A Circular Economy: A resource recovery industry perspective
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Provide some barriers to the resource recovery and recycling industry in Australia
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A Circular Economy: A resource recovery industry perspective
- 1. The Circular Economy: A resource recovery industry perspective
- 2. Barrier 1: The waste hierarchy is linear… Linear model Circular model We need to move towards a 2 1 1 Junction 1 product-life extension v new goods Cost advantage product-life extension Loop 1 reuse of goods, repair of goods, reconditioning of goods and technological/ Fashion upgrading of goods 2 Junction 2 virgin materials v recycling materials Cost advantage virgin materials Loop 2 recycling of materials Resources > Base Materials Reuse & Remarketing Utilisation > Waste Manufacturing
- 3. Barrier 2: LCA as a tool to make decisions… Hopeless boundary issues Misusing LCA results= low cost analysis
- 4. Barrier 3: Material complexity & technical feasibility We need a national consistent material manufacturing and design standards!
- 5. Barrier 4: Government policies • Governments do not focus on sector profitability, sustainability and industry development. • Subsidies to the mining industry • Waste levy revenue from bad design= unavoidable residuals not being returned to the industry= a tax on CE and a Tax on recycling • Fail to see circular economy strategies as central to insurance from material price volatility/depletion, resilient and stable economy
- 6. Barrier 5: Positive externalities in recycling not being recognised
- 7. Barrier 6: Transaction and search costs Reasons: 1.Diffuse and irregular nature of waste generation 2.Heterogeneous nature of secondary materials 3.Administrative costs due to permit requirements 4.Negotiation and bargaining given heterogeneity of secondary material Hard to achieve economies of scale
- 8. Barrier 7: Information failures related to waste quality P1 MPC (Marginal propensity to consume) MPB (fuller information disclaims higher quality) MPB (fuller information disclaims low quality) MPB (limited information) P2 P3 Q3 Q1 Q2 Marginal propensity to consumer can increase or decrease according to what fuller information reveals about a product
- 9. Barrier 8 Waste crime • Levy avoidance • Tax avoidance • Market distortions • Money laundering/organised crime • Illegal exports • Environmental degradation Over 1 billion AUD$ is lost each year!!
- 10. Untapped potential to boost the economy+ a sustainable resource based economy At a National scale: The national economic contribution of the waste sector is estimated to be $14.2 billion per year. A 30% improvement in Increase GDP by up to 3% and add 2 million jobs
Notes de l'éditeur
- We need to transition to a circular economy model. Our current model is contradictory to what we are trying to achieve.
- Products are not designed for reuse/ recycling No national consistent material manufacturing and design standards Government strategies focus on Quantity not Quality of recyclate
- Waste levy revenue unreturned to the industry is a tax on the resource recovery industry via unavoidable residuals to landfill Unintended consequences of existing regulations (e.g. definitions of waste that hinder trade and transport of products for remanufacturing) Sector-by-sector analysis can be a valuable approach to address the variety of opportunities and challenges involved in transitioning towards the circular economy. Within each sector, effective circular economy policymaking requires the combination of many policy interventions, and does not rely on a ‘silver bullet’ or blanket solutions. Policymakers can address market and regulatory failures to create the right enabling conditions for circular economy initiatives to reach scale.
- These are some of the positive externalities: Carbon/GHG abatement Waste reduction Diverted waste from landfill Energy and water savings Energy recovery Job creation More jobs than land filling/sky filling
- There maybe costs associated with price discovery, whether due to lack of transparency or other factors There may be significant search costs with buyers unable to identify potential sellers and sellers unable to identify potential buyers – since production of recyclables is spatially diffuse and temporarily irregular, identifying counterparts may require considerable expenditure of effort. There may be extensive administrative costs associated with actually undertaking the transaction (i.e. due to permit requirements) There may be significant negotiation and bargaining involved before the transaction is completed. Negotiation costs can be high in markets for which products are heterogeneous and for which the nature of heterogeneity is not fully recognised by one or both of the parties or wherein there is potential for disagreement. This heterogeneity can relate to factors such as the degree of wear for some kind of metal scrap, the precise mix of different plastics within a single shipment, the degree of contamination in waste oil, etc. In the presence of substitute goods for which transaction costs are lower, the solution may be altered purchasing decisions within the market. In the case of secondary materials which are substitutes for primary materials, this will mean that if transaction costs are more significant for secondary materials, they will enjoy much less market share than would otherwise be the case.
- These information failures relate to sources of secondary materials at the production input stage. Market failures such as imperfect information (e.g. for businesses to repair, disassemble and remanufacture products) and unaccounted externalities (e.g. carbon emissions). In addition to creating enabling conditions, policymakers can, as appropriate, set direction for a transition to the circular economy Arises from the difficulty for buyers to detect waste quality, and the relative ease with which sellers can conceal inferior quality waste Information concerning the characteristics and quality of secondary material is found to be: Inadequate Unevenly distributed between demanders and suppliers (i.e. asymmetric information) Missing altogether Leading to higher transaction costs and additional consequences such a risk aversion and thus, slow market up take of secondary materials. This is related to a form of risk aversion, disappointment aversion. In such cases, buyers will ‘overweight’ low probability risks of quality inferiority. It is observed that a decision maker will make significant economic trade-offs to remove the possibility of a net loss on a transaction.
- Levy avoidance waste “disappears” high value recyclables waste re- classified as low value waste exported or gets dumped waste sent out of jurisdiction-containerisation illegal dumping & stockpiling Tax avoidance Cash transactions, GST avoidance Market distortions e.g. lower prices= jobs/ROI lost Money laundering/organised crime metal being traded in cash in black market /metal theft/false documents/locks Illegal exports Breach Basel and other Conventions, e.g. e- waste, used oil, used batteries Environmental degradation