost efficiency, long-term benefits, contractual flexibility,
and dependence on fewer suppliers.
o
Establishing a government advisory body
with the explicit mission
of promoting performance-based contractual models in hospital
procurement. Hospitals could be given the option to seek such advice
for all or specific procurement projects. This could take the form of a
partnership, task force, or network to facilitate knowledge sharing.
•
Procurement rules
o
Adjusting budget rules
to enable joint budgets and closer working
between procurement and technical teams (“breaking down siloes”).
This could enable more performance-based contracts (with more
procurement staff and fewer technical maintenance staff). Removing
regulatory or governance barriers that impede interaction of hospital
teams and supplier teams could also help.
Adjusting procurement rules and procedures.
§
Augmenting the procedures for assessing the quality
of
competing bids with tightly defined ‘circularity’ criteria or KPIs.
Such criteria could be part of the (non-binding) guidelines for
public procurement and could include promotion, piloting, and
knowledge sharing of purchasing criteria). Examples include
length of lifetime, reparability, presence of chemicals that hinder
recycling, design for disassembling features.
§
Incorporating accounting for externalities
(e.g. the life cycle
carbon/water/virgin materials footprint) into the guidelines or
rules for all public procurement to create full cost transparency.
o
6.2 Waste reduction and recycling in hospitals
Opportunity:
Centrally managed and systematic initiative to reduce waste and
increase recycling.
Not quantified.
2035 (2020)
economic
potential:
Key barriers:
Insufficient capabilities and skills due to lack of experience; custom
and habit; imperfect information.
Pilot of waste reduction and recycling management integrated into
staff training; waste minimisation and recycling targets; increased
fiscal incentives to avoid waste generation.
Sample policy
options:
Large hospitals are like miniature cities, with many sizable and complex flows of
materials and information. And, similar to cities, they produce large quantities of waste.
Hospitals are run by a central management that coordinates staff and sets a strategic
direction for the whole organisation, and thus might have the potential to holistically
optimise their waste management. Therefore, as is the case for other centrally and
tightly controlled systems such as airports, it is reasonable to envision hospitals as
champions in both waste prevention and recycling.
THE OPPORTUNITY FOR DENMARK
The largest source of (non-hazardous) waste in hospitals is the purchasing and
preparation of food and beverage. As explained by one sector expert, it is common for
departments to order too many meals from the kitchen to add a safety margin, which
risks being magnified by the kitchen’s safety margins. As a result hospital kitchens may
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end up purchasing more food and ingredients than needed, which ultimately produces
avoidable food waste.
The approach to prevent avoidable food waste for large institutions such as hospitals
differs from the alternatives laid out for the consumer-facing market (Section 2.2) in
that it is more centred on right-sizing procured volumes. One way of incentivising this
planning challenge is to set standards on sustainable procurement of the food and
catering services, such as introduced by the NHS in the UK.
183
Given its scale, hospitals could systemise and improve recycling beyond the already
ambitious targets of the Danish society set by the ‘Denmark Without Waste’ strategy.
Hospitals are part of the service sector where the target for recycling packaging waste
in 2018 is 70% (paper, glass, metal and plastic) and 60% for recycling of organic waste
in 2018.
184
In comparison, Danish hospitals today note recycling rates of 15–30%, with an
average below 20%.
185
Danish hospitals therefore have an opportunity to make a systematic effort with strong
management commitment to improve recycling, while at the same time reducing
waste generation. While this effort needs to be driven primarily by a well-informed and
committed staff, it could be guided by, for example, working with waste management
suppliers that increasingly provide waste minimisation services apart from operating the
logistics and treatment. While the potential has not been fully quantified in this case, it
should be feasible to achieve overall recycling rates above of approximately 85% (70%)
by 2035 (2020). This corresponds to being aligned with the ‘Denmark Without Waste’
target by 2020 and then gradually outpacing it.
BARRIERS AND POTENTIAL POLICY OPTIONS
The following paragraphs provide an initial perspective on the barriers limiting the
‘waste reduction and recycling in hospitals’ opportunity (see Figure 8; see also Section
2.2.4 of the toolkit report for the barriers framework). Hospitals face similar social factor
and information barriers when aiming to reduce waste generation and increase recycling
as when trying to increase the use of performance models in procurement. There is
limited capacity within hospital administrations to consider waste prevention and waste
handling and, while procurement departments are already highly professional, hospitals
lack expertise in waste prevention and management. Furthermore, hospital targets are
centred on quality of healthcare; expert interviews indicate that there is resistance to the
idea of adding to or diluting such targets with targets relating to waste. Furthermore,
there is limited information on the economic benefits of reducing waste and increasing
recycling due to a lack of analysis of procured and disposed materials in hospitals. As
in the food and packaging sectors, the incentive to reduce waste and increase recycling
would rise if the market prices of packaging, food and other consumables reflected their
true environmental costs.
As before, at the level of individual hospitals, the main short-term challenge is improving
capabilities and skills as well as changing mindsets. Over a longer time horizon,
policymakers might choose to play a role by creating supporting guidelines (non-
binding) and rules (binding) as well as appropriate incentives. Central government
might also also take on the externalities barrier by internalising more externalities in the
production of food, packaging and other products that may end up being disposed of
by hospitals as waste. Doing so would likely increase hospitals’ monetary incentive for
waste avoidance and recycling.
To address these barriers, the following policy options could be further investigated.
These options are the result of an initial assessment of how cost-effectively different
policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit
report and Appendix D):
183 UK Department of Health,
The Hospital Food Standards Panel’s report on standards for food and drink in NHS
hospitals
(2014).
184 Danish Government,
Denmark Without Waste. Recycle more – incinerate less
(2013).
185 Excluding construction and garden waste. Based on interviews and correspondence with representatives
from hospital environmental managers and Danish Regions.
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Piloting the integration of waste reduction and recycling management into
staff training
across all hospital functions in new or leading hospitals, and syndi-
cating the results into case studies for wider knowledge building.
Setting waste minimisation and recycling targets
for hospitals in line with
overall national targets but taking into account its different, challenging) charac-
ter, and include associated circular economy metrics in the performance criteria
for hospital management.
Investigate fiscal incentives to avoid non-hazardous waste streams to level
the playing field for recycling initiatives
as part of a national initiative for all
sectors. A complementary measure would be the publication of waste avoid-
ance/management performance league tables for hospitals.
Creating or supporting a platform for Danish hospitals
to share information,
exchange best practices and develop a joint strategy for reducing waste and in-
creasing recycling rates with a view to establishing the country as a frontrunner.
Initiating a discussion on pricing in of externalities
(but balancing with
distributional effects) so that the market prices of food, packaging and other
consumables reflect the full social and environmental costs of their production,
consumption and disposal—and ultimately inform better procurement and opera-
tional decisions.
•
•
•
•
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APPENDIX
A
A detailed overview of sector selection in the Denmark
pilot
This appendix summarises the details underlying the sector selection ‘matrix’ developed
for the Denmark case study and shown in Figure 1: the selection of sub-dimensions,
the data collection and the calculations. The list of sub-dimensions does not aim to be
exhaustive and is not necessarily the optimal one for other regions, but could serve as
an inspiration when conducting the sector selection elsewhere. See section 2.1.3 in the
toolkit report for a more extensive discussion about the approach used.
Figure A1 provides an overview of the sub-dimensions used in the Denmark pilot for the
dimensions ‘Role in national economy’ (A) and ‘Circularity potential’ (B). It displays the
type of assessment (quantitative vs. qualitative), an indication of how the calculations
were performed and the relative weight of quantities within each sub-dimension. When
the assessment was qualitative, a scoring-based assessment was performed to yield
a ‘semi-quantitative’ result. The sources behind the data and analyses are reported.
Figures A2 and A3 provide an overview of the relative scoring of each sub-dimension in
the Denmark pilot.
A brief description of the sub-dimensions follows below.
Dimension A. Role in national economy.
A.1.
Contribution to the national economy in terms of gross value added.
Both
the relative size of each sector’s gross value added and the relative growth
rate were taken into account, in order to reflect shifting long-term trends as
well as current contributions.
A.2.
Contribution to national employment and job creation.
Employment
is obviously a key priority for any policymaker and was thus included in
dimension A. Both the relative importance of each sector in terms of full time
equivalents and the relative growth rate were taken into account, in order to
reflect shifting long-term trends as well as current contributions.
A.3.
Competitiveness – trade openness and security of supply.
Export and
import volumes were included to reflect each sector’s competitiveness on the
international market.
A.4.
Competitiveness – strategic dimensions.
This sub-dimension is the
sum
of four qualitatively or quantitatively evaluated quantities illustrating the
strategic importance of each sector for Denmark’s competitiveness in terms
of technology, productivity and sensitivity to global trends. The
sum
synthesis
was selected to reflect that all quantities are important but not necessarily
interdependent. The qualitative evaluation was done by assigning a score of
‘high’, ‘medium’ or ‘low’ to each quantity, associated with scores of 10, 5 and 1
respectively.
•
Patent activity –
Danish patent activity in relation to other countries in the
EU, by technology area mapped on Danish sectors.
Export specialisation
– Classification based on whether each sector’s share of
Danish exports is significantly above, similar to, or below the average share of
exports within the OECD.
Productivity advantage –
Reflects how productive Danish sectors are in com-
parison with the same sectors in international peers.
Energy price sensitivity
– Energy expenditure as share of output value, in-
cluded to reflect each sector’s sensitivity to changes in energy prices.
•
•
•
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Dimension B. Circularity potential.
B.1.
Material intensity –
Purchase of commodities are shown as a share of the
sector’s turnover to reflect how dependent the sector is on physical resources.
B.2.
Environmental profile –
Includes weights of both total waste volumes
and recycling, in order to reflect both the tendency to create a leakage of
material, which could potentially be avoided, and the proficiency with which
the material is recovered today, which could potentially be improved.
B.3.
Scope for improved circularity
– The
product
of three qualitatively
evaluations. A score of ‘high’, ‘medium’ or ‘low’ was assigned to each quantity,
associated with scores of 10, 5 and 1 respectively. The
product
synthesis was
selected due to the interdependence of the four quantities.
•
Intrinsic material value of output (and waste).
Qualitatively estimates the in-
trinsic value of the material handled in each sector. Both raw materials and
value-added parts are taken into account. Implies both economic and envi-
ronmental value.
Potential for higher value-add from circular activities.
States how much more
value could potentially be added through circular economy activities; e.g. the
theoretical amount of intrinsic material value, value added services, and lon-
ger lifetime. Implies both economic and environmental value.
Feasibility in terms of cost and complexity of implementation.
Sizes the esti-
mated feasibility of improving circularity, accounting for e.g. whether prod-
ucts/materials cross borders or not, how materials are mixed, the cost of sep-
aration, and feasibility to engage customers.
•
•
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Figure A1: Summary of methods and data used in the sector selection in the Denmark pilot
A
Prioritisation
sectors based
on role in
the national
economy
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B
Prioritisation of
sectors based
on Circularity
potential
NOTE: GVA = gross value added; CAGR = compound annual growth rate.
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Figure A2: Overview of scoring of ‘Role in national economy’ in the Denmark pilot
High
Medium
Low
A.1
A.2
A.3
A.4
Strategic
dimen-
sions
3
SECTORS
Pharmaceuticals
Machinery
Food and
Beverages
Basic Metals
and fabricated
products
Electronic
products
Rubber and
plastic products
Construction
Hospitals
Mining and
quarrying
Shipping
Electricity and gas
Agriculture,
forestry and
fishing
Water supply,
sewerage
GVA
1
CAGR
1
FTEs
1
CAGR
1
Imports
2
Exports
2
1 Green: value add/employees >4% of total, CAGR >3%; Red: value add/employees <1% of total; CAGR <0%, Orange: value add/
employees 1-4% of total, CAGR 0-3%.
2 Green: imports/exports >5% of total; Red: imports/exports <1% of total; Orange: Imports/exports 1-5% of total.
3 Semi-quantitative.
SOURCE: Ellen MacArthur Foundation.
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Figure A3: Overview of scoring of ‘Circularity potential’ in the Denmark pilot
High
Medium
Low
Information n/a
B.1
B.2
B.3
Share not
recovered
3
Score for
improved
circularity
SECTORS
Pharmaceuticals
Machinery
Food and Beverages
Basic Metals and fabricated
products
Electronic products
Rubber and plastic products
Construction
Hospitals
Mining and quarrying
Shipping
Electricity and gas
Agriculture, forestry and
fishing
Water supply, sewerage
Material
intensity
1
Waste
generated
2
1 Green: material value >40% of sales turnover; Red: material value 10% of sales turnover; Yellow: material value 10-40% of sales
turnover.
2 Green: waste generated
≥10%;
Red: waste generated <1%; Yellow: waste generated is 1%-10% of total waste in Denmark
3 Share of waste not recycled.
SOURCE: Ellen MacArthur Foundation.
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B
Opportunity prioritisation and sector impact assessment
This appendix describes the assumptions and calculations behind the opportunity
prioritisation and impact assessment for each focus sector in the Denmark case study. The
methodology for the assessment is described more detail in Sections 2.2.1 – 2.2.3 of the
toolkit report. It begins with a qualitative assessment and prioritisation using the ReSOLVE
framework, followed by a quantitative impact assessment (where possible). Figure B1
provides a detail of this qualitative assessment for the construction sector.
Figure B1: Qualitative assessment of potential of opportunities for the Construction &
Real Estate sector in the Denmark pilot
QUALITATIVE ASSESSMENT OF POTENTIAL
•
•
Use of biological elements in architecture (e.g. ‘living
roofs’ that purify water)
Return of organic construction material to biosphere
•
Sharing of floor space reducing demand for new buildings
•
•
Shared residential floor space (e.g. Airbnb,
Couchsurfing, Hoffice)
Shared office space (e.g. Liquidspace) and increase of
desk sharing policies
Multi-purposing of offices and public buildings for
better utilisation
Re-purposing of building interiors to increase lifetime
of existing buildings
•
Increased use of under-utilised buildings
•
•
•
•
Coordination of all stakeholders along value chain to
reduce structural waste
Energy use optimisation through low-energy houses
and smart homes
•
Increased reuse and high-value recycling of building
components and materials, enabled by
•
•
•
Designing buildings for disassembly
New business models (e.g. other owner of materials
than property owner)
Building passports/signatures and reverse logistics
ecosystems
Increased teleworking to reduce need for office
floor space
XCHANGE
SOURCE: Ellen MacArthur Foundation
Low potential
Modular production off-site for rapid assembly on-site
3D printing of building components
Prioritised for further assess-
ment
Indirectly included as enabler of
key sector opportunities
High potential
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The ten prioritised opportunities in the Denmark case study span one or more actions in
the ReSOLVE framework, as described below.
Food and beverage:
•
Value capture in cascading bio-refineries (Loop; implicitly Regenerate if more
organic materials are returned to the bio-cycle). Impact assessment described in
Figure B3.
Reduction of avoidable food waste (Optimise). Impact assessment described in
Figure B4.
•
Construction and real estate:
•
Industrialised production and 3D printing of building modules (Optimise, Ex-
change). Impact assessment described in Figure B5.
Reuse and high-value recycling of components and materials (Loop). Impact as-
sessment described in Figure B5.
Sharing and multi-purposing of buildings (Share; implicitly Virtualise as an en-
abler). Impact assessment described in Figure B6.
•
•
Machinery:
•
Remanufacturing and new business models (Loop; implicitly Share as opportu-
nity is partly enabled by performance models that imply access over ownership
and design for upgradability). Impact assessment described in Figure B7.
Packaging:
•
Increased recycling of plastic packaging (Loop). Calculation of additional plastic
material recycling described in Figure B8.
Bio-based packaging where beneficial (Regenerate).
•
Hospitals:
•
Performance models in procurement (Loop, Share). Impact assessment de-
scribed in Figure B9.
Waste reduction and recycling in hospitals (Loop, Optimise).
•
A quantitative impact assessment was conducted for seven of these opportunities,
following the method described in Section 2.2.3 in the toolkit report. The driver tree in
Figure B2 can illustrate this method and its key components are outlined below.
Branch A. Net value created in deep dive sub-sector.
The net value creation is defined
as a product of the overall adoption rate of the circular economy opportunity, the
number of ‘units’ addressed, and the net value created per unit.
•
Adoption rate. The adoption rate is a quantitative answer to the question ‘How
widely will this opportunity have been adopted in a circular scenario?’ where
100% means full realisation of the potential. In the Denmark pilot, the adoption
rates were always expressed as a difference between the circular scenario (2035
and 2020 horizons) and a ‘business as usual’ scenario (where some adoption rate
is typically also greater than zero). This allows the model to take into account
that circular economy opportunities will probably be adopted to some extent
even in a non-circular scenario.
Number of units in deep dive sub-sector. The number of units is used to de- note
any quantity used as the basis of the quantification in the subsector. The unit
could be (an estimated) number of products, or a volume of material flow (such
•
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as tonnes of organic waste). It could also be a monetary unit, such as ‘value of
purchased goods’ or ‘output of new buildings’.
•
Net value created per unit. Circular activities bring two kinds of direct financial
benefits to businesses: (i) cost savings from materials, components or labour
(for example due to parts recovery or virtualisation), and (ii) increased reve-
nues (from additional sales and/or a higher unit price). Additional costs include
in- creased labour costs, increased material/component costs (for example to
design more robust products), and increased energy and capital expenditure, for
example to set up bio-refineries or remanufacturing plants. These elements can
all be assessed separately (as was done in the Denmark pilot), or, alternatively,
for a high-level estimate, in one value (e.g. 5% net cost savings per unit). They
can also be assessed for consumers rather than businesses (as in, for example,
the reduction of avoidable food waste).
Figure B2: Schematic overview of sector-specific impact quantification
Circular scenario adoption rate, %
Adoption
rate
%
Net value
created in
deep-dive
sub-sector
EUR million
Business as usual scenario adoption rate, %
Additional
revenues
and cost
savings per
activity
EUR per unit
Labour
Additional
costs per
activity
EUR per unit
Sector size
Deep-dive
sub-sector
size
Services
Materials / components
Energy
Capital
Additional sales
Price / value increase
Material / labour savings
A
Number
of units in
deep-dive
sub-sector
Net value
created per
unit in deep-
dive sub-
sector
EUR per unit
Size of
sector vs.
deep-dive
sub-sector
Net value
created
in sector
EUR
million
B
Scale up
factor to full
sector
%
%
Scalability
factor
(between 0
and 1)
SOURCE: Ellen MacArthur Foundation
Branch B. Scale-up factor.
The scale-up factor is used to bring the net impact estimated
for the deep-dive sub-sector to the full sector (and adjacent sectors). The calculation
is driven by the relative size of the adjacent sub-sectors compared to the deep dive
sub-sector, and a ‘scalability’ factor introduced to reflect the relative applicability of the
circular economy opportunity in different sub-sectors. The final scale-up factor is the
sum of each individual scale-up factor for all sub-sectors present.
•
Relative size of sub-sector. This calculation is based on the relative economic
size of the individual sub-sectors, for example calculated by comparing output or
gross value added.
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•
Scalability factor. This value, set between 0 and 1, is introduced to adjust the
scaling based on how applicable an opportunity is to an adjacent sub-sector
compared to the deep-dive subsector. For example, a scalability factor of 0.2
means that the impact is estimated to be 20% of the impact estimated for the
deep-dive sub-sector.
Figures B3–B9 summarise the assumptions, estimates and scaling for each of impact
assessments, along with the sources used. An overview of the types of sources for
estimates per opportunity is provided in Figure B10. These assumptions should be read
in light of the scenario description detailed in Figure 8.
While the quantification of circular economy opportunities follow the approach in Figure
B2 in general, variations were introduced to account for differences in the nature of each
opportunity. A calculated example of one of the opportunities is given in the section
below. In Figures B3–B7, the ‘mini’ driver trees shown contain ‘Branch A’ of the driver
tree, while the tabulated scale-up below is a representation of ‘Branch B’.
It should also be noted that due to variations in the use of scale-factors between the
conservative and ambitious circular economy scenarios, the relative contribution of each
opportunity to the total sector-specific presented in figures B3–B9 are different from
those given in Figure 10, which are averages of these two scenarios.
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Figure B3: Value capture in cascading bio-refineries
Impact assessment summary, 2035
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Size as share of
food and beverage
sector
Food and
beverage
NOTE: Results estimated for impact of industries inside Denmark only. This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured in
the economy-wide CGE modelling. BaU = business as usual.
SOURCES:
1 Five company / industrial organisation interviews and five sector expert interviews.
2 Additional price per tonne dependent on type of by-product/waste and its application. Energy production as biofuell/biogas estimated to generate additional EUR 20–30/
tonne. New chemicals estimated to generate EUR 70–80/tonne. Costs estimated to 40–50% of product value.
3 The Netherlands Organisation for Applied Scientific Research, Opportunities for a Circular Economy in the Netherlands (2013). Pricing estimates derived from approximate
current and future prices for a 34 waste / by-product streams.
4 Danish EPA, Organiske restprodukter - vurdering af potentiale og behandlet mængde (2014); Kortlægning af madaffald i servicesektoren (2014); Kortlaegning af
dagrenovation i Danmark - Med fokus på etageboliger og madspild (2014).
5 Estimate, taken as 80% of waste generated by the food and beverage industry per EUR of GVA (from Statistics Denmark). See also M. Gylling et al., The 10+ million tonnes
study: increasing the sustainable production of biomass for biorefineries, University of Copenhagen (2013), concluding that the agricultural sector could produce an additional
10 million tonnes of by-products for use in bio-refineries.
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Figure B4: Reduction of avoidable food waste
Impact assessment summary, 2035
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103
NOTE: Results estimated inside Denmark only. This sector-specific impact does not include indirect effects, e.g. on supply chains,
that are captured in the economy-wide CGE modelling. BaU = business as usual.
SOURCES:
1 SITRA, Assessing the circular economy potential for Finland (2015).
2 Eurostat.
3 Danish Government, Denmark without waste I (2013); Danmark uden affald II (2015).
4 A. Halloran et al., Adressing food waste reduction in Denmark (Food policy 49, 2014).
5 Danish Environmental Protection Agency, Kortlægning af dagsrenovation i Danmark – Med fokus på etageboliger og madspild
(2014).
6 Danish Environmental Protection Agency, Kortlægning af madaffald i servicesektoren: Detaljhandel, restauranter og storkøkkener
(2014).
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Figure B5: Industrialised production and 3D printing of building modules; reuse and high-value recycling of components and materials
Impact assessment summary, 2035
A
B
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NOTE: Results estimated for impact of industries inside Denmark only. This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured
in the economy-wide CGE modelling. BaU = business as usual.
SOURCES:
1 Estimate, informed by three company interviews and three sector expert interviews.
2 Estimates based on reported savings by the Broad Group and WinSun, consolidated in expert interviews. 3D printing savings estimated as 50% of WinSun’s reported
savings, since there is still very little data to exemplify cost savings. Actual savings will vary on a case-by-case basis and be dependent on the size and complexity of
components being 3D printed. See also Ellen MacArthur Foundation, SUN and McKinsey Center for Business and Environment,
Growth Within: A Circular Economy Vision for
a Competitive Europe
(2015); www.archdaily.com/289496/; http://www.yhbm.com/index.php?siteid=3
3 Estimates, informed by literature and expert interviews. See, e.g. US Environmental Protection Agency, Using Recycled Industrial Materials in Buildings (2008); Skive
municipality, Afslutningsrapport Projekt Genbyg Skive (2015).
4 Statistics Denmark.
5 P.-E. Josephson & L. Saukkoriipi, Waste in construction projects: call for a new approach (Chalmers University of Technology, 2007); M. Hogan, The Real Costs of Building
Housing (SPUR, 2014).
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Figure B6: Sharing and multi-purposing of buildings
Impact assessment summary, 2035
NOTE: Results estimated for impact inside Denmark only. This sector-specific impact does not include indirect
effects, e.g. on supply chains, that are captured in the economy-wide CGE modelling. BaU = business as usual.
SOURCES:
1 Estimate, informed by literature: GSA Office of Government-wide Policy, Workspace utilisation and allocation
benchmark (2011); Cushman & Wakefield, Office space across the world (2013); vasakronan.se/artikel/det-digitala-
arbetslivet-ar-har; SITRA, Assessing the circular economy potential for Finland (2015); Ellen MacArthur Foundation,
SUN and McKinsey Center for Business and Environment,
Growth Within: A Circular Economy Vision for a Competitive
Europe
(2015).
2 Statistics Denmark; 100% of commerical buildings; 10% of residential, small residential, small non-residential
buildings; 50% of public buildings and sports buildings.
3 Statistics Denmark.
4 Office hours = 10 hours per day, After hours = 4 hours per day. Current utilization during office hours taken as 20%
higher than reported by GSA.
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Figure B7: Remanufacturing and new business models
Impact assessment summary, 2035
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
NOTE: Results estimated for impact of industries inside Denmark only. This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured
in the economy-wide CGE modelling. BaU = business as usual.
SOURCES:
1 Five sector experts were interviewed for the analysis of cost breakdown and value potential; findings tested on high level with six Danish company and industry
representatives.
2 Towards the Circular Economy Vol. I, Ellen MacArthur Foundation (2012); Assessing Circular Economy potential for Finland, SITRA/McKInsey (2014).
3 Cost breakdown and technical complexity per component gathered from, a.o.: LCA analysis on Vestas V112 model, PE (2011); E.ON Wind Turbine Technology and
Operations Factbook (2013); Windpower Engineering & Development (2012), http://www.windpowerengineering.com/design/mechanical/understanding-costs-for-large-
wind-turbine-drivetrains; EWEA (2009).
4 Wind power demand: Coarse grained estimates based on projections by BTM/Navigant, McKinsey & Co., and DWIA.
5 However, larger secondary value may be derived from successfully remanufactured / refurbished EEEs, as stated by, e.g. Ricoh.
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Figure B8: Increased recycling of plastic packaging
Impact assessment 2013
NOTE: This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured in the economy-
wide CGE modelling.
SOURCES:
1 Total volumes: Danish Environmental Protection Agency, Statistik for emballageforsyning og indsamling af emballageaffald
2012 (2015). Volume distribution and recycling rates are reconciled from 2008 data provided by the Danish Environmental
Protection Agency.
2 Accurate data for PET not inluded in used data set. The the recycling rate is therefore assumed not to change, thus giving a
zero contribution to the 2035 scenario.
3 Estimates, based on interviews with sector experts from the waste management industry and the Danish Environmental
Protection Agency.
4 Estimates, based on interviews with sector experts and ambition levels presentet in the Denmark without waste strategy.
Danish Government, Denmark without waste. Recycle more, incinerate less (2013).
5 Calculated as the sum of addtional volume collected by 2035 at 2035 yield and the additional yield of the collected baseline
volume.
Figure B9: Performance models in procurement in the hospital sector
Impact assessment summary, 2035
NOTE: This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured in the economy-wide
CGE modelling. BaU = business as usual.
SOURCES:
1 Statistics Denmark, Danish Regions
2 Estimates, informed by 4 company interviews; 4 hospital / sector expert interviews
3 Savings rate depends on product category. Based on expert interviews with healthcare equipment providers and case studies
from performance contracts in other industries (e.g. white goods, automotive, printers). The distribution of savings between
hospitals and suppliers has not been modelled. It could be argued that it is skewed towards hospitals in the short term since
suppliers want to create incentives for hospitals to set up performance contracts, but could equilibrate at a more even split in the
long-term as the model gets established and consolidated.
4 Weighted averages of product categories
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Figure B10: Key sources for assumptions & estimates for each circular economy opportunity
Circular economy opportunity
Addressable value pool[1]
 
 
Danish EPA
Literature/reports, Interviews, Danish
EPA
Value creation and costs
Adoption rate
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1
Food & beverage
2 Reduction of avoidable food waste
Industrialised production and 3D
printing of building modules
 
Reuse and high-value recycling of
components and materials
 
Sharing and multi-purposing of
buildings
 
Value capture in cascading bio-
refineries
  Literature/reports, interviews
 
Literature/reports, Interviews
  Literature/reports, interviews
 
Interviews
3
Construction
& Real estate
4
Literature/reports, interviews
  Interviews
 
Interviews, Danish EPA
Literature/reports, interviews
  Interviews
 
Interviews, Danish EPA
5
Machinery
6
7
Plastic packaging
8
Literature/reports
  Interviews
 
Interviews
Remanufacturing and new business
 
models
Increased recycling of plastic
packaging
Bio-based packaging where
beneficial
 
Literature/reports, DBA
  Interviews, literature/reports
 
Interviews, literature/reports
Danish EPA
  Literature/reports, interviews
 
interviews, Danish EPA
 
Interviews
Danish Regions, interviews
 
N/A
  N/A
 
N/A
9 Performance models in procurement  
Hospitals
10 Waste reduction and recycling
  Literature/reports, interviews
  N/A
 
Interviews
 
Interviews
1
Legend:
Sizes of product categories or sub-sectors provided by Statistics Denmark
Literature/reports – Published studies from institutes, businesses or academia
Interviews – company experts and/
or external experts
Danish EPA / DBA – data and/or interviews from Danish EPA or DBA
Danish regions – data on public expenditure from Danish regions
N/A – data not collected (no
quantification made)
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Impact assessment: Value capture in cascading bio-refineries
The following summarizes the impact quantification for the pork and dairy sub-sectors
of the food and beverage sector, as summarised in Figure B3. It should be noted that
the estimated valorisation is an addition or supplement to current valorisation pathways,
which is reflected both in the adoption rate and net value added per unit volume. Only
existing technologies (at R&D or early commercial stage) have been considered as part
of this opportunity.
•
Adoption rate. Overall, the technologies required to produce high-value prod-
ucts (e.g. proteins, nutraceuticals, or food ingredients) are at R&D or pilot stage,
wherefore the 2020 adoption rate was set to 20% (vs. 0% in the BaU scenario).
By 2035, however, it is reasonable that all these enabling technologies, along
with capital to build capacity, will be available in a circular scenario, leading
to a 90% adoption rate assumption (vs. 20% in BaU). These assumptions were
stress-tested with experts and also seen to correlate well with the recent TNO
report on the Dutch economy.
Total volume and different waste streams. The total waste volume from both
industries was broken down into sub-components to reflect different value cre-
ation opportunities for different types of waste. Each waste volume and its com-
position were estimated using direct data and interviews with industry experts,
and was assumed to be constant over the modelled time period.
○
Pork industry: ~3.9 million tonnes per year, divided as 94% wastewater slurry,
1% bone meal, fat, grease and mycosa, 1% hair, bristles and hooves, and 4%
manure, gut content and other waste.
Dairy industry: ~1.5 million tonnes per year, divided as 89% whey and other
former foodstuffs, and 11% other waste.
•
○
•
Net value per unit volume. Two main sources of value were considered: ex-
traction or synthesis of (bio)chemicals, or energy through either biofuel or direct
energy extraction.
○
For modelling purposes, these two value creation pathways were separated
into the ‘Food and beverage’ (FBV) sector, the ‘Chemical industry, plastics
and pharmaceuticals’ (CHM) sector and the ‘Gas and heat’ (GDT) sector. (See
Appendix C for details on sector categorisation in the Danish economy.)
The value creation was expressed in terms of EUR/tonne waste or by-prod-
uct material, and was individually estimated for each identified waste stream
(see above) and value creation activity. Initial pricing estimates were de-
rived from approximate current and future prices for 34 waste / by-product
streams in the recent TNO report and discussed with experts before finalized.
The value creation was expressed as a price ‘delta’ compared to current
prices, taking into account that most waste is currently valorised in some
way. The price ‘deltas’ thus reflect the increase in value creation that can be
unlocked through improved technologies and processes. In some cases, the
‘deltas’ where increased between the 2020 and 2035 scenario, to reflect an
increase in maturity for technologies that require a longer time to develop.
The price delta per waste stream and sector is summarised in Figure B12.
At the same time, an estimate of volume allocation to the three sectors
was conducted, based on assumptions on technological maturity and de-
mand-pull from the respective sectors. It is assumed that a fraction of the
waste / by-product streams is valorised by the pork / dairy processors them-
selves. This fraction is generally increased from 2020 to 2035, as valorising
by-products becomes an increasingly important part of the food processor’s
○
○
○
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business model. The volume allocation per waste stream and sector is sum-
marized in Figure B11.
○
Costs were expressed as percentages of the value created per waste stream.
▫
For the CHM and GDT sectors, the costs were as follows: Materials
10%, Labour 10%, Services 5%, Capital 25% (reflecting an expected
raw material price increase die to the higher value of waste-derived
products the need for capital expenditure to build new plant capacity).
The material cost is booked as additional revenue for the pork/dairy
processors (as the waste / by-product streams are sourced from them).
For the FBV sector, the costs were as follows: Labour 10%, Capital 25%
(assuming no material sourcing or external services needed as bio-
refining becomes an integrated part of existing operations).
▫
As an example, consider wastewater slurry valorisation from the pork industry (3.7
million tonnes).
By 2020, a 20% adoption rate entails that ~750 thousand tonnes are processed to
add additional value compared to business as usual. The assumed price deltas for the
CHM and GDT sectors are 30 and 20 EUR/tonne, respectively. The volume distribution
is 10% vs. 90%, i.e. most of the wastewater will go to generate biofuels and heat. The
pork industry does not generate any additional value from this waste stream, but will
get revenue of 10% (3 and 2 EUR/tonne respectively) from selling the wastewater to
these adjacent industries. In addition, 80% of the volume valorised by the CHM sector
is cascaded to the GDT sector for additional valorisation. After subtracting the 50%
cost base, the CHM sector generates a net value of EUR 1.1 million. The GDT sector
generates EUR 6.7 million plus EUR 0.6 million from material streams cascading from
the CHM sector. Finally, the Pork industry generates an additional EUR 1.6 million from
the price premium of the material streams sold to the CHM and GDT sectors. The net
value created from the wastewater slurry is thus EUR 10 million. Adding up the other five
material streams from pork and dairy gives a net value creation of EUR 16.2 million.
By 2035, the net adoption rate is 70% (90% vs. 20% in BaU), meaning that ~2.8 tonnes
are processed. The shift in volume share towards more valuable products and the
higher value per tonne yields EUR 15.6 million for the CHM sector, 30.6 million for the
GDT sector (21.9 million from direct material allocation and 8.7 million from cascaded
material from the CHM sector), and 11.7 million from the pork industry (including inhouse
valorisation and revenues from selling wastewater to CHM and GDT. The net value
created from the wastewater slurry is thus EUR 57.9 million. Adding up the other five
material streams from pork and dairy (totalling 70% of 5.4 million tonnes) gives a net
value creation of EUR 97 million, corresponding to an average net value of 25 EUR/tonne
(as illustrated in figure B3).
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Figure B11: Pork and Dairy – Price ‘delta’ per sector and waste stream
2020 scenario
2035 scenario
gure B10. Pork
nd Dairy – Price
elta' per sector
nd waste stream  
PORK
EUR / tonne
Food
processor
Chemical
industry
Gas & heat
Food
processor
Chemical
industry
Gas & heat
Wastewater slurry
Bone meal, fat, grease,
mucosa
Hair, bristles, hooves
–
 
30
 
20
 
32
 
40
 
28
–
 
–
 
20
 
8
 
10
 
20
80
 
100
 
20
 
480
 
600
 
20
Manure, gut, other
–
 
–
 
20
 
8
 
10
 
20
DAIRY
Whey & former feedstuffs
40
 
50
 
20
 
40
 
50
 
28
Other waste
40
 
50
 
20
 
40
 
50
 
28
NOTE: Prices are relative to estimates of current prices per waste stream
Figure B12: Pork and Dairy – volume allocation per sector and waste stream
Figure  B11.  Pork  and  
Dairy  –  volume  
alloca8on  per  sector  
and  waste  stream  
PORK
2020 scenario
2035 scenario
Percent
Food
processor
0%
 
Chemical
industry
10%
 
Gas & heat
Food
processor
 
10%
 
Chemical
industry
30%
 
Gas & heat
Wastewater slurry
Bone meal, fat, grease,
mucosa
Hair, bristles, hooves
90%
60%
100%
 
0%
 
0%
 
60%
 
40%
 
0%
10%
 
20%
 
70%
 
70%
 
30%
 
0%
Manure, gut, other
0%
 
0%
 
100%
 
40%
 
30%
 
30%
DAIRY
Whey & former
feedstuffs
Other waste
20%
 
10%
 
70%
 
40%
 
20%
 
40%
0%
 
20%
 
80%
 
0%
 
50%
 
50%
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C
Economy-wide impact quantification
Economy-wide impact assessment methodology
The economy-wide impact assessment was conducted using NERA Economic
Consulting’s N
ew
ERA global model. A multi-sector, multi-region trade, dynamic
computable general equilibrium model. The model uses standard macro and
microeconomic theory to represent the flow of goods and factors of production within
the economy. A simplified version of these interdependent economic flows is shown in
Figure C1. It illustrates the flow of goods, services and payments in a typical CGE set up
between the different economic agents in the domestic and international markets.
In the model, there is a
Figure C1: Overview of a Computable general
representative household in each
equilibrium (CGE) model
region. Households supply factors
of production, including labour and
capital, to firms. In return, firms
provide households with payments
for the factors of production.
Firm output is produced from a
combination of productive factors
and intermediate inputs of goods
and services supplied by other firms.
The final output of individual firms
can be consumed within Denmark
or exported. The model also
accounts for imports into Denmark.
Goods and services in the model
are treated as ‘Armington’ goods
Exports
and services, that is, imported and
domestically produced goods and
services are assumed to be only
imperfect substitutes.
In addition to consuming goods
and services, households can
accumulate savings, which they provide to firms for investments in new capital.
Taxes are collected by a passive government, which recycles tax receipts back to the
households as lump-sum transfers.
Another feature of the CGE framework is that all markets are required to clear, meaning
that the sum of regional products and factors of production must equal their demands,
and that the income of each household must equal its factor endowments plus any net
transfers received. In other words, there can be ‘no free lunches’. The model assumes
general equilibrium, which requires that for all sectors, regions and time periods, there is
a global equilibrium where supply and demand are equated simultaneously, as producers
and households anticipate all future changes. The mechanism by which this is achieved
is through price changes.
To analyse the economic impact of scenarios (e.g. structural change from increased
circularity in the economy), CGE models such as the N
ew
ERA model represent the
interactions and feedback effects in the exchange of goods and services simultaneously
between consumers, producers and government and across sectors, regions and time.
They are therefore particularly useful to assess both the direct and indirect effects of
structural changes and are able to analyse scenarios of changes to the economy with
potentially large impacts that have not been implemented in the past.
Limited work has been done to date in modelling the circular economy in a CGE
framework. Our review of the literature identified just two sources that would qualify as
economic impact assessments of the circular economy using hybrid or CGE frameworks.
1
At the time of writing, to our knowledge, there are no CGE models that can fully
1
Assessment of Scenarios and Options towards a Resource Efficient Europe,
European Commission (2014),
and
A National CGE modeling for Resource Circular Economy,
Korea Environment Institute (2006).
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represent the attributes of a truly circular economy. These include: inputs and material
substitutions; changes in resource productivity and production technology; new circular
economic sectors, their services and products; priced externalities; and the generalised
changes in the stocks and flows of goods, capital, labour and materials.
CGE model description
The CGE model used for the analysis represents five world regions: Denmark and its
main trading partners, which have been aggregated as the Rest of Europe, China, Oil
exporting countries and Rest of the world. Different aggregations of the economic
sectors were used for Denmark and the other regions. In Denmark there are 21 economic
sectors (16 non-energy and 5 energy sectors), while in the rest of the world 17 economic
sectors (12 non-energy and 5 energy) were represented. From a time perspective,
the model was set up to span between 2015 and 2035 and was run in 5-year time
increments. These sectoral and geographic dimensions are summarised in Figure C2.
Figure C2: Sectoral and geographical aggregates in the CGE Model in the Denmark
pilot
SECTOR
 
GAS
OIL
COL
CRU
ELE
ELY
GDT
MEP
CNS
CNS-Repair
FBV
CHM
AGR
FAB
MIN
AOG
WRH
SER
RPD
RNT
HSP
SOT
TRN
WTR
DESCRIPTION
 
Natural gas works
Refined oil products
Coal transformation
Crude oil
Electricity, gas and heat
Electricity
Gas and heat
Machinery and electronic products
Construction - New buildings and infrastructure
Construction - Repair and maintenance of buildings
Food and beverages
Chemical industry, plastics and pharmaceuticals
Agriculture, forestry and fishing
Basic metals and fabricated metal products
Mining
Other manufacturing
Services - wholesale, retail and hospitality
Services
Services - Repair of machinery and other durables
Services - Renting of buildings
Services - Hospitals
Services - other
Transport
Sewerage and waste management
REGION
Denmark
Yes
Yes
Yes
Yes
EU, China,
OPEC, RoW
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
 
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
 
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
 
 
 
 
Yes
Yes
SOURCE: NERA Economic Consulting.
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Producer behaviour in the model is characterised by a ‘production function’. A
production function represents how different inputs are used to manufacture a
commodity or service. For example, production of machinery requires capital, labour,
energy, and other materials as inputs. Parameters in the production function define
the way in which substitution between inputs and outputs changes in response to
changes in the relative prices of inputs and outputs. These price-induced substitution
relationships are called ‘elasticities’. Figure C3 provides an illustrative representation
of a production function. The sigmas (σ) shown are illustrative substitution elasticities
between the different inputs. Consumer behaviour, the production of natural resources
and regional trade are similarly represented in the CGE model by these ‘nested’
functions.
Figure C3: Generic structure of production functions in the CGE Model
SOURCE: NERA Economic Consulting.
Theoretically, there are several ways to represent the circular economy within a CGE
framework and, as with any modelling exercise, choosing between options involves an
effort versus quality trade-off. This trade-off will be between the availability of time,
effort and data on the one hand, and the required quantity and quality of detail in
representing circular economy activities, sectors and flows of goods, materials and
externalities, on the other.
Figure C4 presents four potential approaches to represent circularity in a CGE
framework and their pros and cons. For policymakers to select which of those
approaches is best suited to their needs, there are three important aspects to consider:
1.
Detail and precision in representation of economic relations in the circular econ-
omy (e.g. are sectors and services associated with circular economy activities to
be explicitly modelled, e.g. product dismantlers in the refurbished goods supply
chain?).
Degree and scope of representation of economic and materials flows (e.g. in ad-
dition to monetary flows, does the model need to explicitly represent physical
flows of virgin materials, recovered/recycled materials, different by-product and
waste types?).
Time and effort requirements, (duration of the assessment, access to internal and
external experts and modellers) and data and assumption requirements (quantity
of primary data readily available to model the required level of detail).
2.
3.
As shown in Figure C4, the approach selected for the Denmark pilot study was chosen
as a balanced compromise between the three criteria above
.
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Figure C4: Potential approaches and trade-offs for representing circularity
within a CGE framework
APPROACH DESCRIPTION
Use an existing CGE framework
to model circularity as an in-
crease in resource efficiency or
changes in consumption pref-
erences
PROS
Simplest approach to (partially)
modelling circularity
CONS
Very general representation
Impacts depend on exogenous
parameters (productivity or
preferences)
Partial representation or circu-
larity, no structural change
As part of a hybrid approach,
re-estimate production func-
tions in existing CGE structure
to match the sector specific
estimates of circularity
Easy to implement bottom-up
cost and output effects
Captures direct effects on focus
sectors and indirect effects on
the economy
Limited data requirements and
easily replicable
Bottom-up cost and output ef-
fects are exogenous
Materials flows not explicitly
modelled (captured indirectly by
financial flows)
Only partial representation of
structural change (no new tech-
nologies or sectors)
Important time and effort re-
quirement
Significant requirement of de-
tailed data / assumptions of new
activities to calibrate model
Very time-intensive and complex
modelling exercise
Substantial data and assump-
tions requirements
Develop CGE structure that
includes new circular activities
(e.g. regenerate, share) as sepa-
rate economic activities. Works
with hybrid approaches.
Does not require quantifying
effects in an ad hoc manner
Approximate size and some
effects of circular economy can
be quantified
Highly detailed representation
of circular sectors and flows
Size and effects of circular econ-
omy quantified
Circularity levers endogenously
determined
Develop CGE structure that rep-
resents all materials and value
flows and represents all exter-
nalities in production and utility
functions. Works with hybrid
approaches.
APPROACH SELECTED FOR
DENMARK PILOT
SOURCE: NERA Economic Consulting.
As described in Section 2.3.1 in the toolkit report, the hybrid approach consists of several
steps preceding the actual CGE modelling. As illustrated in Figure C5, it begins with
representing the impact induced by circular economy scenarios in the focus sectors
in the form of an input-output table. These changes are then used to ‘re-parametrise’
production (and utility) functions according to the following procedure:
•
Interpolate input effects from cost savings (or increases) as well as output ef-
fects of revenue increases per focus sector for intermediate model years 2025
and 2030 based on the sector-specific quantification for years 2020 and 2035.
Re-parametrise production functions (i.e. estimate new parameter values) to
match decreases (or increases) in the values of input factors into the focus sec-
tors relative to the baseline value.
Re-parametrise production functions to match increases (or decreases) in the
values of the output from focus sectors relative to the baseline value.
Impose these time-varying changes in inputs and outputs for all model years (i.e.
the input-output value structure of implementing the circular economy opportu-
nities) by redefining (re-calibrating) the production formulae of all focus sectors.
•
•
•
 ERU, Alm.del - 2015-16 - Bilag 93: 'Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making', fra Erhvervs- og Vækstministeriet
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Figure C5: Overview of a ‘hybrid’ CGE approach
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1
2
QUANTIFY DIRECT IMPACT
BY SCALING UP FROM
PRODUCTS AND SECTORS
3
CONVERSION OF
DIRECT IMPACTS INTO
CGE MODEL INPUT
4
5
ACTIVITIES
IDENTIFY SECTOR
OPPORTUNITIES
REPRESENTATION OF
CIRCULARITY IN CGE
MODEL
RUN SCENARIOS IN
CGE AND ANALYSE
RESULTS
FOOD AND
BEVERAGE
Goods and services
GDP
δ=0
CONSTRUCTION
Materials
Energy + Value added
δ=0
δ=0
Energy
δ=0
Fossil fuels
δ=0
EMPLOYMENT
Capital
Value added
δ=0
Labour
CO
2
EMISSIONS
MACHINERY
TOTAL
EFFECTS
OUTPUT
Product/sub-sector
technical poteantial
Sector economic
potential
Distribution of direct
impacts as CGE
model input
Implementation of
direct impacts in
CGE
Economy-wide
and inter-sectoral
impacts
SOURCE: NERA Economic Consulting, Ellen MacArthur Foundation
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After re-parametrisation, the model is run and will optimise supply and demand of all
commodities and services in the economy via price impacts. The results for the re-
parametrised version of the production (and utility) functions now represent the circular
economy scenario(s) in the CGE model and can then be compared to the baseline
scenario.
Scenario descriptions, key assumptions and sources
•
The macro-economic impact modelling was conducted by calibrating the CGE
model to a ‘baseline’ (or business as usual) reference scenario and then quantify-
ing the changes to key macroeconomic indicators after running a ‘circular econ-
omy’ scenario through the model. Two scenarios were assessed, a ‘conservative’
and an ‘ambitious’ version of the circular economy.
As described above, the scenario inputs to the CGE model were modified in-
put-output tables for Denmark for the years 2020 and 2035, where input and
output values were adjusted based on the impact from the sector-specific op-
portunity assessment (see Chapters 2–6 Appendix B and Section 2.2.3 of the
toolkit report). The macro-economic model therefore quantified the direct and
indirect economy-wide effects that the sector specific structural changes would
have on the broader Danish economy.
•
Baseline scenario.
The baseline scenario was developed through the following steps:
•
Incorporating the Denmark 2011 input-output table within the GTAP8 dataset and
scaling other regions’ economic flows by actual GDP growth from 2007 till 2011
such that a globally balanced dataset was achieved.
Building in exogenously specified regional forecasts, including Danish projections
Calibrating the baseline: Adjusting model parameters such that they replicate the
macroeconomic outlook by targeting GDP, carbon emissions by sector and by
fuel, energy price, and energy production projections. This baseline calibration
resulted in a projection consistent with the baseline scenario assumptions.
•
•
Circular economy scenarios.
From a macroeconomic modelling perspective, the key
assumptions of the circular economy scenarios (for both the ambitious and conservative
cases) were as follows:
•
The functional form of the production and utility functions remain the same be-
tween the baseline and the circular economy scenarios.
Behavioural parameter values of the utility function remain the same between
the baseline and the circular economy scenarios.
Energy sector assumptions remain the same between the baseline and the cir-
cular economy scenarios (i.e. no explicit modelling of an additional shift towards
renewable energy).
•
•
Each circular economy scenario is represented by producing an input-output table that
represents the changes induced by the circular economy opportunities, quantified as
described in section 2.2.3 of the toolkit report. The allocation of changes in input factors
(labour, materials, energy and capital) was done based on an analysis of the changes in
demand due to the circular economy activities,
2
and from which sectors’ key material
inputs are provided in the current (2011) input-output table.
The main difference between the ‘conservative’ and ‘ambitious’ scenarios are how the
impact assessed for the deep-dive sub-sector is scaled up to adjacent (sub-)sectors.
This difference is described in detail in Appendix B.
Several data sources were combined to construct the baseline calibration and circular
economy scenario analysis. These are summarised in Figure C6.
2
For example: reduced demand for materials and increased demand for labour due to remanufacturing in
machinery; reduced demand for labour and increased need for capital for industrialised production and 3D
printing of building modules.
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Figure C6: Data sources used in the baseline calibration and CGE modelling in the
Denmark pilot
Data
Data source
Denmark
Rest of World
Benchmark year input/output table
Primary factor and commodity tax rates, output
and export tax (subsidy) rates, and import tax
rates
•
Statistics Denmark
GTAP 8 database
GTAP 8 database
GTAP 8 dataset includes Armington elasticities, intra-
import elasticity of substitution, factor substitution
elasticities, factor transformation elasticities.
Other sources include:
-
Paltsev, S., J.M. Reilly, H.D. Jacoby, R.S. Eckaus, J.
McFarland, M. Sarofim, M. Asadoorian and M.
Babiker, 2005: The MIT Emissions Prediction and
Policy Analysis (EPPA) Model: Version 4.
-
Mikkel Barslund, Ulrik R. Beck, Jens Hauch, Peter B.
Nellemann, “MUSE: Model documentation and
applications,” Danish Economic Council, Working
Paper 2010:4.
DREAM group
•
Substitution elasticities for production,
consumptions functions
GDP and employment data and projections to
2035
Energy demand data and projections to 2035
Energy price data and projections to 2035
Energy production data and projections
CO2 emissions data and projection to 2035
Danish Energy Agency (ENS)
Statistics Denmark
Own calculations
1.A.1.1.1.1.1
EIA IEO
1
2013
1 US Energy Information Administration – International Energy Outlook 2013
http://www.eia.gov/forecasts/archive/ieo13/
SOURCE: NERA Economic Consulting.
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D
Assessment of policy options
An initial mapping of policy interventions to barriers (see Section 2.2.5 in the toolkit
report) can result in a large number of policy options. It can be useful as a first step
to apply a high-level policy impact and cost assessment. Other factors such as time
to implementation, time to achieve outcome, and distributional effects can also be
taken into account. Such a high- level qualitative prioritisation can provide input for
the subsequent due diligence and impact assessment/cost-benefit analysis in the
policymaking process.
An example of such a prioritisation exercise for the ‘Value capture in cascading bio-
refineries’ opportunity in the Danish pilot is found in Figure D1. Such a matrix can be the
result of an analytical exercise as the one described in this appendix or can be made
more directly based on expert input.
Figure D2 provides an overview of the basic arithmetic of the policy assessment tool
developed for the Denmark pilot study. The tool is a workbook that contains 87 policy
interventions identified to address the barriers to the circular economy opportunities
in the five focus sectors. The goal of the tool is to rank the policies by their relative
cost-effectiveness using a semi-quantitative scoring function. This is done by scoring
each intervention on two dimensions, ‘impact’ and ‘cost’, from which a weighted ‘cost-
effectiveness score’ is derived.
The development and implementation of the tool described here is one of many
alternatives that policymakers can use as a first step to narrow down a long list of policy
options to those with the best potential to address the barriers to circular economy
opportunities. It should be noted that the main benefit of this tool was that it facilitated
discussion. Ultimately, the final sets of policy options for each sector were determined
with the help of significant input from government stakeholders and sector experts.
While the approach outlined here is a useful first step, it is underlined that it is not meant
as a substitute for adequate due diligence and impact assessment in the standard policy
making process.
The scoring rules and methodology used to arrive at a prioritised set of policy options
are described in detail below. Each policy intervention was scored independently of
others, i.e. not allowing them to work in conjunction with any other policy, but keeping
in mind their potential to work well as part of a package. All scores are relative, with
comparisons made across several dimensions including policy types, circular economy
opportunities and sectors to ensure adequate scoring distributions.
Scoring of impact dimension
The ‘impact score’ of a policy is the product of two equally weighted factors: the
‘importance of a barrier’, which builds on the detailed barrier analysis described
in Section 2.2.4 of the main report; and the tentative effectiveness of the policy
intervention at overcoming the barrier. The methodology, described in detail below,
was systematically applied to all policy interventions to obtain a first set of impact
scores, which were discussed and iterated in sector ‘deep dive’ sessions with multiple
stakeholders.
•
Scoring the ‘importance of barrier’:
Based on expert judgment on the size/
importance of the barrier to deliver the circular economy opportunity.
Scoring the ‘effectiveness’ in 2020 and 2035:
Based on an expert-guided esti-
mate of how effective the policy intervention would be in addressing the barrier,
given existing initiatives, over two time periods, equally weighted:
○
Short-term effectiveness (by 2020) with higher scores given to economic/fis-
cal incentives (subsidies, taxes, guarantees) and lower scores to information
or R&D interventions.
•
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Figure D1: Prioritisation of policy options – ‘Value capture in cascading bio-refineries
Form public private
partnerships to finance the
deployment of mature bio-
deployment of mature bio-
refining technologies
loan guarantees for the
Provide low-cost loans or
Incorporate bio-refining into
the government’s long-term
strategic plans
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refining technologies
HIGH
Stimulate the development
of advanced, high-value
bio-refining technologies by
funding cross-institutional
R&D clusters
Reduce VAT on high value
IMPACT
chemicals derived from waste
feedstock
Require municipalities to send
organic waste for one round
of processing to extract high
value compounds before it
could be incinerated / used as
fertiliser
Identify and communicate
necessary changes to
EU policy (or its national
implementation) to address
unintended consequence
Require municipalities
to collect organic waste
separately
Propose a minimum proportion
of 2nd generation biofuels in the
EU biofuel target
Provide a business
advice service
LOW
HIGH
COST
SOURCE: Ellen MacArthur Foundation; NERA Economic Consulting
LOW
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○
Long-term effectiveness (by 2035) with the same scores for economic/fiscal
incentives and those for information or R&D increased or decreased where
relevant.
Scoring of cost dimension
The ‘cost’ score of a policy is the product of two equally weighted factors:
‘administrative
and transaction costs’, determined by estimates and expert consultation; and wider
economic costs of the intervention. The methodology, described in detail below, was
systematically applied to arrive at a first set of cost scores, which were discussed and
iterated in sector ‘deep dive’ sessions with multiple stakeholders.
•
Scoring the ‘administrative and transaction costs’:
Based on an expert-guid-
ed estimate of the combined cost incurred by government to set up and operate
the policy and the cost to the private sector of complying with it.
○
Cost incurred by government refers to any foregone revenue or additional
spending commitment entered into by the government by virtue of the poli-
cy.
Cost to the private sector refers to one-off adjustment costs and any in-
crease in the cost of doing business caused by the policy.
○
•
Scoring the ‘wider economic cost’:
based on an expert-guided estimate of the
cost–benefit trade-off between economic advantages and disadvantages in a
sector created by the policy across government, businesses and consumers.
○
An example is a policy that reduces market competition creates advantages
for businesses, but disadvantages for consumers. Similarly, a subsidy creates
an advantage for its recipients, but disadvantages for the government.
The ‘economic advantage and disadvantage’ component focuses on each
particular sector. The scoring has not taken into account the intrinsic benefits
of the policy supporting circular economy activities, since they are addressed
in the ‘impact’ score.
The ‘balance across the economy’ component looks at the average net dis-
advantage in other parts of the economy due to a sector-directed policy, but
not on the distribution of advantages and disadvantages, which belongs to
the political viability sphere.
○
○
The assessment does not incorporate the economy-wide computational general
equilibrium modelling of the impact of circular economy opportunities.
The total impact and cost scores are combined to provide a rank between 1 and 3:
1.
Impact and cost are both greater than 50 (out of 100), putting the policy on the
short-list
One or other of the impact and cost scores is 50 or above, putting the policy in a
‘supporting policy’ category
Neither impact nor cost score reaches 50, putting the policy in the unattractive
category.
2.
3.
Figure D3 shows a worked example of how the tool was used to provide an initial score
for a particular policy option. All of these individual scores that comprise the total
impact and total cost scores were subsequently discussed with the project team and
Danish government stakeholders and adjusted accordingly.
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Figure D2: Snapshot and description of the policy assessment tool
a
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Figure D3: Worked example of the implementation of the scoring methodology.
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E
Why the circular economy matters
The linear ‘take, make, dispose’ economic model relies on large quantities
of cheap, easily accessible materials and energy and is reaching its physical
limits. The circular economy is an attractive and viable alternative that
businesses are already exploring today.
The circular economy is one that is restorative and regenerative by design
and aims to keep products, components, and materials at their highest utility
and value at all times, distinguishing between technical and biological cycles.
This new economic model seeks to ultimately decouple global economic
development from finite resource consumption. It enables key policy
objectives such as generating economic growth, creating jobs, and reducing
environmental impacts, including carbon emissions.
A favourable alignment of factors makes the transition possible. Resource-
related challenges to businesses and economies are mounting. An
unprecedented favourable alignment of technological and social factors
enables the transition to the circular economy.
As many circular economy opportunities have a sound underlying
profitability, businesses are driving the shift towards the circular economy.
Yet there are often non-financial barriers limiting further scale-up or holding
back pace. Policymakers therefore can play an important role to help
overcome these barriers and to create the right enabling conditions and,
as appropriate, set direction for a transition to the circular economy. The
toolkit aims to complement existing literature by offering policymakers an
actionable step-by-step methodology to design a strategy to accelerate the
transition towards the circular economy.
The following is an adapted version of Chapter 1.1 of the toolkit report, aimed at providing
a basic understanding of the circular economy for the reader. It covers both ideas
and insights developed in the past and more recent thinking, including the ReSOLVE
framework developed by the Ellen MacArthur Foundation and the McKinsey Center for
Business and the Environment.
From linear to circular – Accelerating a proven concept
CIRCULAR ECONOMY – AN INDUSTRIAL SYSTEM THAT IS RESTORATIVE AND
REGENERATIVE BY DESIGN
The linear ‘take, make, dispose’ model, the dominant economic model of our time, relies
on large quantities of easily accessible resources and energy, and as such is increasingly
unfit for the reality in which it operates. Working towards efficiency – a reduction of
resources and fossil energy consumed per unit of economic output – will not alter the
finite nature of their stocks but can only delay the inevitable. A deeper change of the
operating system is necessary.
The notion of the circular economy has attracted attention in recent years. The concept
is characterised, more than defined, as an economy that is restorative and regenerative
by design and aims to keep products, components, and materials at their highest
utility and value at all times, distinguishing between technical and biological cycles. It
is conceived as a continuous positive development cycle that preserves and enhances
natural capital, optimises resource yields, and minimises system risks by managing finite
stocks and renewable flows. It works effectively at every scale.
The circular economy provides multiple value creation mechanisms that are decoupled
from the consumption of finite resources. Consumption should in a true circular
economy only happen in effective bio-cycles; elsewhere use replaces consumption.
Resources are regenerated in the bio-cycle or recovered and restored in the technical
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cycle. In the bio-cycle, life processes regenerate disordered materials, despite or without
human intervention. In the technical cycle, circular economy technologies and business
models aim to maximise the value extracted from finite stocks of technical assets and
materials, and thereby address much of the structural waste in industrial sectors. In
the biological cycle, a circular economy encourages flows of biological nutrients to be
managed so as not to exceed the carrying capacity of natural systems, and aims to
enhance the stock of natural capital by creating the conditions for regeneration of, for
example, soil.
In a diverse, vibrant, multi-scale system, restoration increases long-term resilience and
innovation.
3
The systems emphasis in circular economy matters, as it can create a series
of business and economic opportunities, while generating environmental and social
benefits. The circular economy does not just reduce the systemic harm engendered by a
linear economy; it creates a positive reinforcing development cycle.
The circular economy rests on three key principles, shown in Figure E1.
•
Preserve and enhance natural capital
by controlling finite stocks and balancing
renewable resource flows—for example, replacing fossil fuels with renewable en-
ergy or using the maximum sustainable yield method to preserve fish stocks.
Optimise resource yields
by circulating products, components, and materials at
the highest utility at all times in both technical and biological cycles – for exam-
ple, sharing or looping products and extending product lifetimes.
Foster system effectiveness
by revealing and designing out
negative external-
ities,
such as water, air, soil, and noise pollution; climate change; toxins; conges-
tion; and negative health effects related to resource use.
•
•
These three principles of the circular economy can be translated into a set of six
business actions: Regenerate, Share, Optimise, Loop, Virtualise, and Exchange – together,
the ReSOLVE framework (see Figure E2). For each action, there are examples of leading
companies that are already implementing them.
Each of the six actions represents a major circular business opportunity that, enabled
by the technology revolution, looks quite different from what it would have 15 years
ago or what it would look like in a framework for growth in the linear economy. In
different ways, these actions all increase the utilisation of physical assets, prolong their
life, and shift resource use from finite to renewable sources. Each action reinforces and
accelerates the performance of the other actions.
The ReSOLVE framework offers businesses and countries a tool for generating
circular strategies and growth initiatives. Many global leaders have built their success
on innovation in just one of these areas. Most industries already have profitable
opportunities in each area.
A short description of these levers, and examples of businesses that are implementing
them, follows below.
REgenerate.
Shift to renewable energy and materials; reclaim, retain, and regenerate
health of ecosystems and return recovered biological resources to the biosphere.
Cumulative new investments in European renewable energy represented USD 650 billion
over the 2004–13 period.
4
The Savory Institute has influenced the regeneration of more
than 2.5 million hectares of lands worldwide.
3
4
John Fullerton, (Capital Institute)
Regenerative Capitalism: How Universal Principles and Patterns Will Shape
Our New Economy,
(2015).
Angus McCrone,
Global Trends in Renewable Energy Investment 2014
(Frankfurt School-UNEP Collaborating
Centre for Climate & Sustainable Energy Finance, the United Nations Environment Programme (UNEP) and
Bloomberg New Energy Finance, 2014).
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Figure E1: Circular economy – an industrial system that is restorative and regenerative by design
PRINCIPLE 1
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
Preserve and enhance natural capital
by controlling finite stocks and
balancing renewable resource flows
ReSOLVE levers: regenerate, virtualise,
exchange
Regenerate
Renewables flow management
Renewables
Substitute materials
Finite materials
Virtualise
Restore
Stock management
PRINCIPLE 2
Optimise resource
yields by circulating
products, components
and materials in
use at the highest
utility at all times in
both technical and
biological cycles
ReSOLVE levers:
regenerate, share,
optimise, loop
Regeneration
Biosphere
Biogas
Farming/collection
1
Parts manufacturer
Biochemical
feedstock
Product manufacturer
Recycle
Service provider
Share
Refurbish/
remanufacture
Reuse/redistribute
Cascades
6 2803 0006 9
Maintain/prolong
Consumer
Anaerobic
digestion
Extraction of
biochemical
feedstock
2
Collection
User
Collection
PRINCIPLE 3
Foster system effectiveness by
revealing and designing out negative
externalities
All ReSOLVE levers
Minimise systematic
leakage and negative
externalities
1 Hunting and fishing
2 Can take both post-harvest and post-consumer waste as an input
SOURCE: Ellen MacArthur Foundation, SUN and McKinsey Center for Business and Environment,
Growth Within: A Circular Economy Vision for a Competitive Europe
(2015).
Drawing from Braungart & McDonough, Cradle to Cradle (C2C).
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Share.
Keep product loop speed low and maximise utilisation of products, by sharing
them among different users (peer-to-peer sharing of privately owned products or public
sharing of a pool of products), by reusing them through their entire technical lifetime
(second hand), and by prolonging their lifetime through maintenance, repair, and design
for durability. BlaBlaCar is one famous car example growing at 200% per annum with 20
million registered users in 19 countries. BMW and Sixt’s Drive Now offer by-the-minute
rental of cars that can be collected and dropped anywhere in a city centre. Lyft matches
passengers needing a lift with drivers of their own cars willing to provide one through a
smartphone app. In housing, Airbnb has more than one million spaces listed in more than
34,000 cities across more than 190 countries.
Optimise.
Increase performance/efficiency of a product; remove waste in production
and supply chain (from sourcing and logistics, to production, use phase, end-of-use
collection etc.); leverage big data, automation, remote sensing and steering. All these
actions are implemented without changes to the actual product or technology. A well-
known illustration of this lever is the lean philosophy made famous by Toyota.
Loop.
Keep components and materials in closed loops and prioritise inner loops. For
finite materials, it means remanufacturing products or components and recycling
materials. Caterpillar, Michelin, Rolls Royce, Philips or Renault are just a few companies
exploring this direction. For renewable materials, it means anaerobic digestion and
extracting biochemicals from organic waste. The Plant is an example of closed loop,
zero-waste food production located in Chicago.
Virtualise.
Dematerialise resource use by delivering utility virtually: directly, e.g. books
or music; or indirectly, e.g. online shopping, autonomous vehicles, virtual offices. Google,
Apple, and most OEMs plan to release driverless cars on the market in the next decade.
Exchange.
Replace old with advanced non-renewable materials, apply new technologies
(e.g. 3D printing or electric engines) and choose new products/services (e.g. multimodal
transport). For instance, in 2014 Chinese company WinSun 3D-printed ten houses, each
about 195 square metres, in 24 hours.
BENEFITS OF THE CIRCULAR ECONOMY
The transition towards the circular economy can bring about the lasting benefits
of a more innovative, resilient and productive economy.
The principal benefits to
moving to the circular economy are as follows:
•
Substantial net material savings and reduced exposure to price volatility:
based on detailed product-level modelling, the Ellen MacArthur Foundation has
estimated that, in the medium-lived complex products industries, the circular
economy represents net material cost savings at an EU level for an ‘advanced’
scenario of up to USD 630 billion annually; in fast-moving consumer goods
(FCMG) at the global level net materials savings could reach USD 700 billion
annually – see Figure E3.
Increased innovation and job creation potential:
circularity as a ‘rethinking
device’ has proved to be a powerful new frame, capable of sparking creative
solutions and stimulating innovation. The effects of a more circular industrial
model on the structure and vitality of labour markets still need to be further
explored, but initial evidence suggests that the impact will be positive (see
below).
Increased resilience in living systems and in the economy:
land degradation
costs an estimated USD 40 billion annually worldwide, without taking into
account the hidden costs of increased fertiliser use, loss of biodiversity and loss
of unique landscapes. Higher land productivity, less waste in the food value chain
•
•
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and the return of nutrients to the soil will enhance the value of land and soil as
assets. The circular economy, by moving much more biological material through
the anaerobic digestion or composting process and back into the soil, will reduce
the need for replenishment with additional nutrients. This is the principle of
regeneration at work.
The circular economy can be an important lever to achieve key policy objectives
such as generating economic growth, creating jobs, and reducing environmental
impact.
Multiple studies have already demonstrated how the circular economy
can contribute at a national, regional and supranational level to objectives such as
generating economic growth, creating jobs, and reducing environmental impact. While
using different methodologies and performed on different sectoral and geographical
scopes, these studies have consistently demonstrated the positive impacts of the
circular economy: growing GDP by 0.8–7%, adding 0.2–3.0% jobs, and reducing carbon
emissions by 8–70% (see Figure 4).
Figure E2: The economic opportunity of the circular economy
Complex durables with medium
lifespans, EU
USD billion per year, net material cost savings based on
current total input costs per sector
Consumer industries, global
USD billion per year, net material cost savings based on
total material savings from consumer categories
706
630
Other
Motor vehicles
Packaged food
Machinery and equipment
Apparel
Electrical machinery and
apparatus
Other transport
Furniture
Radio, TV and communication
Office machinery and computers
Beverages
Fresh food
Beauty and personal care
Tissue and hygiene
NOTE: Rough estimates from advanced scenario
SOURCE: Towards the Circular Economy 1, 2 by the Ellen MacArthur Foundation
CIRCULAR ECONOMY LITERATURE
The circular economy concept has deep-rooted origins and cannot be traced back to
one single date or author. Its practical applications to modern economic systems and
industrial processes, however, have gained momentum since the late 1970s as a result
of the efforts of a small number of academics, thought-leaders, and businesses. The
general concept has been refined and developed by the following schools of thought,
which all treat the economy as a complex adaptive system and draw on insights from
living systems especially:
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•
•
•
•
•
•
•
Regenerative design (Prof. John T. Lyle);
Performance economy (Prof. Walter Stahel);
Cradle to Cradle (Prof. Michael Braungart and William McDonough);
Industrial ecology (Prof. Roland Clift, Thomas E. Graedel);
Biomimicry (Janine Benyus);
Natural capitalism (Amory Lovins);
Blue Economy (Gunter Pauli).
To learn more about the concepts that lie behind the circular economy framework,
a good starting point is Chapter 2 of
Towards the Circular Economy I
by the Ellen
MacArthur Foundation (2012). For a broader discussion of the three principles and the
ReSOLVE framework, see the report
Growth Within: A Circular Economy Vision for a
Competitive Europe.
5
For a more general discussion of the interplay between the circular
economy, employment, education, money and finance, public policy and taxation, see
the book
The Circular Economy – A Wealth of Flows
by Ken Webster, Head of Innovation
at the Ellen MacArthur Foundation.
5
Ellen MacArthur Foundation, Stiftungsfonds für Umweltökonomie und Nachhaltigkeit (SUN) and McKinsey
Center for Business and Environment,
Growth Within: A Circular Economy Vision for a Competitive Europe
(2015).
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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY
Figure E3: Estimated potential contribution of the circular economy to economic growth, job
creation and reduction of greenhouse gas emissions
GDP IMPACT
WHOLE ECONOMY
(MATERIALS AND
ENERGY)
WHOLE ECONOMY
(MATERIAL FOCUS)
SELECTED SECTORS
(MATERIAL FOCUS)
1
NET EMPLOYMENT
6.7
N/A
2
3.0
3.0
3
2.0
1.0
1.4
0.6
0.8
1.0
4
N/A
0.3
5
0.8
N/A
6
0.8
N/A
7
0.7
0.2
8
0.2
0.2
9
N/A
0.3
1 2030 scenario.
2 Full scenario; GDP impact equal to trade balance effect.
3 ‘Material efficiency scenario’; GDP impact equal to trade balance effect.
4 Net job creation from increased reuse, remanufacturing, recycling, bio-refining and servitisation.
5 Built environment.
6 Forestry, pulp and paper, machinery, equipment and electronics, built environment, food waste, P2P sharing.
7 Remanufacturing industry.
8 Ontario; Waste management and recycling industry.
9 Waste management and recycling industry; compiled from several reports, see http://ec.europa.eu/environment/circular-
economy/index_en.htm, http://ec.europa.eu/smart-regulation/impact/planned_ia/docs/2014_env_005_waste_review_en.pdf
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GHG EMISSION REDUCTION
SOURCE
25.0
Ellen MacArthur Foundation, SUN
and McKinsey Center for Business
and Environment
70.0
Club of Rome
10.0
Club of Rome
8.0
TNO
N/A
Cambridge Econometrics, Biointelli-
gence service
N/A
WRAP
N/A
EC, TNO
N/A
SITRA
N/A
Zero Waste Scotland
N/A
Conference Board of Canada
4.5
Zero Waste Europe
SOURCE: NL: TNO, Opportunities for a circular economy in the Netherlands (2013); EU (1): Ellen MacArthur Foundation, SUN
and McKinsey Center for Business and Environment, Growth Within: A Circular Economy Vision for a Competitive Europe (2015);
EU (2): Cambridge Econometrics / Biointelligence Service / EC, Study on modelling of the economic and environmental impacts
of raw material consumption (2014); SWE: Club of Rome, The circular economy and benefits for Society (2015); UK: WRAP,
Employment and the circular economy: job creation in a more resource efficient Britain (2014); FIN: SITRA, Assessing circular
economy potential for Finland (2014); EU, built environment: TNO / EC, Assessment of scenarios and options towards a
resource efficient Europe: an analysis for the European built environment (2013); SCO: Zero Waste Scotland, Circular economy
evidence building programme: Remanufacturing study (2015); EU, waste management: Zero Waste Europe, EU circular economy
package: Questioning the reasons for withdrawal (2015); CAN: Conference Board of Canada, Opportunities for Ontario’s Waste:
Economic Impacts of Waste Diversion in North America (2014)
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ABOUT THE ELLEN MACARTHUR FOUNDATION
The Ellen MacArthur Foundation was established in 2010 with the aim of accelerating
the transition to the circular economy. Since its creation the charity has emerged as
a global thought leader, establishing circular economy on the agenda of decision
makers across business, government and academia. The charity’s work focuses on
four interlinking areas:
EDUCATION: INSPIRING LEARNERS TO RE-THINK THE FUTURE THROUGH THE
CIRCULAR ECONOMY FRAMEWORK
We are creating a global teaching and learning platform built around the circular
economy framework, working in both formal and informal education. With an
emphasis on online learning, the Foundation provides cutting edge insights and
content to support circular economy education and the systems thinking required to
accelerate a transition.
BUSINESS AND GOVERNMENT: CATALYSING CIRCULAR INNOVATION AND
CREATING THE CONDITIONS FOR IT TO FLOURISH
Since our launch, we’ve emphasised the real-world relevance of our activities and
understand that business innovation sits at the heart of any transition to the circular
economy. The Foundation works with Global Partners (Cisco, Google, Kingfisher,
Philips, Renault, and Unilever) to develop circular business initiatives and to address
challenges to implementing them.
INSIGHT AND ANALYSIS: PROVIDING ROBUST EVIDENCE ABOUT THE BENEFITS
OF THE TRANSITION
We work to quantify the economic potential of the circular model and develop
approaches for capturing this value. Our insight and analysis feeds into a growing
body of economic reports highlighting the rationale for an accelerated transition
towards the circular economy, and exploring the potential benefits across different
stakeholders and sectors.
COMMUNICATIONS: ENGAGING A GLOBAL AUDIENCE AROUND THE CIRCULAR
ECONOMY
The Foundation communicates cutting edge ideas and insight t§hrough its circular
economy research, reports, case studies and books disseminated through our
publications arm. We utilise new and relevant digital media to reach audiences who
can accelerate the transition, globally. In addition, we aggregate, curate, and make
knowledge accessible through Circulate, an online location dedicated to providing up
to date news and unique insight on the circular economy and related subjects.
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Published November 2015
Charity Registration No. 1130306 • OSCR registration no. SC043120 • EU transparency register N°389996116741-55