Circular Economy and Sustainability
Pardeep Singh
Anamika Yadav
Indranil Chowdhury
Ravindra Pratap Singh Editors
Green
Circular
Economy
A New Paradigm for Sustainable
Development
Circular Economy and Sustainability
Series Editors
Alexandros Stefanakis, Technical University of Crete, Chania, Greece
Ioannis Nikolaou, Democritus University of Thrace, Xanthi, Greece
Editorial Board Members
Julian Kirchherr, Utrecht University, Utrecht, The Netherlands
Dimitrios Komilis, Democritus University of Thrace, Xanthi, Greece
Shu Yuan (Sean) Pan, National Taiwan University, Taipei, Taiwan
Roberta Salomone, University of Messina, Messina, Italy
This book series aims at exploring the rising field of Circular Economy (CE) which
is rapidly gaining interest and merit from scholars, decision makers and practitioners
as the global economic model to decouple economic growth and development
from the consumption of finite natural resources. This field suggests that global
sustainability can be achieved by adopting a set of CE principles and strategies
such as design out waste, systems thinking, adoption of nature-based approaches,
shift to renewable energy and materials, reclaim, retain, and restore the health of
ecosystems, return recovered biological resources to the biosphere, remanufacture
products or components, among others.
However, the increasing complexity of sustainability challenges has made traditional engineering, business models, economics and existing social approaches
unable to successfully adopt such principles and strategies. In fact, the CE field
is often viewed as a simple evolution of the concept of sustainability or as a
revisiting of an old discussion on recycling and reuse of waste materials. However,
a modern perception of CE at different levels (micro, meso, and macro) indicates
that CE is rather a systemic tool to achieve sustainability and a new eco-effective
approach of returning and maintaining waste in the production processes by
closing the loop of materials. In this frame, CE and sustainability can be seen
as a multidimensional concept based on a variety of scientific disciplines (e.g.,
engineering, economics, environmental sciences, social sciences). Nevertheless, the
interconnections and synergies among the scientific disciplines have been rarely and
not in deep investigated.
One significant goal of the book series is to study and highlight the growing
theoretical links of CE and sustainability at different scales and levels, to investigate
the synergies between the two concepts and to analyze and present its realization
through strategies, policies, business models, entrepreneurship, financial instruments and technologies. Thus, the book series provides a new platform for CE and
sustainability research and case studies and relevant scientific discussion towards
new system-wide solutions.
Specific topics that fall within the scope of the series include, but are not limited
to, studies that investigate the systemic, integrated approach of CE and sustainability
across different levels and its expression and realization in different disciplines
and fields such as business models, economics, consumer services and behaviour,
the Internet of Things, product design, sustainable consumption & production,
bio-economy, environmental accounting, industrial ecology, industrial symbiosis,
resource recovery, ecosystem services, circular water economy, circular cities,
nature-based solutions, waste management, renewable energy, circular materials,
life cycle assessment, strong sustainability, environmental education, among others.
Pardeep Singh • Anamika Yadav •
Indranil Chowdhury • Ravindra Pratap Singh
Editors
Green Circular Economy
A New Paradigm for Sustainable
Development
Editors
Pardeep Singh
Department of Environmental Studies
PGDAV College, University of Delhi
New Dehli, India
Anamika Yadav
Centre for Science and Environment
New Delhi, India
Indranil Chowdhury
Department of Economics
PGDAV College, University of Delhi
New Delhi, India
Ravindra Pratap Singh
Central Public Works Department (CPWD)
Government of India
New Delhi, India
ISSN 2731-5509
ISSN 2731-5517 (electronic)
Circular Economy and Sustainability
ISBN 978-3-031-40303-3
ISBN 978-3-031-40304-0 (eBook)
https://doi.org/10.1007/978-3-031-40304-0
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland
AG 2023
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of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and
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The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication
does not imply, even in the absence of a specific statement, that such names are exempt from the relevant
protective laws and regulations and therefore free for general use.
The publisher, the authors, and the editors are safe to assume that the advice and information in this book
are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or
the editors give a warranty, expressed or implied, with respect to the material contained herein or for any
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Contents
1
Circular Economy Aspirations: Three Strategies in Search
of a Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Anil Hira and Ronaldo Au-Yeung
1
2
The Environment Value System and Green Circular Economy . . . . . . .
Lledó Castellet-Viciano, Vicent Hernández-Chover,
and Francesc Hernández-Sancho
23
3
Circular Economy and Sustainable Production and Consumption . . .
Arzoo Shahzabeen, Annesha Ghosh, Bhanu Pandey,
and Sameer Shekhar
43
4
Green Human Resource Management and Circular Economy. . . . . . . .
Abhay Punia, Ravindra Pratap Singh, and Nalini Singh Chauhan
67
5
Economies of Scale in Green Circular Economies . . . . . . . . . . . . . . . . . . . . . .
Vicent Hernández-Chover, Lledó Castellet-Viciano,
and Francesc Hernández-Sancho
85
6
Temporal Study of the Interrelationship Between Economics
and Environmental Degradation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Niloy Sarkar, Amit Singh, Pankaj Kumar, and Mahima Kaushik
7
Cities as Emerging Centers in a Circular Economy:
An Assessment of Indian Cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Anindita Roy Saha and Garima Gupta
8
Trade and Management of Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Shouvik Chakraborty
v
vi
Contents
9
Carbon Emission from Liquid Fuel and Pollution Haven
Hypothesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Badri Narayanan Gopalakrishnan and Apra Sinha
10
The Development Practice and Reform Optimization Path
of Green Circular Economy in Erhai Lake of China . . . . . . . . . . . . . . . . . . . 201
Tang Xuebing, Cai Jun, and Zhang Shoulei
11
Recent Trends in Biohydrogen Economy: Challenges
and Future Perspectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219
Ekta Mishra, Shruti Kapse, and Shilpi Jain
12
Strategic Planning and Business Sustainability
in Agribusiness: Analysis in a Model Farm in Brazil . . . . . . . . . . . . . . . . . . . 235
Najara Escarião Agripino, Kettrin Farias Bem Maracajá,
and Janine Vicente Dias
13
Application of Industrial Ecology Principles In and Around
Cement Industry in NCR of Delhi: Potentials, Problems
and Possibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
Anuja Malhotra and Nandan Nawn
14
Challenges and Recommendations for a Green Circular Economy. . . 283
Lledó Castellet-Viciano, Águeda Bellver-Domingo,
Vicent Hernández-Chover, and Francesc Hernández-Sancho
Chapter 1
Circular Economy Aspirations: Three
Strategies in Search of a Direction
Anil Hira and Ronaldo Au-Yeung
Abstract The “circular economy” is a concept embraced by policymakers in
the European Union and China. It represents a recognition of growing global
environmental challenges, including climate change, and the externalities costs
of waste. In this chapter, we compare the nascent policy efforts to define and
operationalize the circular economy in the EU, China, and the United States (US),
the major global economies. We begin by comparing how each entity defines
circular economy, finding widely varying and ambiguous concepts. We then turn
to macro-level or economy-wide policies. Here we find notable efforts to spread
principles. In the EU, such efforts are taking the form of new global standards
and regulations, while in China they are in the form of goals for industrial waste
reduction at the provincial level. The US is notable for its lack of action at the
national level. The real activity in the US around circular economy transformation
appears to be happening at the meso- or industry-level. Here we see a haphazard
effort to create new supply chains and manage waste streams, parallel with an
effort around constructing eco-industrial parks, in an attempt to share energy and
reuse waste. We find such efforts to be haphazard and disorganized. We close with
some reflections around the progress needed for the next steps to create a circular
economy, including conceptual and measurement clarification; developing viable
business and economic models that, together with regulation, incentivize businesses
to change the production models; and spreading circular concepts to ensure adequate
societal support to accept the consumption changes required.
Keywords Circular economy · US · China · European Union · Waste · Supply
chains
A. Hira () · R. Au-Yeung
Department of Political Science, Simon Fraser University, Burnaby, BC, Canada
e-mail: ahira@sfu.ca; ronaldo_ouyang@sfu.ca
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_1
1
2
A. Hira and R. Au-Yeung
1.1 Introduction
Current (linear) production and consumption models generate enormous amounts
of waste across the globe, suggesting the need to think through new, more circular
models. While there are few good global measurements, the EU has funded a
CREEA (Compiling and Refining Environmental and Economic Accounts) project
including the EXIOBASE that seeks to estimate overall waste. Using these data,
Tisserant et al. (2017) estimate that households in the North generate 1–2 tons of
solid waste per year. In 2007, total global waste was estimated to reach as much
as 3.2 gigatons (1 billion metric tons or Gt), of which just 1 Gt was recycled
or reused, 0.7 was incinerated, gasified, composted, or used as aggregates, and
1.5 Gt was landfilled. While plastics have been gaining the most attention due
to their persistence in the environment, the main sources in terms of volume are
construction, waste metal, inert material, and paper/wood (Pacini and Golbeck
2020). Haas et al. (2015) estimate that just 37% of materials are currently circular,
mostly including recycling and reuse as energy sources, though they note even this
estimate is likely overblown. A more recent estimate is that only 15% of solid waste
is recycled, with the rest going to landfills (Pietzsch et al. 2017).
As a result of these stark facts, a general movement toward sustainable materials use and reduction has taken shape. One central focus of this movement is
conceptualized in the “circular economy” (CE) concept. This chapter focuses on
comparing the policies behind such transformations, across the three largest global
economies of the European Union (EU), China, and the United States (US). Our
attention is on plans around the material flows reflected in the transition to a CE as a
next step beyond climate change adjustments, which are focused purely on energy.
No one knows yet what a true zero waste economy looks like or how to balance
environmental with economic and social needs.
We examine the CE as a “club good” for global policy practice in which the
largest economic entities need to lead the way. So far, the US has not embraced
the CE in policy, beyond acknowledging the principle. By contrast, the more robust
experiments in CE policies in the EU and China are important as they serve as
prototypes for future international rules and norms around sustainability. In fact, the
EU has been active in promoting CE projects globally, including dialogues and a
recent memorandum with China (Kern et al. 2020).
Suárez-Eiroa et al. (2019) point out that there are three relevant levels of
analysis for the CE. At the micro-level, individual companies make decisions about
material use and disposal. At the meso-level, they refer to inter-firm networks,
such as industrial parks seeking to develop industrial symbiosis or coordination and
sharing of materials, energy, and waste. The macro-level refers to social and policy
approaches to the CE. This chapter focuses on policies at the macro- and meso-level
in the three largest global economies. A different level of analysis and focus would
be needed to study the micro-level.
1 Circular Economy Aspirations: Three Strategies in Search of a Direction
3
1.2 What Does the Circular Economy Mean?
Boulding’s classic 1966 article was the precursor for the circular economy. In the
article, the economist referred to closed and open economy systems, characterizing
the linear economy as “the cowboy economy” of a new frontier, while the CE
was more like a “spaceship economy”, recognizing finite natural resources and the
importance of waste management. The popularization of the CE concept is often
traced back to Pearce and Turner’s 1989 work on natural resource and environmental
economics. They helped to introduce the idea of a “bioeconomy”, whereby the
natural resource endowments of the Earth are part of a system that not only provides
useful products but also the resources for all types of living organisms. Thus, the
efficient use of resources has consequences well beyond their initial use, including
the costs of disposition of waste materials. The problem is how to cost out waste
products appropriately, which are not reflected in the initial production costs. This
links with the long-standing notions of “industrial ecology”, the bioeconomy, and
ecosystems, in emphasizing the need to reuse industrial waste products and seeing
the production process as affecting larger natural systems. It also links with the
more recent ideas around a “green economy” that emphasizes shifts to lower carbon
emissions.
Becque et al. (2016, 5) offer perhaps the most comprehensive definition of the
circular economy, stating that it rests on three principles:
(a) To preserve and enhance natural capital by controlling finite stocks and
balancing renewable resource flows
(b) To optimize resource yields by circulating products, components, and materials
at the highest utility at all times
(c) To foster system effectiveness by designing out negative externalities. Implicit
within this is the use of renewable energy as well as using energy in the most
productive way.
Ghisellini et al. (2016, 11) suggest that the CE decouples environmental pressure
from economic growth. They state that “CE implies the adoption of cleaner
production patterns at company level, an increase of producers and consumers
responsibility and awareness, the use of renewable technologies and materials
(wherever possible) as well as the adoption of suitable, clear and stable policies
and tools”. Perhaps, what is equally important is the gradually increasing rejection
of previous production and consumption patterns, reflecting overall “resource use
inefficiency”.
One of the leading CE proponents, the Ellen MacArthur Foundation based in the
UK, offers three basic principles on their website: eliminate waste and pollution;
circulate products and materials at their highest values; and regenerate waste. While
these principles have been widely embraced, they do not easily translate into clear
policy prescriptions or actions.
The fact is that there is a great deal of contestation around the CE. Kirchherr et
al. (2017) find 114 definitions for CE, which range from recycling to sustainable
4
A. Hira and R. Au-Yeung
development. Reike et al. (2018) suggest that the concept has evolved over roughly
three phases. The first phase from the 1970s to 1990s emphasized dealing with waste
reduction and management, such as “polluter pays” principles and waste treatment
(“end of pipe”) policies gaining traction. In the second phase, from 1990 to 2010,
there was more emphasis on integrating preventive measures, along with the ideas
around the harmony between business and environmental objectives. Businesses
can gain in terms of both efficiency and reputation from proactive environmental
measures. They identify this as the timeframe when the phrase “circular economy”
started to gain roots. From 2010, the third phase reflected the increasing concerns
around population growth, resource depletion, and climate change. This is the period
when the three Rs (reuse, recycling, and reduction (of use)) gained traction.
Korhonen et al. (2018a), in turn, suggest the main principle for the CE should
be that “the material flows released from economy to nature should be in a form
in which nature can utilize them in its own functions”. They provide the examples
of using biomass as fertilizers to expand forests that can act as carbon sinks, or
using anaerobic digesters to create fertilizers out of biowastes. However, they also
acknowledge even such shifts may not be enough to manage natural resources
if global consumption, spurred by population growth, continues to increase. In a
similar vein, Korhonen et al. (2018b) usefully posit that there are four key elements
to achieve a true circular economy:
1. Industrial ecology, focused on material and energy flows of nature.
2. Industrial symbiosis, to focus on organizing networks of business and consumer
actors.
3. Cradle-to-cradle design to consider the entire life cycle of a product.
4. The sharing economy to reduce the need for individual ownership.
In short, the CE principles seek to shift society beyond climate change emissions
reduction, recycling toward a zero waste society, and a completely closed-circle
resource approach to production. This requires efforts well beyond waste reduction
and disposal to include a wide range of areas for attention, from eco-design to
energy, packaging, and production process efficiency to re-use, remanufacturing,
and repurposing. Even farther along lie the tasks of cleaning up legacy waste,
including ubiquitous plastic.
1.2.1 Working Definitions of the CE in the US, EU, and China
The US does not have federal legislation regarding establishing a CE, though a
number of states and municipalities have promoted the concept, most notably San
Francisco, with its zero waste program. US government agencies ranging from the
USAID to NIST promote the CE concept. However, they are generally limited in
the scope of their CE activities. For example, the EPA has a short website defining
a CE; however, its webpage on strategy only discusses recycling. USAID (n.d.)
promotes circularity via renewable energy. NIST (n.d.) mentions the possibilities
1 Circular Economy Aspirations: Three Strategies in Search of a Direction
5
for supporting measurement of waste (see bibliography for link). In sum, the US is
far behind the EU and China in terms of accepting and promoting a CE. Lacking
national-level policies, we discuss US CE activities in the meso-section below.
The EU Action Plan for the Circular Economy (2015) offers the following
definition, an economy “where the value of products, materials and resources is
maintained ( . . . ) for as long as possible and the generation of waste is minimised”
in order to achieve “a sustainable, low carbon, resource efficient and competitive
economy”.
China’s Circular Economy Promotion Law (2008, art. 2) defines the CE as “general reduction, reuse, and resource utilization [ziyuan hua] activities in the process of
production, distribution, and consumption”. It refers to resource utilization as “the
direct use of waste as raw materials or the recycling of waste”, which has a broader
denotation than the traditional concept of recycling. The article further delineates
reduction as activities that “reduce resource consumption and waste generation
during production, distribution, and consumption”.
For the purpose of the law, reuse is defined as “the use of waste as a product
directly or after repair, refurbishment, and remanufacturing, or the use of all or part
of the waste as part of other products”. Together, resource utilization, reuse, and
reduction (of use) form the Chinese version of the three Rs that guide Beijing’s
operationalization of the CE concept.
In its Guidelines for Compiling Circular Economy Development Plans, the
National Development and Reform Commission (NDRC 2010, 1) adds another
layer to the Chinese definition of the CE concept, asserting that “circular economy
is a fundamental change to the traditional growth model of ‘mass production,
mass consumption, and mass waste’ and is an economic development model that
maximizes resource conservation and environmental protection”.
It is, however, worth noting that the emphasis of China’s CE definition has
shifted over time. While the Circular Economy Promotion Law (2008, art.4), the
Guidelines for Compiling Circular Economy Development Plans (NDRC 2010, 3),
the Notice on Printing and Distributing the National Environmental Protection
12th Five-Year Plan (State Council 2011), and the Announcements on Circular
Economy Development Strategy and Near-Term Action Plan (State Council, 2013)
all prioritized prevention or reduction of use in the first place, the priority has
shifted since China’s 13th Five-Year Plan (2016–2020). In fact, both the Mediumand Long-Term Plan for the Construction of Renewable Resources and Recycling
Systems (2015–2020) (Ministry of Commerce et al. 2015) and the 14th Five-Year
Plan on Circular Economy (NDRC 2021, 3) altered the course, with the former
prioritizing recycling and sorting and the latter emphasizing reuse and resource
utilization.
In short, paralleling the lack of agreement around CE among scholars (Kirchherr
et al. 2017), each country in our study interprets the term differently, leading to
various guiding principles. Furthermore, even within the same country, the concept
can be altered over time, as we have seen in the case of China.
6
A. Hira and R. Au-Yeung
1.3 The CE from a Policy Perspective
Reike et al. (2018) suggest that there have been three general historical periods in
circular economy strategies in the US and EU, an approach that resonates with other
scholars (Blomsma and Brennan 2017).
• From the 1970s to 1990s (CE 1.0), the focus was on dealing with waste.
During this time, waste management, including “polluter pays” and “end-ofpipe” approaches predominated, with landfills, incineration, and later, recycling
being the primary methods of dealing with waste. In this period, business was a
passive partner.
• In the second phase (CE 2.0), in the wake of the 1987 Brundtland Report, there
was a greater emphasis on preventative measures, seeking to enlist businesses
to improve efficiency and their general reputation. Concepts such as industrial
ecology and life cycle thinking gained traction, as the perspective shifted from
production processes to include their effects on ecosystems. The authors see the
seeds for the spread of the idea around the circular or closed-loop economy
starting to spread during this period.
• From 2010, CE 3.0, according to the authors, the limitations on growth including population pressures and resource depletion were becoming increasingly
accepted. There was a grudging acceptance that consumption has limits.
Becque et al. (2016, 5) suggest five main areas for CE policy interventions: public
procurement; collaboration platforms/sharing economy; providing technical support
to businesses; fiscal policy, particularly around taxes; education, information and
awareness; and regulation, particularly around materials. They further note that the
transition to the CE will inflict pain upon linear-dependent businesses even while
growing new lines, something most authors ignore.
There are a number of barriers to the CE: cultural, including a lack of awareness
and motivation at the company and consumer levels; regulatory, with a lack of
policies, including procurement and appropriate taxation; market, reflecting a lack
of successful business models around CE; and technological, including an inability
to design viable remanufacturing processes (Kircherr et al. 2018). To these, we can
add a lack of data and information throughout the factors.
In practice, global CE policy activities are more focused more on recycling than
reuse. Ranta et al. (2018) suggest that there is a lack of institutional support for
the CE. They examine three dimensions of institutionality: regulative; normative,
including business certification and accreditation systems; and culture-cognitive,
reflecting shared beliefs and values, and find each lacking in support. As examples,
there is inadequate regulation regarding disposal of materials or incentivizing reuse.
There is inadequate transparency or certification systems to spur businesses who
want to brand their products as eco-friendly. Moreover, customers generally prefer
new products. Where they see corporate initiatives, pressures are haphazard and
inconsistent. For example, Huawei felt pressure from private stakeholders and thus
began an e-cycling program. Dell’s recycling program was spurred by California’s
1 Circular Economy Aspirations: Three Strategies in Search of a Direction
7
law that requires it to arrange for recycling end-of-life products and by perceived
cost savings from recycling.
1.4 EU’s CE Policy
Recognizing the unique nature of the EU as a federation of nation states, we choose
to limit our observations here to the EU level of strategy. Each nation state has their
own CE strategy that is beyond the scope of this work. Perhaps more concerning is
the high degree of differentiation across EU nations (Mazur-Wierzbicka 2021).
Under the Europe 2020 Strategy (European Commission 2011), the EU introduced the idea of promoting resource efficiency that contained circular economy
concepts. The EU 2015 Action Plan for the Circular Economy suggests a number of
avenues for progress, including eco-design; product labeling; government procurement; waste management; improving standards for secondary materials; innovation,
investment and R&D; and monitoring progress. Across these concepts, the literature
signals the importance of four main documents: the Circular Economy Package
(2015), which lays down the conceptual groundwork; the Waste Directive; the EcoDesign Directive; and the REACH (Registration, Evaluation, Authorization, and
Restriction of Chemicals) regulation (EC 1907/2006) which lays out regulations
for the use of chemicals.
Domenech and Bahn-Walkowiak (2019) describe additional documents that
build upon the CE momentum. These include the Resource Efficiency Roadmap
(2011), the Circular Economy Action Plan (COM 2020 98), and the Europe
2020 Strategy. They describe the main policy tools as water regulation, including
the polluter pays principles, extended producer responsibility, and accepting the
concepts of waste hierarchy and life cycle analysis. Furthermore, the Eco-Design
Directive seeks to improve energy efficiency. The authors’ main criticism is the
reluctance in adequately using the tax policy to reflect true resource costs. They also
point to the inconsistencies across national-level policies, particularly in Central and
Eastern Europe. The Circular Economy Action Plan mentions the development of
sector-specific initiatives in electronics and IT; batteries and vehicles; packaging;
plastics; textiles; construction and buildings; and food, water, and nutrients. Wilts
et al. (2016) describe three CE policy instruments from EU policies that can be
generalized. The first is setting up waste/recycling targets. The second is creating
mandatory design standards for recycling, reuse, and repairability. The third is
placing responsibility upon individual producers, which would mean that producers
would bear the costs for the entire life cycle of the product. They note that while
attractive, each concept is challenging to put into practice because of the lack of
ready indicators.
Joltreau (2022) notes extended producer responsibility (EPR) as an important
EU initiative. EPR forces producers to finance the recycling and waste management
costs of the products they create. The most common policy instrument for EPR
is the advance disposal fee, which is charged at the point of sale. There is also a
8
A. Hira and R. Au-Yeung
responsibility to create a producer responsibility organization (PRO) that can take
on the collecting, sorting, recycling, and waste activities. The author points out the
EPR regulations vary considerably across member states in the EU.
Den Hollander et al. (2017) point to the “waste hierarchy”, a concept arising
in the European Waste Framework Directive of 2009 that sets out a priority order
for managing waste. The priorities reflect CE notions, with preventing waste as
the preferred option, reuse, recycling, and other recovery as an intermediate one,
and disposal as a last resort. They note the limitations of this approach in that it
does not consider dematerialization (reduction of inputs) or decoupling (reduction
of consumption), as well as the idea that there is a one way flow up the hierarchy for
improvement. The EU also introduced the Waste Frame Directive that prohibits the
shipment of hazardous material outside of the OECD area, in response to concerns
about dumping waste in the South. Moreover, the EU has a Landfill Tax to try to
incentivize reuse (Gregson et al. 2015, 227).
The EU waste hierarchy is a central conceptual framework for the CE. It dates
back to 2008, and sets up the following in order of priority: prevention; preparing for
re-use; recycling; recovery; and finally disposal (EC n.d.-a, b, c, d, e). Maitre-Ekern
(2021) points out that EU waste policy is focused primarily on prevention, such as
through extended producer responsibility (EPR), and reducing impact, to the neglect
of eco-design and re-use and recycling through secondary market development.
There is an issue, for example, around the lack of repair parts and capacity for
re-use. Moreover, information about the waste profile of products and secondary
products are not readily available to consumers. She calls the need transition as one
from EPR to PPR (pre-market producer responsibility).
Eco-design is more of a concept than a practice so far. The 2005/32/EC Directive
of the EU required companies who produce certain energy-using products to
integrate environmental factors into their design. The EC website offers general
language resolutions around eco standards for a number of products ranging
from computers to dishwashers to vacuum cleaners. There is also a suggestion
of the possibility of mandatory labeling of energy use to inform consumers (EC,
Sustainable product). However, companies so far lack a clear methodology for how
to accomplish the redesign of consumer items to make them more circular (Grote et
al. 2007).
In terms of the REACH regulation, the 2006 EU regulation seeks to embrace
the precautionary principle of industry ensuring the safety of chemical materials
before authorities register and license them. The other goal was to move toward regulatory harmonization across member states, which might, in turn, spur innovation
(Williams et al. 2009).
Alaranta and Turunen (2021) suggest that the distinction between waste and
chemicals regulation should be eliminated, merging REACH with the waste directive. The main issues are that chemicals are no longer traced once they become part
of a product, and certainly not as part of a waste stream. Furthermore, new design
principles fail to adequately consider legacy waste.
Botos et al. (2019) point out that the US has taken a very different approach to
hazardous chemicals from the EU REACH approach in rejecting the precautionary
1 Circular Economy Aspirations: Three Strategies in Search of a Direction
9
principle. The main federal law is the Toxic Substances Control Act (TSCA) of
1976. Rather the approach is more common law, allowed for legal action against
chemical-induced harm rather than pushing industry to prove safety. As in the EU
there is likewise a sub-federal, state, level of safety regulation. If a chemical is
deemed risky based on evidence, the Environmental Protection Agency (EPA) can
limit or ban its use, after requiring testing.
Evaluations at the supra-national level are so far limited, reflecting the recency
of the strategy. Friant et al. (2021a, b), reflecting others, conclude that EU “words”
exceed their “actions”, with holistic language unmatched by policies, which focus
primarily on “end of pipe” solutions, rather than the whole production process.
They are concerned about the lack of mandatory targets; the lack of attention to
developing secondary reuse markets and eco-design; inadequate fiscal incentives;
and a modicum of awareness raising. Based on a series of stakeholder interviews,
Kirchherr et al. (2018) find that the primary barriers in the EU to CE transition are in
a lack of market incentives and corporate culture. They find that EU regulations have
not focused on these key factors. Calisto Friant et al. (2021a, b) assess EU policies
more harshly, suggesting that they are rhetorical, focusing in practice more on
increasing recycling and waste management, without undertaking the fundamental
shifts needed to develop a CE. In fact, examining the EC Resource Efficiency
Scorecard (2016), the most recent of which is 2015, reveals a reliance on very
general indicators, such as overall amounts of resources (including land, water, and
carbon), are used per output (GDP). While these are a good starting point, they are
just that.
1.5 Chinese CE Policies
China is a late mover in developing the circularity of its economy. Nonetheless,
the country has thus far been highly successful in CE development. According to
the National Bureau of Statistics (2015), Beijing’s CE index increased by 37.6%
between 2005 and 2013, with improvements in resource intensity, waste intensity,
recycling, and contaminant disposal rates of 34.7%, 46.5%, 8.2%, and 74.6%,
respectively. Furthermore, despite subnational-level regional differences (Fan and
Fang 2020), studies have found a strong trend of decoupling economic growth from
mass use of natural resources (Bleischwitz et al. 2022; Matthews and Tan 2011), as
well as improvements in end-of-life waste recycling (Wang et al. 2020), utilization
of plastic wastes (Jiang et al. 2020), and overall circularity (Wang et al. 2020).
As in China’s climate change adjustments (Hira and Au-Yeung 2023), the driving
force behind Beijing’s CE development can be attributed to its internalization
and full realization of the negative externalities related to the linear economic
growth model of mass production, mass consumption, and mass waste. In official
documents, state agencies explicitly cite resource depletion and environmental
concerns due to rapid industrialization and urbanization (State Council 2005, 2013;
10
A. Hira and R. Au-Yeung
NDRC 2010) as well as supply chain and resource security issues owing to
overreliance on foreign resources (NDRC 2021) as the reasons why the People’s
Republic is in an urgent need of developing a circular economic growth model. In
the view of the central government, the CE is the “fundamental measure necessary
to eliminate China’s environmental and resource constraints” (NDRC 2010, 1)
and the solution to “the conflict between economic growth and resources and the
environment” (State Council 2013).
To resolve issues such as resource depletion, seen in the linear economic
development model, Beijing has made the CE a national objective since 2005
with the publication of Opinions on Accelerating the Development of Circular
Economy (State Council 2005), following a top-down and central governmentdriven approach to policy implementation (Bleischwitz et al. 2022; Matthews and
Tan 2016). The Circular Economy Promotion Law (2008) makes “ . . . subnational
governments above the county level . . . responsible for organizing, coordinating,
and regulating affairs in relation to circular economy promotion in their respective
jurisdictions” (art. 5) and requires higher governments to “make regular assessments
of the work of the lower authorities . . . against major indicators” (art. 14). Together,
these provisions form the basis for the “target responsibility” enforcement model
wherein the career advancement of subnational officials is contingent upon their
jurisdictions’ contribution to the national CE targets (McDowall et al. 2017;
Bleischwitz et al. 2022).
Given the direct and immediate responsibilities and incentives tied to local
authorities under this model, subnational governments are well incentivized to
engage in inter-jurisdictional competitions in an effort to contribute to national CE
targets. Evidently, during China’s 14th Five-Year Plan period (2021–2025), 19 out
of 31 provincial jurisdictions (excluding Hong Kong, Macau, and Taiwan) have
adopted more ambitious targets than that of the central government, in terms of
energy consumption reduction (as per unit of GDP), as Fig. 1.1 shows. Only three
provinces (Guangxi, Yunnan, and Gansu) have selected an energy consumption
reduction target lower than the national standard. While the national aim targets a
reduction of energy consumption (as per unit of GDP) by 13.5% compared to 2020
levels (NDRC 2021, 4), the average objective among provincial jurisdictions seats
at nearly 14%, a significantly higher aim considering the overall size of China’s
economy.
On top of the momentum generated by inter-jurisdictional competitions, we
observe that the social responsibility model has generated a “catch up” effect in
which weaker performing subnational governments are likely to embrace no less
ambitious aims. Notably, Liaoning, Shanxi, Xinjiang, Hebei, and Inner Mongolia,
the five worst performative jurisdictions in Fan and Fang’s (2020) analysis, have all
adopted energy consumption reduction targets of 13.5% or higher during the 14th
Five-Year Plan period, as Fig. 1.1 illustrates. In fact, Inner Mongolia and Hebei have
one of the highest targets among China’s 31 provincial jurisdictions.
At the same time, while much of China’s CE development approach is top down
and directed by the central government, it is worth noting that the model does allow
for flexibility and tailored approaches according to local conditions. For example,
whereases the national 14th Five-Year Plan on Circular Economy (NDRC 2021,
1 Circular Economy Aspirations: Three Strategies in Search of a Direction
11
Fig. 1.1 Provincial 14th Five-Year Plan targets of energy consumption reduction (as per unit of
GDP). (Source: Compiled by Au-Yeung from provincial 14th Five-Year Plans. Note: we choose to
examine the per unit GDP energy consumption target because of data availability issues for other
major indicators at the subnational level)
3) puts a strong emphasis on reuse and resource utilization, Shanghai continues to
prioritize prevention in the first place up to its lasted provincial CE promotion plan
(Shanghai Government 2022). This is perhaps due to the exceptionally high resource
utilization rate in the provincial-level municipality: during the 13th Five-Year Plan
period (2016–2020), the city/province has achieved a bulk industrial solid waste
utilization rate of 99.7% (Shanghai Government 2022). Additionally, regions, such
as Tianjin, have their own special CE indicators for local needs, such as desalination
rate, which is not present in either the national plan or subnational targets in most
provincial jurisdictions.
China’s model comes with a few significant flaws. Foremost among them is the
fact that the economy is seen as the central focus of Beijing’s CE strategy, implying
that circularity follows economic growth (Bleischwitz et al. 2022). As the authors
point out, the fact that the CE is centrally administrated by the NDRC, as opposed
12
A. Hira and R. Au-Yeung
to the Ministry of Ecology and Environment, indicates economic needs overshadow
circularity concerns. In fact, China’s Circular Economy Promotion Law (2008, art.
4) makes it explicit, stating that “the circular economy shall be promoted on the
premises of being . . . reasonable in economy . . . ”.
China’s official CE progress index reflects this prioritization. Notably, three out
of five measures are weighted in relative relations to economic growth. The resource
and waste intensity rates, for their parts, are respectively measured by per unit
GDP resource consumptions and waste productions (National Bureau of Statistics
2015). Although in 2017 the NDRC (2017) published a more comprehensive set of
indicators, now including 17 different measurements, many of the important indexes
(namely, resource productivity, energy consumption, water consumption, and land
output rates) remain to be weighted in relative relations to the overall economic
performance.
Perhaps the most vital indicator among the “non-per unit GDP” measures is the
solid industrial waste utilization rate, but China has shown no tangible progress in
improving it in recent years. As Fig. 1.2 shows, there has in fact been a deterioration
of China’s solid industrial waste utilization. Between 2012 and 2017, the overall
amount declined by 193 million tons, while the utilization rate decreased from
61.49% to 54.71%. Although there has been a reserving trend thereafter, we see
no improvement in solid industrial waste utilization up to 2019 (compared to 2012
levels).
2100
64.00%
2050
62.00%
2000
60.00%
1950
58.00%
1900
56.00%
1850
54.00%
1800
52.00%
1750
1700
50.00%
2012
2013
2014
2015
2016
2017
Overall Amount of Industrial Solid Waste Utilized (million tons)
2018
2019
Utilization Rate
Fig. 1.2 Solid industrial waste utilization rate, 2012–2019. (Source: Gathered by Qianzhan
Industry Research Institute (2020) from National Bureau of Statistics, Ministry of Environment
and Ministry of Environment and Ecology)
1 Circular Economy Aspirations: Three Strategies in Search of a Direction
13
This perhaps explains why China has altered its CE priority from prevention
and reduction (of use) to recycling and resource utilization since the 13th FiveYear Plan period. Nonetheless, its poor performance in resource utilization indicates
a significant room for future improvement, a stark fact well recognized by the
central government (NDRC 2021). While no one is yet sure about the implication
of China’s import ban on waste products,1 it provides a clear signal for future
international cooperation among the “club members”: coordination on improving
and building resource utilization capacities.
At the macro level, the Chinese approach shows the value of national goals
and indicators of progress. While China is one country, the discipline of the
central government over the provinces should not be exaggerated. Thus, differential
levels of progress are revealed, suggesting the need for tailoring according to
local conditions, including level of energy generation and use and manufacturing
presence; access to renewable resources; and competence of local authorities. We
see the need to prove “progress” regularly as potentially obfuscating such needs.
Last but not least, across the South, economic growth remains the priority. It seems
that the tension between it and sustainability has not yet been resolved.
1.6 CE Meso-Level Experiments – Eco-Industrial Parks
Given the challenges of creating effective national-level policies or business systems, one approach could be more feasible- the creation of eco-industrial parks
that link different suppliers and users of waste and byproducts. Prior to the UN’s
agenda emphasizing industrial resource efficiency, industrial parks were primarily
based on the co-location of related industries operations. The focus on clusteringrelated industrial operations was driven by the goal of improving the efficiency, as
well as reducing costs, for industry by sharing infrastructure, such as land, roads,
and drainage ways, between co-located businesses. Eco-industrial parks, however,
differ by also prioritizing the exchange of waste resources between industrial park
establishments, thereby simultaneously extracting economic value and reducing
industrial pollution. Eco-industrial parks, by adopting the concept of “waste as a
resource”, facilitate a shift from a linear model of industrial production to a closedloop model whereby the waste from a particular industrial activity can become raw
materials for other industrial activities within the park (Sharma 2013).
An eco-industrial park requires a data system around circularity. Thus, risk is
distributed and shared along the entire supply chain, along with gaining commitment
from customers. Evidently, creating a viable eco-industrial park also requires new
1 The implication of the import ban remains a controversial debate. While some argue the ban will
result in a scarcity of recycled materials (e.g., Qu et al. 2019), others see it as beneficial to the CE
(e.g., Wen et al. 2021). We observe that the ban maybe beneficial to China’s CE, considering its
poor resource utilization performance (and capacity).
14
A. Hira and R. Au-Yeung
governance arrangements. Success in creating such arrangements can create an
exemplar effect, where a platform design for the system could be imitated and
adapted for other products and locations (Kornietzko et al. 2020; Ehrenfeld and
Gertler 1997).
Government policies that promote industrial zoning are important in tackling
manufacturing pollution via eco-industrial parks (World Bank Group 2017). The
Danish eco-industrial park of Kalundborg has achieved a semi-mythical status in
the emerging CE literature. The Kalundborg park is singled out, as a coal-fired
power station, oil refinery, pharmaceutical plant, and plasterboard manufacturing
plant share water, byproducts and residues, and energy through a Combined Heat
and Power (CHP) system (Gregson et al. 2015, 223). Other smaller companies
also participate in the by-product and reuse market. The power station supplies
excess heat and steam to industrial and residential neighbors. Similarly, by-products
of the power and refining processes are used by other industries through a series
of complex contracts and arrangements that have evolved over time. Municipal
authorities play a crucial role in managing water treatment and streamlining
environmental regulations for collective benefit (Valentine 2016). Lehtoranta et al.
(2011) find that Scandinavian pulp and paper industries have naturally developed
symbiotic operations, “typically consisting of power plants, chemical manufacturing
plants, waste management facilities, and sewage treatment plants that operate
around the ‘anchor tenant’, a pulp and paper mill. Such systems often engage
in close interaction with local municipalities by providing employment, district
heating, and waste disposal”.
However, emerging studies about eco-industrial parks cast doubts about the
spontaneous re-creation of the Kalundborg experiment, which relied on both a propitious co-location of symbiotic firms, and deep relations of trust among company
and government officials (Branson 2016). Consider, furthermore, that Kalundborg’s
success depends on the excess heat of a coal-fired plant, one that is likely to
be shut down in the future, putting the experiment in jeopardy. Similarly, Lybæk
et al. (2021), studying a Danish bioenergy and combined heat and power plant
that uses dairy and pig waste, point to serious policy gaps in maximizing project
outputs, including a lack of knowledge about waste management among companies,
municipalities, and the companies; a lack of incentives for reuse of waste, such as
access to finance; a lack of market demand; and coordination breakdowns among
different levels of government and private and public stakeholders.
In the south of France are two other EIP experiments, “Salaise-Sablons” in Lyon
and “Les Portes du Tarn” in Toulouse. The latter is the subject of a mini case study
by Belaud et al. (2019). The park opened in 2017. The authors note that the park
includes mixed uses, including 20% to stores and leisure, and another 15% for
agricultural activities. The park was developed with community consultation and
includes community gardens. The local urban planning agency helped to coordinate
the public private, and community stakeholders around an information system that
sought to manage and monitor water, energy, and waste streams. While it is too early
to make assessments, the experiment has some notable innovations in including
retail and community input and activities.
1 Circular Economy Aspirations: Three Strategies in Search of a Direction
15
While there is no federal circular economy policy in the US, various states and
municipalities have moved in this direction, such as San Francisco’s now famous
attempt to move toward zero waste. In terms of eco-industrial parks, there are
several examples. In an early (2004) article, Heeres et al. compare eco-industrial
parks in Baltimore, Brownsville, and Cape Charles with three Dutch parks. They
find less active participation of both companies and the public in the US parks
reduces their overall effectiveness. Companies in the US seem less convinced by
the benefits of cooperation. They suggest planning for parks should focus less on
material flows and more energy efficiency. Gibbs and Deutz (2005) count 34 ecoindustrial parks across the US. Examining a subset of these, the authors find that all
come short of the goals of the parks, to share and reduce the overall use of energy
and materials among multiple industry participants. They argue that most parks use
the eco-industrial label for marketing and subsidy purposes, and are not subject to
performance measures.
Eckelman and Chertow (2013) by contrast, argue that the Campbell Industrial
Park in Honolulu is successful. Established in 1958, it combines approximately
250 companies, including a coal-fired and an oil-based electricity generators; two
oil refineries, which provide cogeneration; a wastewater treatment an oil and tyre
recovery, and a cement plant. The steam from electricity generation is used in
the oil refineries. Despite such isolated cases, the overall evidence indicates that
circularity in the US remains a very nascent concept from a policy perspective,
though the corporate sector has seized upon the benefits of touting its environmental
achievements cloaked in the circularity concept (US Chamber of Commerce
Foundation 2015).
By sharp contrast, China embraces CE principles in its 12th Five Year Plan
(2011–2015), where it states its goal to improve energy and water efficiency of
heavy industries through recycling and remanufacturing, including encouraging
exchanges between companies (Preston 2012). These feed into China’s policies to
promote industrial eco-industrial parks where different companies co-locate in order
to achieve efficiency, particularly in utilization of waste materials. Such initiatives
are “top down” and primarily implemented through the National Demonstration
Eco-Industrial Parks program (Bleischwitz et al. 2022; Zhang et al. 2010).
Currently, the country has mainly three types of eco-industrial parks: sectoral
(i.e., parks dominated and led by one or a few core enterprises through material
and energy integration to establish symbiotic relationships among companies in a
given industry or related fields); integrated (i.e., parks transformed from economic
and technological development zones and high-tech industrial development zones;
usually composed of enterprises from different industries); and venous (i.e., parks
where the dominant sector is resource utilization) (Xu 2017; Bleischwitz et al.
2022).
To qualify for funding as a national demonstrator in China, an industrial park
must (1) pass pre-audits by related agencies at the provincial level; (2) develop a
plan for eco-industrial park construction and prepare technical reports; (3) fulfill
necessary qualifications, including (but not limited to) demonstrated support from
local government, evidence of plans to establish an eco-industrial park, a strong
16
A. Hira and R. Au-Yeung
record in upholding national legislation and policies related to environmental
protection, and commitments to implement regional and national environmental
assessments; (4) pass expert review of the plan and report; and (5) after gaining
the national demonstrator status, the park is subject to triannual reviews (for details,
see Zhang et al. 2010, 505–506; Thieriot and Sawyer 2015, 4).
At first glance, the National Demonstration Eco-Industrial Parks initiative may
seem overly strict, posing unnecessary and superfluous entry barriers. The incentives
are, however, equally appealing. In addition to support, including taxation breaks,
from the central government, the Measures for the Administration of National Ecoindustrial Demonstration Parks (Ministry of Economy and Environment et al. 2015,
14–15) explicitly requires subnational governments to “establish special subsidies
or tax incentives” for national eco-industrial park demonstrators. Yunnan Province,
for instance, provides a one-time grant of five million yuan (approx. 0.72 million
USD) for successful applicants (Yunnan Government 2022).
1.6.1 Limitations of Eco-Industrial Parks
In a review of eco-industrial park experiments, Bellantuono et al. (2017) conclude
that government policy must play a guiding role, including in creating adequate
incentives and organizational spaces for industrial symbiosis to have a chance to
gel. Other challenges include the prohibitive cost of investments in innovative
technological solutions (World Bank Group 2017). This hurdle raises concerns
over competitiveness for firms operating within eco-industrial parks who have
local competitors who are not required to meet similar technological advancement
requirements (World Bank Group 2017).
Management of eco-industrial parks can be hindered by the absence of clear and
appropriate mandates, as well as sufficient financial support for resident enterprises
(World Bank Group 2017). As Ewijk and Stegemann (2020) point out, beyond
the concept of eco-industrial parks, there is a major logical gap in meso-level
policy. Policymakers are seeking out what to do after waste is created, rather
than investigating the potential uses of waste and developing markets (as well as
designing) products for their use.
As Xu (2017) notes, presently most existing Chinese eco-industrial parks are
designed around resource sharing among different firms, implying that the utilization of waste materials is relatively neglected. The same cautions would apply to the
US and the EU as well. On top of this, we have seen absent top-down direction, it is
extremely difficult for private sector firms to organize themselves into eco-industrial
park, a classic collective action problem.
1 Circular Economy Aspirations: Three Strategies in Search of a Direction
17
1.7 Conclusion
We have reviewed the embrace of the circular economy concept by both China and
the EU. The US does not yet seem ready to accept the idea at the national level.
On both the supply and demand side, there are inadequate market mechanisms and
incentives to create a consistent transition away from the linear model. Lacking clear
conceptualization, measurement of progress is also ambiguous. So far, societies
across the globe are not ready to embrace a switch to a CE, which would imply
vastly different means of production and consumption.
Considering the incremental, multi-layered approach of the EU’s circular economy policy package, Fitch-Roy et al. (2020) conclude: “disrupting the entire EU
economy in the way that CE envisages requires bold, innovative approaches to
almost all future policy design that take, as a starting point, non-linearity or
circularity as a core objective”. Because of the costs and externalities issues noted
above, whereby it is more costly at present to implement than a linear waste model,
the circular economy is only likely to succeed where there is significant consumer
pressure and/or proactive policies. Thus far, there are few signs of consumer
pressure, as consumers, both retail and business, remain fixated on prices. For a
circular economy to succeed thus requires strong government policies, including a
general institutional framework to promote and enforce changes in supply chains.
Zink and Geyer (2017) note serious challenges to implementing a CE upon which
we build here. The first is that efficiency measures may take a long time to pay
off vs. high upfront costs. This links with the “rebound effect” whereby increased
efficiency reduces prices of inputs, thereby spurring consumption. The second is to
link markets that may not have existing linkages based on supply chains or financial
linkages. A ready example is the de-linking of fashion producers from secondary
clothing and textile markets. A third challenge is the difficulty of substituting for
more sustainable materials. The most prominent example is plastic. The final set of
challenges relates to consumer acceptance of recycled materials, which are often not
only more expensive but often perceived as being subpar in quality.
In the area of planning, it seems that efforts at the macro level require the
acceptance of the principles of a CE, alongside using regulation and policy to
recognize the costs of pollution externalities. The real action seems to be happening
on the meso-level of sectoral transformation including the promotion of new
standards, regulatory incentives reflecting the true costs of pollution, and the
promotion of eco-industrial parks.
Even at the meso-level, there are multiple barriers and limitations to transitioning
to a CE. These include regulatory constraints, lack of consumer awareness, inadequate information on resource flows, and an overall clear lack of incentives for the
transition. As Antonioli et al. (2022) in an extensive study of Italian firms, most
businesses simply not only do not find it profitable, and face considerable expenses
in shifting from linear to circular supply chain strategies.
For example, the EU Green Deal is bold in laying out plans for both circularity
and the idea of creating clean energy and green jobs that would be “globally
18
A. Hira and R. Au-Yeung
competitive and resilient”. However, the 2022 RePowerEU plan suggests a heavy
reliance on natural gas as an immediate means to reduce reliance on Russian
natural gas (EC, RePowerEC). In July 2022, the EU Parliament voted to designate
natural gas and nuclear energy as acceptable transitional fuels (EC 2022). More
fundamentally, how economic growth and sustainability can be compatibly pursued
is entirely unclear, and an even more pressing question for countries in the South,
where environmental enforcement is generally more lax (Hira and Pacini 2022).
Much more research is needed to develop viable CE business models by sector,
alongside regulatory action.
Looking to the future, Hartley et al. (2020) suggest the following steps: adopting
circular design standards and norms as part of regulations; expanded use of
government procurement for CE promotion; reducing taxes and barriers to the
production and trade of waste products; promoting the CE to consumers; and
creating materials flow databases. This last point is echoed by other authors such
as Kristensen and Mosgaard (2020) who find that measurement of circularity is
severely lacking. One could add to this that information about the resource footprint
is entirely lacking to both business and retail consumers. Until some of these gaps
are filled at the global level, the CE will remain nothing more than a bold concept
with limited achievement.
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10.1111/jiec.12545
Chapter 2
The Environment Value System
and Green Circular Economy
Lledó Castellet-Viciano, Vicent Hernández-Chover,
and Francesc Hernández-Sancho
Abstract When assessing the feasibility of implementing a project based on a
circular economy model, it is necessary to consider the non-action cost as an
alternative, that is, to analyse the costs and benefits that the non-implementation
of the model will have. Generally, we tend to value the positive and negative aspects
of the execution of a project, but rarely do we consider that not implementing
them can also have repercussions. For example, the non-implementation of water
reuse projects puts the satisfaction of water needs at risk, generating restrictions
in the different uses with their consequent economic implications. In addition, it
would continue promoting the overexploitation of aquifers and the reduction of the
volume of water of surface sources as well as the decrease in the quality of all water
bodies, affecting all ecosystems. Therefore, the inclusion of the costs of no-action in
decision-making is essential to justify adequate investment policies that guarantee
the implementation of the circular economy actions. Since most of the consequences
related to circular economy actions are social and environmental and they usually
do not have a market value, their quantification requires very specific economic
assessment instruments.
Keywords Water · Wastewater · Reuse · Externalities · Non-action cost
2.1 Introduction
One of the main reasons why the circular economy is gaining increasing prominence
is because of the great pressure being placed on natural resources and the environment in general. The non-profit group Forum for the Future estimates that the current
rate of natural resource consumption is 1.5 times the rate of replenishment. If this
consumption pattern continues, resource consumption in 2030 will be equivalent
L. Castellet-Viciano () · V. Hernández-Chover · F. Hernández-Sancho
Inter-university Institute for Local Development (IILD-WATER), Water Economics Group,
University of Valencia, Valencia, Spain
e-mail: lledo.castellet@uv.es; Vicent.hernandez@uv.es; Francesc.hernandez@uv.es
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_2
23
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L. Castellet-Viciano et al.
to the consumption of two planets, while three planets will be needed by 2050.
Parallel to the significant consumption of environmental resources, large amounts of
waste are generated globally, approximately 2.01 billion tonnes of municipal solid
waste per year, of which at least 33% is not managed in an environmentally safe
way. Looking ahead, waste generation is foreseen to reach 3.4 billion tonnes by
2050 worldwide, which doubles the population growth by then. Moreover, human
activities have a lot to do with climate change, which is leading to more frequent
occurrences of extreme events such as droughts, floods, earthquakes, hurricanes,
etc. Longer periods of droughts and their increasing frequency are one of the
main challenges in water resources management. Therefore, the need to implement
strategies to enable sustainable development is becoming extremely relevant.
Given this situation, the need to change the current linear economic and productive system to a circular one is becoming imminent. In recent years, the circular
economy has been gaining prominence both at the global scale, in world politics
and institutions, as well as at the national, regional and local levels. However,
according to Korhonen et al. (2018), the growth of the circular economy has been on
a theoretical basis. In this sense, much progress has been made in raising awareness
of the need to leave behind the current linear economic model and replace it with
a circular one, which aims to reduce the consumption of raw materials by making
them stay longer in the economic system, while reducing the environmental impact
associated with the extraction of these, the production processes of other materials
and products, and the generation and disposal of waste generated in the whole
stages of processes. However, practical implementation and scalability has been
very limited (Ghisellini et al. 2016), with the exception of a few successful cases.
The lack of implementation of circular economy-based projects is associated
with the large number of barriers that need to be overcome for these projects to
become a reality. In addition to social barriers, generally associated with a lack
of information and a system that has been rooted in society for decades, and
political and regulatory difficulties, derived from a fragmented administration and
institutions in which the competences for resource management are very divided
and regulated by different regulations that are disconnected from each other, there
are also technological and economic or financial barriers. The implementation of
projects based on the circular economy requires advanced technologies that, on
the one hand, maximise the efficiency of processes and, on the other, allow the
recovery of products and materials for their reintroduction into the production
system. Some authors argue that the necessary technology is available and that
there is no limitation on the part of technological development, and that the main
disadvantage of not implementing these actions is fundamentally economic, since it
is a technology that requires a large economic investment.
In order to integrate and promote the circular economy, the fundamentals of
sustainable development—economic, social and environmental sustainability—had
to be reformulated in 2015 with the aim of unifying criteria in the member states
of the United Nations. They became known as the Sustainable Development Goals
(SDGs) (United Nations 2020). Consequently, the circular economy has become an
instrument to help companies, public institutions and society in general to follow
2 The Environment Value System and Green Circular Economy
25
the principles of sustainable development (Kirchherr et al. 2017). If we analyse the
Sustainable Development Goals, we can see that five of the 17 goals set are related
to the circular economy. The five SDGs mentioned are the following:
•
•
•
•
•
SDG6: Clean water and sanitation.
SDG7: Affordable and clean energy.
SDG8: Decent work and economic growth.
SDG12: Responsible consumption and production.
SDG15: Life on land.
When planning such a strategy, we must take into account the activities proposed
by the circular economy, such as:
• Recycling and reuse of water (Targets 6.1, 6.2, 6.3, 6.4 and 14.1).
• Industrial symbiosis and the creation of industrial clusters, where all businesses
take advantage of the energy and waste discarded by others, to use them in
various functions, thus extending their useful life (Goals 3.9, 6.3, 7.3, 8.2, 12.4,
9.4 and 17.7).
• Reduction of waste (Targets 12.3 and 12.5).
• Reducing wasteful consumption and production (Targets 8.4 and 9.4).
• Sustainable food production systems (Targets 2.4 and 2.5).
• Favour and care for the environment and the natural ecosystem, reducing human
impact on the environment and facilitating its expansion (Targets 15.1, 15.2 and
15.5).
• Transition to renewable energy sources (Targets 7.2 and 7.3) and provide energy
for all, including small developing countries (Targets 7.1 and 7.b).
• The implementation of the 7Rs model, preserving the capabilities and functions
of materials, allowing to preserve and even improve product quality (Targets 8.4
and 12.4).
• Creating sustainable cities and merging industry with the natural environment
(mutual benefit) (Targets 9.2 and 11.6).
• Conservation and restoration of natural resources (Target 12.2).
Today, technological changes have created new economic, social, and environmental opportunities. The different economic sectors have achieved greater
flexibility and individualisation of products and services, as well as greater control
of manufacturing and distribution processes that can be used to enhance the
transition towards a circular economy or green economy, which are closely related.
According to UNEP (2011), the Green Economy is an economic model that is
committed to sustainable development and results in improved human well-being
and social equity, while significantly reducing environmental risks and ecological
scarcities. It aims to reduce the consumption of energy, raw materials, and water,
improve resource efficiency, minimise or reduce greenhouse gas emissions and
pollution, promote waste reduction and reuse, prevent the loss of biodiversity and
ecosystem services, and achieve social equity. To achieve the transition to the green
economy, ten main sectors of the economy were considered with the capacity
to: reduce poverty, invest in natural capital and its restoration, generate jobs and
26
L. Castellet-Viciano et al.
improve social equity, encourage renewable energy and energy efficiency, mobility
and urban sustainability: agriculture, buildings, energy supply, fisheries, forestry,
industry, tourism, transport, waste management, and water (UNEP 2011).
However, the circular economy and the green economy cannot be achieved
through technological development and innovation alone, but simultaneously
require policy and regulatory mechanisms that promote sustainable development,
rectify negative externalities, and promote eco-innovation in industry. In this sense,
environmental regulation and the role of governments is essential to regulate
economic production and social activities that may cause negative environmental
externalities, as well as to create a coordination mechanism to assign responsibilities
to the different actors involved in the activities, from public or private institutions,
industries or companies, and the citizens themselves.
2.2 Benefits of the Circular Economy
The shift from the current linear to a circular economic model is by no means
a simple matter as it involves political changes at all levels; new organisational
and structural forms that allow a transversal management of resources; changes
at the business level to improve the efficiency of processes; as well as a new
form of consumption by society. To help in the transition towards a circular
economy, innovation and technology become fundamental aspects (Vanner et al.
2014; Acsinte and Verbeek 2015; Accenture 2014). But this change, which initially
seeks to ensure environmental sustainability through a circular flow, in which the
consumption of material resources is reduced thanks to a better use of resources
and the reuse of products and waste generated throughout the production system,
eliminating the dependence between economic growth and the production process,
will have repercussions in ecological, economic and social terms. The identification
of the impact that the circular economy will have on the environmental, social and
economic levels is important in order to be able to move towards the creation of
policies that allow for the appropriate management of this new system.
It should be taken into account that when assessing the benefits generated by a
given circular economy policy or action, it does not only affect those sectors directly
involved, but also has an impact on the entire value chain. Moreover, the impacts can
be perceived in the short, medium or long term, i.e., the effects can be perceived at
different times since the action takes place or vary over time. Some of the circular
economy measures may also have large-scale consequences and affect relations with
other countries through imports and exports of raw materials and products. On the
other hand, measures such as awareness-raising campaigns on the consumption of
recycled products are intended to have an impact on consumption patterns but will
ultimately have environmental, social and economic repercussions.
2 The Environment Value System and Green Circular Economy
27
2.2.1 Environmental Benefits
One way to assess the benefits that the circular economy can generate through the
implementation of all those actions that promote environmental sustainability is
through ecosystem services, which are the numerous and varied benefits that the
environment and ecosystems provide to society (MEA 2005). Generally, ecosystem
services are classified into different groups, and these can vary according to different
authors (Constanza et al. 1997; De Groot et al. 2002; Turner and Daily 2008;
Camacho-Valdez et al. 2014) according to their diversity, functionality, processes
and structure. However, the different ecosystem services are classified into four main
groups:
• Supporting services: These are services that support the full range of services
provided by the natural environment, e.g., offering the living space for all living
organisms while maintaining genetic diversity.
• Provisioning services: These refer to any kind of natural goods that humans can
obtain from the environmental system, e.g., food, water, timber, fuels, etc.
• Regulating services: These are the benefits that are involved in balancing the
processes of ecological systems, e.g., regulating air quality and soil nutrients,
controlling pests and external events, etc.
• Cultural services: These include a whole set of non-material benefits provided by
ecosystems, e.g., aesthetic, cultural, historical, inspirational values, etc.
Very few studies address the analysis of the benefits resulting from the application of circular economy globally, except for literature review articles that gather
the main conclusions reached by very specific studies, almost all of them at the
local level. Next, the main benefits of the circular economy from an environmental
point of view are listed: minimisation of the use of natural resources, avoiding
the generation of waste and the emission of greenhouse gases (Albino et al. 2016;
Fraccascia et al. 2017; Paquin et al. 2015).
However, there are some reports that try to quantify at the European level some
of these benefits in terms of greenhouse gas reduction. To assess the environmental
effects of the circular economy, the European Union focuses its attention on the
textile, agri-food and construction sectors. For example, the Cambridge Econometrics & BIO Intelligence Service (2014) estimates that improving EU resource
productivity by 3% would lead to a 25% reduction in greenhouse gas emissions by
2030. On the other hand, a study by Beasley et al. (2014) estimates the benefits
of implementing different measures based on the circular economy in different
sectors. This report estimates that the reduction of food waste would generate a
reduction of CO2 equivalent emissions between 56.2 and 84.3 Mt by 2030. As a
consequence, agricultural production adapted to the demand would generate the
release of agricultural land, representing between 38,070 and 56,970 km2 in 2030.
Other sectors analysed are textiles and furniture. It is estimated that practices
focused on reuse in these sectors can reduce the amount of CO2 equivalent by
approximately 18.4 Mt and 30.7 Mt by 2030. Besides this, the reuse of textiles
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L. Castellet-Viciano et al.
is also estimated to reduce the use of fertilisers and pesticides in cotton production.
The EEB estimates that the amount of fertilisers and pesticides that can be avoided
ranges from 0.58 to 1.02 Mt in 2030.
On the other hand, the Ellen MacArthur Foundation and the McKinsey Center
for Business and the Environment (2015) also carry out an approach to the
environmental impact of the circular economy. In this case, they avoid giving
absolute values and talk about potential greenhouse gas reduction percentages that
the circular economy could produce in the mobility, food systems and building
sectors, which are estimated at 48% by 2030 and up to 83% by 2050. The study
estimates that, among other things, in the automobile and building materials sectors,
land use and the use of water and fertilisers in agriculture, the consumption of
primary materials could decrease by up to 32% by 2030 and 53% by 2050.
Another important piece of information is provided by the European Commission
(2015) on the effects of the implementation of one of the most important Directives
of the first decade of the twenty-first century, the Waste Framework Directive. A
policy review in this area has not been carried out since 1975. This report assesses
the positive effects of preventing a large part of municipal biodegradable waste from
ending up in landfill and of reuse and recycling actions. It is estimated that, thanks
to these actions, the emission of 65,556 Mt of CO2 equivalent could be avoided by
2035.
2.2.2 Social Benefits
Most of the existing studies on the impact of the circular economy at a social level
focus on the estimation of jobs that would be generated. For example, the EEB
report (2014) estimates that thanks to the circular economy 1/6 unemployed young
people could get a job. Cambridge Econometrics & BIO Intelligence Service (2014)
associates a 2% improvement in EU resource productivity with the creation of two
million additional jobs by 2030. In the work of Mitchell and James (2015), which
analyses the social impact of the circular economy in the UK, the authors go further,
and in addition to estimating the jobs that could be generated, they also refer to their
quality, namely medium-skilled jobs, which would compensate for the effect that
industrialisation had on this group of employment. Furthermore, they argue that
the circular economy would enhance job creation in those regions with the highest
unemployment rates, thus equalising regional unemployment disparities.
In contrast, there is very little information on the implications regarding gender,
labour competences, job quality, well-being issues, as well as equity guarantees
(Sehnem et al. 2019). Murray et al. (2017) point out that not including social aspects
from the basis on which the foundations of the circular economy are built, as issues
such as inter- and intra-generational equity, gender, racial and religious equality and
other diversity, financial equality, or in terms of equality of social opportunity are
not addressed or are not addressed in a very clear way.
2 The Environment Value System and Green Circular Economy
29
2.2.3 Economic Benefits
A large part of the literature review by Rizos et al. (2017) focuses the economic
benefits of the circular economy on job creation. Undoubtedly, the generation of
jobs is not only beneficial on a social level, but also on an economic level.
On the other hand, other studies and reports try to connect the impact that
the circular economy can generate through the improvement of the efficiency of
the productive system on GDP. For example, Cambridge Econometrics & BIO
Intelligence Service (2014) estimates that EU GDP can benefit from a 2% to
2.5% improvement in resource productivity; however, any further improvement
in resource productivity would have a net cost to GDP as the abatement options
become more expensive. On the other hand, the Ellen MacArthur Foundation and
the McKinsey Center for Business and the Environment (2015) determine that an
increase in resource productivity of 3% by 2030 in Europe, equivalent to 1.8 trillion
euros, could be achieved through the implementation of advanced technology and
the incorporation of newer organisations in the mobility, food and construction
sectors. It should be borne in mind that these results are indicative, as estimates
are based on assumptions, due to the difficulty of calculation, the uncertainty of the
effects themselves, and the large number of variables that influence GDP.
Perhaps the most tangible effects occur at the micro level with the creation of
value at the industrial level. The creation of value through the reuse of products and
materials together with greater efficiency of the processes that allow for a better
use of resources is expected to generate a reduction in costs in terms of marginal
cost, consumption of raw materials, waste management, and environmental taxes
(Sehnem et al. 2019).
2.3 The Cost of No Action
The current “take-make-use-dispose” system puts at risk the sustainability of
the environment, on which both social sustainability and economic sustainability
depend. Moreover, the fact that the availability of some of these commodities is
becoming very limited has resulted in an increase in the price of raw materials and
their volatility.
When assessing the feasibility of implementing projects aimed at improving
the sustainability of the production and consumption system, it is necessary to
consider non-action as an alternative, i.e., to analyse the costs and benefits of
not implementing the projects. Generally, we tend to assess the positive and
negative aspects of implementing a project or measure, but rarely, if ever, do
we consider that non-implementation may also have repercussions. For example,
the non-implementation of water reuse projects puts at risk the satisfaction of
water demands, generating restrictions in the different uses with their consequent
economic implications, as well as continuing to promote the overexploitation of
30
L. Castellet-Viciano et al.
aquifers and the reduction of the volume of water from superficial sources, as well
as continuing to promote the reduction of the quality of the water bodies as a whole,
affecting the entire ecosystem. Another of the areas most analysed from the point
of view of non-action in recent years is climate change. Perhaps because, despite
the warnings of the impact that it has and will have on the economic, social and
environmental levels, little has been done or is being done to reduce or mitigate its
effects. Hence, the need to emphasise that failure to take action also has a cost.
Obtaining the costs of non-action becomes an instrument that provides relevant
information for monitoring and predicting changes in the condition of the environment. Expressing the cost of non-action in monetary terms (economic costs)
provides a common unit for assessing impacts across sectors, countries and over
time. Thanks to that, they can be compared with the costs of a project or action,
contributing to the justification of projects, or helping in the decision-making
process and choosing between different alternative actions.
Therefore, the inclusion of the costs of non-action in decision-making is essential
to justify appropriate investment policies to achieve the aims of the circular
economy. As these are social and environmental costs that have no market value,
their quantification requires very specific economic valuation tools.
When implementing actions or measures with effects on the environment, it must
be taken into account that in order to measure the effects on the environment it is
necessary to take into consideration the time as a variable. The effects can occur
in the short, medium, or long term, or be different over time. For example, when it
comes to an action whose objective is to replace a raw material with a recycled or
reused material, such as the implementation of a project for the reuse of reclaimed
water to supply crop fields, the effects observed could be different as time goes
by. If the water to be replaced comes from an aquifer, the short-term effects will
basically be the reduction of pressure on the aquifer; however, the most relevant
effects will occur in the medium and long term, as the aquifer is recharged with
water and the natural water balances will be re-established; the quality of the water
in the aquifer, which in coastal areas may have been exposed to marine intrusion
due to low water levels, will also improve; and indirectly the general condition of the
surface water bodies above the aquifer and the ecosystems of the area as a whole will
also indirectly benefit. Therefore, just as the benefits of certain actions or projects
increase over time, non-action or non-implementation of measures based on the
circular economy can have different effects over time and get worse the longer the
time passes.
2 The Environment Value System and Green Circular Economy
31
2.4 Environmental Externalities
2.4.1 Internalisation of Externalities
Decoupling economic growth from environmental degradation is one of the main
challenges that the circular economy aims to achieve. Today, both policy makers and
companies and industries themselves have realised that the environmental degradation generated by the current production and consumption system itself poses a risk
to ensure the viability of their own businesses and economic development in general.
When there is a market failure as a consequence of the divergence between social
costs and private costs, we have what are called externalities. Externalities can be
positive, when a positive effect is not reported as a benefit, or negative, when the
market does not capture the costs of a negative effect. One of the most frequently
occurring types of externalities, and with a negative character due to poorly defined
property rights, are environmental externalities.
The current system of production and consumption results in external costs on
the environment, and therefore on society, that do not impact on the economic
performance of the agent that generates them. Some of these environmental
externalities are the costs in terms of loss of biodiversity and damaged ecosystems,
depletion of terrestrial and marine species and natural resources, or greenhouse gas
emissions that harm human health and enhance climate change. Such externalities
are global and very widespread, but can vary widely at national, regional and
local scales. Taking into account the importance of the environmental impacts
generated by the current linear economic system, some authors have tried to
evaluate the environmental impacts generated by this system in economic terms.
The study carried out by Trucost (2013) estimates that economic activities in the
primary sector generate an environmental impact valued at 7.3 trillion dollars per
year, which represents 23% of global economic production, according to 2009
numbers. A similar approach is taken by Stern (2006), whose work estimates that
the environmental damage generated by greenhouse gas emissions represents 5%
of GDP, while taking measures to reduce this environmental impact would only
represent 1% of annual GDP.
In order to address the environmental impacts generated by the production
system and promote more sustainable actions based on the circular economy, it is
necessary to internalise environmental externalities (Ding et al. 2014; Eidelwein et
al. 2018). The internalisation of externalities consists of a set of public or private
measures that ensure that both the costs and the indirect benefits generated by
a given activity are included in the final price of the goods or services that are
marketed (Ding et al. 2014).
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L. Castellet-Viciano et al.
2.4.2 Methods to Quantify Environmental Value in Monetary
Terms
One of the main limitations to the internalisation of environmental externalities
is their quantification in monetary terms. It is not always easy to identify and
quantify the environmental externalities resulting from a given activity, and even
less in economic terms. In some ways, it is possible to estimate or predict the
number of animals or species that may be affected by a given action or process;
in the same way, it is possible to predict or estimate the generation or reduction
of greenhouse gases that an activity produces/reduces; or the volume of water
that a given activity consumes or saves... but determining the economic value
that this entails is a challenge. Despite the difficulty of quantifying them, there
are different methodologies that allow us to quantify these externalities. Some
of the most commonly referenced methodologies in the literature for valuing
environmental externalities are “willingness to pay”, “contingent valuation”, “life
cycle assessment”, “payments for ecosystem services”, or “setting prices”. These
are key words used in most recent research, which emphasise the quantification and
internalisation of the externalities of infrastructures.
2.4.2.1
Contingent Valuation Method
This method is one of the most widely applied in environmental issues. It is
based on the valuation of the environmental benefits derived from implemented
improvements, depending on the economic amount that potential beneficiaries are
willing to pay or the monetary value they would pay for maintaining it. This value
is obtained directly from those affected through a series of surveys or interviews,
designed to determine the willingness to pay for an environmental benefit, or if
applicable, the monetary value they would be willing to accept as compensation
for environmental damage. In the case of willingness to pay, the interviewer
has to narrow down the respondent’s ideal monetary value for that particular
environmental benefit. This is done by offering an initial amount and increasing
this amount until the respondent gives a negative answer, which will indicate the
overestimate of the value of the environmental improvement, while the answer prior
to the negative one (the highest positive answer) will indicate the underestimate
(Llinares and Romero 2008).
This methodology is a relatively easy way to obtain an economic estimation
of environmental assets, as it allows valuing environmental goods through the
valuation of the user who directly benefits from them.
• The questions should have the following characteristics in order to avoid possible
biases:
• The format should be a dichotomous choice (willing or unwilling to pay).
• The response rate has to be above 70% of the whole sample.
• Interviews should be in a face-to-face format.
2 The Environment Value System and Green Circular Economy
33
• Always ask first whether you are willing to pay, not whether you are willing to
accept.
• The results should be compared with another type of method.
With this, the contingent valuation may have a better chance of truly reflecting
the value estimated by the interviewees, but it would be convenient to support these
results with other types of study, as it may still present doubts (Llinares and Romero
2008).
2.4.2.2
Analytic Multicriteria Valuation Method
Multicriteria Methods are based on Decision Theory (specifically, Multicriteria
Decision Theory), whose main idea is that “economic agents in charge of decisions
do not only focus on a single objective, but also seek to satisfy a series of goals
associated with these objectives” (Romero 1996).
The Analytic Multicriteria Valuation Method, hereafter referred to as AMUVAM,
is one of the most widely used methods in recent years (Martin-Gamboa et al. 2017).
It is composed of the Analytic Hierarchy Process method, referred to as AHP, and
a “pivot” value consisting of activities with a market that can regulate them. The
AMUVAM method tries to collect the Environmental Services that can have a direct
value in the market, to use them as the “pivot” value that will give way to estimate
a monetary value for those Environmental Services that do not have a market and
therefore, need a reference to give a monetary value.
Therefore, from the value of the market services that can be found in a specific
place, we can determine the value of the ecosystem services by using a “Pivot” value
and estimate a relationship for their monetary value (Aznar et al. 2012).
As discussed, the AMUVAM is composed of the AHP and a market pivot value.
The AHP is a “selection of alternatives on the basis of a number of criteria or
variables, which are often in conflict” (Saaty, 1980). However, this method has a
problem, it does not give a direct economic value, hence the need to include a pivot
value. For the application of AHP, a decision-maker is needed, who searches from
a set of alternatives for the one that best suits his or her interests. It also requires
the definition of the criteria to be used to determine which alternatives are most in
line with the decision-maker’s wishes. The different interests of the criteria are then
weighted in order to select the alternatives.
Once all alternatives and criteria are defined, they are compared with the
comparison scale (Saaty, 1980) to obtain “n matrices”, where “n” is the number of
criteria defined above. The result is a matrix that is used to see the weighting of the
alternatives, according to all the criteria and the weight given by the decision-maker.
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2.4.2.3
L. Castellet-Viciano et al.
Demand Curves: Econometric Modelling and Mathematical
Programming
In this section, the construction of demand curves will be described, but focused
on the case study of this work: the price of water and how this intervenes in the
economic valuation of ecosystem services.
For decisions on the uses of water resources in situations of scarcity, it is
necessary to know the economic value of water and how it varies depending on
the intended use. For this reason, if water is a final good, i.e., the users are direct
consumers then it is a final demand (e.g., urban use). On the other hand, if it is
an intermediate good, where the user is a producer, it is a derived demand that is
determined by the final demand (e.g., farmers, industrialists).
The purpose of this methodology is to lay the foundations of a water market
depending on its use and demand, in order to be able to economically value the
ecosystem services linked to water. In order to value it, econometric models and
mathematical programming techniques are used:
• Econometric models: the application of statistical techniques to economic phenomena.
• Mathematical programming: establishes models that try to obtain the optimal
solution according to a set of constraints.
Linear regression models aim to reveal and model the relationship between a
quantitative dependent variable (costs) and one or more factors, which are known as
independent or explanatory variables. The costs of an investment project depend
on different variables, such as storage tanks, length of networks, area (km2 ) to
be protected, number of pumps, remote sensing and monitoring systems, etc.
Consequently, the scalability of the project under study can be explained with a
predictive model.
Knowing how geographical and technical variables influence the formation of
the investment and maintenance cost allows multiple scenarios to be generated, thus
reducing uncertainty in decision-making. In order to validate a predictive model
capable of projecting the costs of any investment project similar to the current one, a
series of basic hypotheses of the model are analysed in order to check the normality
of the residuals, multicollinearity of the variables, independence of the residuals
and homoscedasticity. The normality of the residuals states that the model errors are
normally distributed. If this hypothesis is not fulfilled, it may be because outliers
are found in the sample. Multicollinearity occurs when there is linear dependence
between the independent variables. The multicollinearity of the variables can be
checked by means of the Variance Inflation Factor (VIF). When the VIF is close to
1 it means that there is no correlation between the variables. The independence of the
residuals is given by the Durbin-Watson test. The Durbin-Watson test measures the
degree of autocorrelation between the residual corresponding to each observation
and the previous one. When DW < 1.18 it can be stated that there is correlation,
when DW > 1.4 there is no correlation and when DW takes values between 1.18
and 1.4 the independence of the residuals is inconclusive. Homoscedasticity means
2 The Environment Value System and Green Circular Economy
35
that the error of the variance of the variable is maintained across observations.
Using SPSS, homoscedasticity is tested by looking at the predicted and residual
values on a graph. If no trends in the distribution are observed, the assumption of
homoscedasticity is fulfilled.
2.4.2.4
Travel Cost Method
This method is widely used to value natural parks and, therefore, their ecosystem
services from a recreational point of view. The basic principle is found in the
relationship between the time used to reach the location where the study is carried
out and the time used for their usage and enjoyment, with the money (the real cost)
that is used in the same place, such as the amount of fuel used, the expenditure made
in the natural area.
It could be related to contingent valuation, since it ultimately relates consumer
preferences to the consumer’s willingness to pay. However, there is an important
difference between contingent valuation and the travel cost method: in contingent
valuation the question would be “how much would I be willing to pay...?” or “how
much would I be willing to accept for...?” In the travel cost method, it would be
“how much have you paid for...?” a more true-to-life question.
This methodology also relates to opportunity cost. This is because we not only
count the money, which is the real cost of the services of the natural area, and the
travel and use time, but also the cost of using this time for this activity, as it could
have been used for something else (Llinares and Romero 2008).
This method is often used with the comparison to an existing market to carry out
an economic valuation: the consumption of a good or ecosystem service of a natural
area is linked to the consumption of another marketable or private good. Therefore,
it is possible to have an economic approximation of the ecosystem service to be
monetarily valued.
2.4.2.5
Hedonic Price Method
This method was first presented by Griliches (1971). Starting from an ecosystem
service without a defined market, it determines how the pleasure or discomfort
of consuming this ecosystem service affects the price of goods that are indirectly
affected and for which there is a defined market (Llinares and Romero 2008).
The hedonic pricing methodology starts with the identification of the goods
with a given market that are believed to be affected by the hedonic variable. Once
identified, the percentage of the value of these goods that have been obtained
thanks to this hedonic variable must be calculated. Once this percentage of value
is obtained, the marginal willingness to pay can be calculated.
An example to understand this method would be, in a newly constructed building
we have two types of houses. Both have exactly the same characteristics in terms
of size, rooms, layout, materials and appliances, etc. However, house A has a view
36
L. Castellet-Viciano et al.
of a Natural Park, with the benefits of aesthetics, fresh air, etc. However, house B
has views to a wastewater treatment plant, with the problems that this implies: noise,
bad odour, etc. This difference in external factors, which cannot be given a monetary
value, means that house A has a higher economic value than house B, and in this
way, the percentage of value that this ecosystem service implies in the hedonic price
of the house could be calculated.
2.4.2.6
Choice Experiment Method
The choice experiment method is one of the most widely used methods for the
economic valuation of environmental assets (Brouwer et al. 2009). This technique
consists of assessing and valuing environmental goods by their characteristics and
attributes and probabilistic models are applied to choose from a list of different
scenarios, understanding among them the different characteristics that can be
obtained depending on whether or not action is taken to alleviate environmental
problems. For this, an estimated marginal cost is used that can be converted into
a willingness to pay by users to change the situation of this environmental good
(Glenk et al. 2015).
As can be seen, it is similar to the contingent valuation method discussed above.
The difference lies in the fact that in the choice experiment the respondent chooses
between different scenarios that have different attributes, depending on the form
of action that may or may not be established. Therefore, the surveyor has already
calculated the economic valuation of the ecosystem service with the different
attributes, giving the respondent a choice between them. Normally, the no action
scenario, i.e., the current situation, is compared with various scenarios where action
is taken, but the form and, above all, the availability of the resource varies (more or
less action is taken, depending on the purpose to be achieved).
2.4.2.7
Shadow Prices
The first study related to shadow prices was carried out by Färe et al. (1989) in
order to economically value a negative environmental impact resulting from human
activities. This negative environmental impact is called undesirable output, and it
can be economically valued thanks to the distance function methodology developed
by these authors. This methodology has been widely used by numerous authors in
order to value the environmental impact generated in different fields (Färe et al.
1993, 1998; Yaisawarng and Klein 1994; Coggins and Swinton 1996; Swinton et
al. 1998; McClelland and Horowitz 1999; Reig-Martínez et al. 2001; HernandezSancho et al. 2010). More recently, regarding the water resources management,
Bellver-Domingo et al. (2017) use this methodology to calculate the value that
would be generated by the removal of emerging pollutants from wastewater,
preventing them from reaching the environment.
2 The Environment Value System and Green Circular Economy
37
It is important to highlight that the so-called undesirable outputs analysed in the
different works are considered negative environmental externalities resulting from
any human activity. The calculated shadow prices are an approximation of the value
that could be given to the environmental damage resulting from a given action,
which has not been incorporated into the final price of the goods and services that
have caused it. Among the advantages of this methodology for valuing externalities
through distance functions with respect to other methods introduced previously are
its robustness and the reduced costs compared to the always costly survey processes
and the possible appearance of biases associated with both the questions asked and
the interviewer himself.
2.4.2.8
Cost-Benefit Ratio
One of the methodologies that presents a great potential to be applied in this study
due to its proximity to the topic addressed is the benefit-cost ratio developed by
González-Sanchis et al. (2019). The objective of the study is to analyse the efficiency
and feasibility of forest management in a semi-arid area located in eastern Spain,
between the provinces of Castellón and Valencia. This research takes into account
the water balance of the area, the biomass production, and the reduction of fire risk
as benefits.
To quantify the profitability of the different forest management practices proposed, the benefit-cost ratio is used to obtain an indicator to evaluate the effectiveness and profitability under different scenarios.
The benefit-cost ratio developed in the study is presented below:
MVW · W · 1 − Pf + MVW · Wf · Pf + BV · TB · 1 − Pf + BV · TB · Pf
.BC =
Pf · FEC · BrA + Pf · RC · BrA + MC
where:
• MVW, marginal value of water (A
C/m3 ).
• W and Wf , water availability in the soil calculated considering the percolation
before and after a fire (m3 ).
• Pf , probability of fire occurrence.
• BV, biomass value (A
C/Mg).
• TB, total biomass extracted (Mg).
• FEC, fire extinguishing costs (A
C).
• BrA, area burned (ha).
• RC, restoration costs (A
C/ha).
• MC, management costs (A
C/ha).
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L. Castellet-Viciano et al.
2.5 Conclusions
Today’s society is increasingly aware of the need to implement actions to promote
the change from the current linear model to a circular one. There is a growing
predisposition on the part of policy makers and the productive and industrial sector
to promote and implement actions that facilitate the transition, since this is the
only way to cover the risks in the supply of resources and materials, increasing
the response capacity of the production and consumption system in the face of
anomalies and shortages in the sources of raw materials, as has been seen in
recent years. Many literature references mention the high technological investment
required by production sector to promote the recovery and recycling of materials
and products; however, when the environmental, social and economic costs of maintaining the current linear economic system are analysed, they probably far surpass
those of the actions to be implemented. Therefore, when talking about economic and
financial barriers, emphasis should be placed on the lack of mechanisms to finance
these technologies. One possible way of guaranteeing the financing of this kind of
technology is through the internalisation of environmental and social externalities,
but for this purpose there must be appropriate mechanisms to introduce them into
the cost of the products or services.
The fact that products or services do not internalise the environmental and
social externalities generated along the production and consumption chain does not
encourage the use of recycled materials and prevents recycled materials or products
from competing in price with materials or products from conventional sources.
Thus, one of the ways to support the use of products or services that use recycled
materials is to internalise the external benefits of these technologies and make them
competitive in the market. The internalisation of the external costs resulting from
the environmental impacts generated by the current production and consumption
system through the application of taxes should have an impact on the reduction of
these impacts and also on the increased use of recycled materials, more efficient or
more environmentally sustainable processes, since those products or services that
are not sustainable or less sustainable should have a higher cost due to the taxes
associated with the environmental impacts generated by their production or use.
In this sense, it is necessary to emphasise the need to promote all those policies
and measures that allow the incorporation of positive and/or negative environmental
externalities in products or services, either through taxes, subsidies, support from
the EU Structural Funds or other sources of financing, etc.
We can conclude that from the point of view of the internalisation of environmental externalities there are a number of challenges that need to be addressed
in order to effectively integrate the circular economy into the production and
consumption system. These challenges are mainly: (i) to establish institutional
procedures to promote the internalisation of environmental externalities through the
actors involved; (ii) to establish a common framework of economic instruments
to be applied to economically quantify environmental and social externalities;
2 The Environment Value System and Green Circular Economy
39
(iii) to establish the mechanisms and structures necessary for the integration of
externalities.
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Chapter 3
Circular Economy and Sustainable
Production and Consumption
Arzoo Shahzabeen, Annesha Ghosh, Bhanu Pandey, and Sameer Shekhar
Abstract For a long time, it has been a common, one-way process of using
materials taken from the earth and ending up discarding them as waste. The circular
economy is primarily concerned with the reduction of waste and pollution, the
reuse of products and materials, and the renewal of nature. It is an alternative
model of production, consumption, and disposal that is being proposed as a way
to address both mounting environmental crises and expanding global prosperity.
It is considered a powerful tool for resource conservation and reducing needless
environmental exploitation. Efficient and effective output can be guaranteed through
the adoption of sustainable consumption and production practices. It safeguards
the requirements of future generations while ensuring that human activities do
not exceed Earth’s carrying capacity. The consumption pattern in an economy
determines the growth and success of the economy, which can be improved by
switching to reusable products. In this chapter, we have looked at the theoretical
foundations of the circular economy and their connections to sustainability as they
are currently formulated in the literature. The research also aimed to provide a
concise summary of the circular economy, including its background, possibilities,
management, business opportunities, and metrics. The chapter discussed the gap
between conventional and circular economic systems. Furthermore, the study also
discussed the challenges and limitations of the circular economy at the institutional,
technical, managerial, and societal levels.
Keywords Linear economy · Natural resources · Recycle · Reduce · Reuse ·
Waste
A. Shahzabeen
Mount Carmel College, Autonomous, Bengaluru, Karnataka, India
A. Ghosh ()
Department of Life Sciences, School of Natural Sciences, Central University of Jharkhand,
Ranchi, India
B. Pandey · S. Shekhar
CSIR-Central Institute of Mining & Fuel Research, Dhanbad, Jharkhand, India
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_3
43
44
A. Shahzabeen et al.
3.1 Introduction
Since the industrial revolution, both the growing global population and demand for
natural resources have increased significantly, indicating a rise in natural resource
consumption. As a result of such indiscriminate use, there has been a significant
depletion of our natural resources, and there has been strong speculation that the
resulting environmental damage will exceed the environment’s carrying capacity
in the near future. Additionally, driven by these factors (urbanization, population
bloom, industrialization, and other anthropogenic activities), the rates of global
waste generation have been alarming, and by 2050, the world is projected to
generate 3.4 billion tons of waste per year, a significant increase from the 2.01
billion tons generated annually at present (Kaza et al. 2018). Environmental issues
such as biodiversity loss, air, soil, and water pollution, the depletion of resources,
and unsustainable land usage are increasingly threatening the life-support systems
of the Earth (Rockstrom et al. 2009). To deal with these problems, the circular
economy has gained popularity in recent times. However, there is still a long way
to go in order to make the shift from a linear to a circular economy paradigm,
which will necessitate the introduction of novel insights that will ultimately
result in cutting-edge technology developments that will enable the creation of
environmentally friendly goods and services (Abad-Segura et al. 2020).
The idea of a circular model of production is not a new concept. Boulding (1966)
described Earth as a “closed spaceship” with limited reservoirs of resources, and
humans must discover the significance of being a part of this cyclical ecological
system of production. Other possible sources of inspiration for the notion of a
circular economy include Rachel Carson’s Silent Spring (Carson 1962), the “limits
to growth” argument of the Club of Rome (1970), and the work of eco-economist
Herman Daly (Naustdalslid 2014). In the year 1990, Pearce and Turner (Pearce
and Turner 1990) introduced the concept of a circular economy in their book
“Economics of Natural Resources and the Environment,” using ideas from the
previous studies of Kenneth E. Boulding. It began by looking at the traditional
linear economic system and developing a new economic model known as a “circular
economy,” which was based on the first two laws of thermodynamics. They
developed a conceptual framework, such as the source-product-pollution mode
of the circular economy. However, it is important to note that the concept of a
“circular economy” does not apply to thermodynamics, because no system can be
100% circular (or closed) according to the entropy law (Andersen 2007). Table
3.1 provides a summary of the objectives and conclusions of some noteworthy
investigations published to date.
Initially, the 3Rs were the cornerstones of the circular economy idea, which
includes reducing, reusing, and recycling (Wu et al. 2014), and later, the 6Rs
principle was adopted, which mainly encompasses reusing, reducing, redesigning,
recycling, recovering, and remanufacturing (Jawahir and Bradley 2016). Various
cultural, social, and political systems influenced the distinct evolution of the
notion of a circular economy. In the early 1990s, the circular economy concept
To promote the circular utilization
of agricultural resources
To develop a new system of circular
economy using traditional linear
economic system
To present a multi-sectorial and
macro-meso level framework to
monitor (and set goals for) circular
economy implementation in cities
To review the history of the circular
economy concept to provide a
context for a critical examination of
how it is applied currently
To describes a new tool to ensure
the quantification of circular
initiatives and the method to define
it
2
3
4
6
5
Objective of the studies
To adapt the theoretical circular
economy framework in the field of
agriculture
S.No.
1
Circular economy-related initiatives require integrated bottom-up and top-down
approaches to implementation and evaluation. Critical research gaps observed in
this study include the circular economy concept application to and assessment of
the biological systems (e.g., agricultural industries) and the chemical/biochemical
industry products and value chains
A new Circular Business Model (CBM) visualization tool, which overcomes the
main limitations of the existing models able to explain circular economy concepts
but not to boost its practical implementation in industry. Every industry can use
CBM to find hidden circular possibilities or choose the optimum circular
economy strategy
Conclusions
The gap between circular economy framework and agriculture sector could be
reduced in two ways: (i) by adapting the general circular economy framework to
the agricultural sector’s specificities; (ii) by evaluating how indicators of
agricultural production systems’ circularity support decision-making
Publicity and education should be strengthened to promote the concept of
ecological values and green consumption in the whole society like choosing less
packaging or recyclable items, rather than a one-time item to minimize waste
generation.
Traditional linear system could be used to develop a new circular economy which
uses the first two laws of thermodynamics. Developed a new conceptual
framework for circular economy, such as the source-product-pollution model.
Four economic functions of the environment can be identified: amenity values,
resource provision, waste and emission sink, and life-support system
Framework encompasses circular economy key concepts, such as flexibility,
modularity, and transparency. It is structured to include all sectors in which
circular economy could be adopted in a city
Table 3.1 Highlights of some of the important studies published on circular economy till date
(continued)
Bianchini et al.
(2019)
Winans et al. (2017)
Cavaleiro de Ferreira
and Fuso-Nerini
(2019)
Pearce and Turner
(1990)
Jun and Xiang (2011)
References
Velasco-Muñoz et al.
(2021)
3 Circular Economy and Sustainable Production and Consumption
45
To describe the foundations for
establishing a circular in small and
medium enterprises in India
To present the principles of
sustainable manufacturing to serve
as the basis, and to provide the
technological elements to ensure
the creation of a circular economy
To describe the role of soil and land
management in a circular economy
8
10
9
Objective of the studies
To map methodological
developments regarding circularity
metrics for products and services
S.No.
7
Table 3.1 (continued)
The circular economy is highly dependent on the functioning of soils and land for
the production of food and other biomass. Earth diminishing potential for
resource production, due to a range of reasons, is leading to resource scarcity. The
management of the resources, land, and soil is thus necessary to make a circular
economy successful
6R-based technological elements, which encompass reusing, reducing,
redesigning, recycling, recovering, and remanufacturing are identified and shown
as essential ingredients for achieving economic growth, environmental protection,
and societal benefits
Conclusions
The circular economy is expected to be the optimal pathway to sustainable
development. A good circularity metric should measure how circular strategies
contribute to sustainable development without shifting the burden from reduced
material consumption to increased environmental, economic, or social impacts
The circular economy faces institutional, technical, managerial, and societal
challenges
Breure et al. (2018)
Jawahir and Bradley
(2016)
Sohal et al. (2022)
References
Corona et al. (2019)
46
A. Shahzabeen et al.
3 Circular Economy and Sustainable Production and Consumption
47
was introduced into German environmental policy with the goal of addressing
challenges associated with input materials and natural resource utilization for longterm economic growth (Geng and Doberstein 2008). Since the beginning of the
twenty-first century, China has pursued comprehensive circular economy policies,
such as resource-oriented, production-oriented, waste-oriented, use-oriented, and
life cycle-oriented. In China, the notion of circular economy is utilized as a tool
for profitable product creation, the development of new technologies, the updating
of equipment, and the improvement of industrial management (Yuan et al. 2006). In
the United Kingdom, Denmark, Switzerland, and Portugal, the circular economy
concept is mostly applied to waste management, although in certain regions of
Korea and Japan, an increase in consumer responsibility for material and waste
usage has been seen for its application. In North America and Europe, enhancing
3Rs initiatives (reduce, reuse, and recycle) and conducting product-level life cycle
analyses have been the primary motivation behind the application of the circular
economy concept (Winans et al. 2017).
3.1.1 Why Circular Economy?
We use materials obtained from the earth and, at last, throw them away as waste—
the process is direct. The circular economy mainly focuses on the elimination of
waste products, using materials to their full value, and their subsequent renewal.
By these methods, it boosts economic growth. The circular economy is the model
for sustainable use of nature and its products by eradicating toxic substances from
nature. The circular economy focuses on corporate and industrial processes for
the natural development of products. It promotes the idea of conserving natural
resources by combining science and technology with societal policies. In today’s
time, circular economies can be understood as a universal system that flows in a
circular loop with multiple knots (Cavaleiro de Ferreira and Fuso-Nerini 2019). The
circular economy provides structural support to the combined existing methods and
plans in a systematic way, which helps in achieving low consumption of resources
and low production of pollution with a high circulation rate. Essentially, it promotes
the idea of preserving the ecosystem’s balance and preserving the environment and
natural resources for future generations, so that our children and grandchildren can
benefit from the resources provided by nature. The main component of a circular
economy is related to the usage of products and the energy flow of the products
in an ecosystem. The most important is a closed-loop ecosystem in which waste is
nearly zero because every residual created from waste is used for product renewal
or to create new products from its segments.
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3.2 Principles of Circular Economy
• Elimination of pollution and waste: The elimination of waste and pollution is
the primary tenet of the circular economy. Because the resources on our planet
are limited, a take-make-waste economic system cannot function over the long
run. The circular economy paradigm blends scientific principles with natural
cycles. Waste that is produced can be recycled with the aid of contemporary
technology. Rather than piling up, generated trash should be incorporated into
subsequent manufacturing cycles. Companies were able to develop practical
circular economy strategies within the industrial ecology framework due to
technological advancements, design, and recovery processes (Hobson 2016).
This encouraged a decrease in raw material consumption and waste production,
which has positive environmental and financial effects for businesses (Andersen
2007).
• Circulation of products and raw materials at their highest level of values: Circulating goods and materials at their peak utility value is the circular economy’s
second tenet. Maintaining materials in use implies using them either as a product
or, when that is no longer possible, as components or raw materials. Nothing is
wasted in this manner, and materials and goods maintain their inherent value.
There are numerous ways to maintain the circulation of goods and resources,
and it can be useful to consider two primary cycles: the technological cycle and
the biological cycle. In the technological cycle, products are reused, repaired,
remanufactured, and recycled, whereas biodegradable materials are returned
to the ground in the biological cycle via procedures such as composting and
anaerobic digestion.
Prolonging replacement is one method of extending the lifespan of an item when
it is owned. Replacement behavior can be influenced by a wide range of elements,
including customer attitudes and situational circumstances (Van Nes 2016). This
may be caused by product development strategies (layout for repair and upgrade,
etc.) or a strong product connection. If a customer returns a used item, allowing
the product, parts, or materials to be recirculated, it is one way for businesses to
realize value from those products (Wilson et al. 2017). Its highest degree of value
is maintained if the object continues to function as a whole. As an alternative,
users might sell, generally through a third-party website or a used-goods store.
Last but not least, individuals could promote reuse by donating unwanted goods
to charities or friends and family or by sharing them on networks. In a circular
economy, material recycling is the lowest degree of value preservation, although in
specific product categories and situations it might be significant. In these situations,
correct disposal and recycling are required. Anaerobic digestion, taking products to
a certified recycling facility, or specifically avoiding throwing them in the regular
trash can be included in this.
• Room for nature to thrive: Increased resource consumption is putting a strain on
the environment and depleting its natural resources. Ecosystems are under stress
3 Circular Economy and Sustainable Production and Consumption
49
because of human activities, which have detrimental effects on biodiversity and
the services ecosystems provide (such as adapting to and mitigating the effects of
climate change, degrading pollutants, preventing soil erosion, and increasing soil
fertility). Furthermore, the adoption of improper disposal of resource residues
in the waste phase of product life can have serious consequences for the
environment. Adopting a circular economy, encouraging the efficient use of
resources and preventing the production of problematic residue, is in response to
the rising environmental stress resulting from different anthropogenic activities
such as mineral resource extraction, land use and degradation, the disposal of
waste materials, and the scarcity of land and resources (Breure et al. 2018). We
must resort to creating natural capital rather than perpetually destroying nature.
Therefore, regeneration of nature is the circular economy’s third major goal. A
circular economy, as opposed to the concept of “take-make-waste” in a linear
economy, supports natural processes and creates more space for nature to flourish
(Fig. 3.1). By adopting a more circular model for economic activity, we may
redirect resources from extraction to renewal. The goal of the circular economy
is to completely eliminate waste by reusing and recycling everything possible.
Long-term, effective (re)use of resources is central to the circular economy.
In this light, the (renewable) biobased materials’ utilization as manufacturing
elements is considered crucial to the circular economy (De Baan et al. 2013).
However, possibilities for applying biobased resources in various ways could
lead to increased competition for scarce land.
Fig. 3.1 Linear v/s Circular economy
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3.3 Circular Economy in the Agricultural Sector
In order to meet the demand for food in 2050, studies show that agricultural
production around the world needs to rise by 70% (Aznar-Sanchez et al. 2020). In a
typical business scenario, there are two ways to reach this goal: either by expanding
the amount of land used for agriculture, which in 2017 accounted for about 37%
of the total available surface (FAOSTAT 2020), or by increasing production in
the areas that are already being farmed, which could increase the amount of land
used for agriculture by up to 38% while increasing global water consumption
by 53% (Alexander et al. 2015). Therefore, such rising agricultural demand has
imposed a disequilibrium between production and environmental preservation,
concomitant with a significant obstacle to the sustainable long-term management
of natural resources (Rufi-Salis et al. 2020; Vanhamäki et al. 2020). For these
reasons, the concept of the “circular economy” has emerged as a viable option
for maximizing economic output while simultaneously minimizing the detrimental
effects of agricultural activities on the environment (Stegmann et al. 2020).
Resource efficiency is the core axis of decision-making and economic practices,
as stated by Canales et al. (2019), in order to guarantee higher added value and
keep resources inside the production system for as long as possible. To maximize
productivity in circular agriculture models, it is important to optimize procedures so
that resources are used as efficiently as possible and no unnecessary by-products are
created (Sherwood 2020).
Sustainability is a key concept when addressing the adoption of a circular
economy in agriculture. Since the circular economy strives to promote sustainable
development by fostering economic and social prosperity and environmental protection through the prevention of pollution (Burgo-Bencomo et al. 2019), instead
of being a subsidized industry, circular agriculture should become a cornerstone of
the economy to ensure its long-term viability (Bos and Broeze 2020). Additionally,
it must guarantee the sustainability of biodiversity and production efficiency
in its agroecosystems over time, thereby ensuring environmentally sustainable
practices (Jun and Xiang 2011), and generally contribute to social sustainability
(Burgo Bencomo et al. 2019) by ensuring food security, alleviating poverty, and
strengthening living conditions and public health. Last but not least, it is commonly
acknowledged that circular agriculture requires regenerative practices, which are
considered strategies that preserve and improve ecological services (Morseletto
2020). As circular production models are established in agroecosystems, agriculture
must advance to include regenerative technologies that seal nutrient loops, reduce
leakage, and enhance each loop’s durability in terms of its value (Morseletto 2020).
However, adopting circular models in agriculture necessitates a paradigm shift in
the production and use of agricultural goods. Value chains must be reorganized to
improve local product marketing and create business models that allow materials to
cascade until they are assimilated into the ecosystem, preventing the loss of priceless
nutrients. Consumers must adopt a more environmentally conscious mindset and
3 Circular Economy and Sustainable Production and Consumption
51
support the growth of this type of business model through their purchase decisions
(Velasco-Munoz et al. 2021).
3.4 How Circular Economy Supports Sustainable
Development
Since the circular economy and sustainable development are related ideas, circular
economy might be used as a useful instrument to support sustainable development
(Corona et al. 2019; Millar et al. 2019; Skvarciany et al. 2021). The circular
economy’s guiding principles have numerous advantages for the environment and
society, including limits on energy use, waste production, and resource use, and
they directly support the possibility of sustainable growth (Fellner et al. 2017;
Gregson et al. 2015). As a result, the circular economy might be a powerful
tool for resource conservation and reducing needless environmental exploitation.
The following are some instances of how the circular economy can help advance
sustainable development.
3.4.1 Cradle-to-Cradle
In 2001, Michael Braungart and William McDonough developed a new method
based on the concept of eco-effectiveness in manufacturing in which everything is
intended for reuse (Braungart and McDonough 2001). All products should be easily
disassembled into their component parts for reuse in the creation of new items. The
primary objective is to manufacture components that can be retrieved and reused.
They were attempting to reduce waste to zero.
Cradle-to-cradle design, positive lists, intelligent materials pooling, and other
techniques contribute to eco-effectiveness and the development of cycle material
flow metabolisms (Van Dijk et al. 2014). Eco-effective material flow systems not
only enable materials to keep their position as resources but also enable a continuous
accumulation of knowledge that serves as the foundation for real upcycling by
creating a coherent network of information flows among participants in the material
flow chain (Berndtsson 2015). This ongoing accumulation of knowledge is a
constant source of added value for goods and services and establishes a positive
link between environmentally friendly industrial systems and long-term economic
development. Beyond achieving zero emissions, the goal is to use resources in a way
that preserves or boosts their value and production over time. Coherent biological
and technical metabolisms ensure the availability of raw materials for industrial
processes. Industry performs material recycling as part of its technical metabolism,
which results in more jobs and economic activity (Braungart et al. 2007). Ecological
processes inside the biological metabolism recycle materials, which leads to the
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renewal and replenishment of natural systems. The favorable association between
biological metabolism and natural system health is the cornerstone for a constructive
recoupling of the interaction between ecology and economy.
3.4.2 Performance Economy
In 1981, Stehle and Rede-Mulvey proposed that closed loops favor the reuse, repair,
and remanufacture of goods over the manufacture of new goods and have positive
effects in terms of job creation, economic competitiveness, resource savings, and
preventing waste. This was part of a study that looked at the possibility of
substituting manpower for energy. The circular economy strives to accomplish
the following four basic goals: the extension of product life; the provision of
services rather than goods; the development of a “functional service economy”;
and a performance economy (Stahel 2020). This concept suggests that the circular
economy needs to function within a framework in order to be efficient.
3.5 Challenges in Circular Economy
In recent years, scholars and institutions have widely investigated the concept of a
“circular economy” as a possible approach to improving the sustainability of our
economic system. Reuse, repair, and recycling are becoming increasingly important
in a variety of industries. At the same time, businesses are becoming more interested
in this new economic model (Elia et al. 2017). However, the framework for the
circular economy still does not provide any precise criteria to support the selection
of actions, nor does it provide any explicit guidance on how to put the concept into
effect. In spite of all of these obstacles, the concepts that are implemented by the
circular economy offer a great deal of potential (Bianchini et al. 2019). It enables a
synthesis of environmental stewardship and commercial concerns by asserting that
value creation is still possible within robust planetary constraints. Proponents of the
circular economy, who drew inspiration from ecological principles, have turned the
concept’s many advantages into tangible market niches (Whicher et al. 2018).
As the idea still has some problems, it is important to study it from both an
academic and a practical point of view (Merli et al. 2018) to understand how the
ideas and principles of circular economy can be used in modern business practices.
Even though the circular economy is mostly about managing waste, it is important
to think about the following things when getting ready to use it:
3 Circular Economy and Sustainable Production and Consumption
53
3.5.1 Waste Treatment Infrastructure
In addition to the appropriate regulations, adequate personnel and infrastructure are
very important components in order to achieve the prospects of the circular economy
concept, in which the amount of money, work, and time that are required to prepare
everything that is necessary are of utmost significance (Van Buren et al. 2016). For
example, in the world’s lands, rivers, and oceans, nearly one-third of all plastics are
left behind because they are not collected by a waste management system and end
up as litter (Rosenboom et al. 2022).
This challenge is especially acute in developing countries since those countries
usually lack sufficient infrastructure for garbage handling (Nnorom and Osibanjo
2008). China, Indonesia, the Philippines, Thailand, and Vietnam account for more
than half of all plastic litter; thus, enhancing waste management and recycling
infrastructure in these nations might significantly reduce the amount of plastic that
enters our protected environments.
3.5.2 Convenience-Oriented
Recent studies on the circular economy have shown that cultural hurdles, notably a
lack of user or customer acceptance, are a substantial impediment to the spread of
so-called “circular” business models. Johnson (2013) suggests adopting techniques
like bringing linen bags to the grocery store and buying rice, beans, and other staples
from bulk bins to live a waste-free life. The study concluded that there is more
plastic garbage today than there was in the 1960s when it compared current plastic
consumption trends with those of the time (Johnson 2013). Before people use a lot
of single-use, disposable plastic products and packaging, there needs to be a change
in how people live (Müller and Schonbauer 2020).
3.5.3 The Current Recycling Technology
From a recycling standpoint, closed-loop recycling is severely hindered by the
complexity of the products and the variety of the waste. The majority of waste
is made up of mixtures of several different materials, making it impossible to
recycle them without first separating them, which is frequently not yet practicable.
Additionally, a variety of contaminants may make a material more difficult to
recycle, depending on the recycling technology. Since there are lengthy supply
chains, accurate information is needed but is currently impossible to obtain. The
phase of sorting is crucial to closing the material loop from a recycling perspective
(Karell and Niinimäki 2019). According to the sorting perspective, automation is
seen as a necessary future development because hand sorting is unable to do so at
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this time with the required efficiency and precision. The internal issues raised by the
experts are related to the state of technology today. Recycling experts concur that it
is too soon to provide explicit instructions to designers and sorters because chemical
recycling technologies are still in their infancy (lab or pilot) (Gloeser-Chahoud
et al. 2021). Only 2–3% of recycled plastics are transformed into goods with the
same or comparable level of quality; the majority of recycled plastics are simply
shredded and reprocessed into lower-value uses, such as polyester carpet fiber. This
is mostly due to the limitations imposed on the methods by which plastics can be
characterized according to their chemical composition and cleaned of additives. In
order to encourage makers of consumer goods to make use of recycled plastics, we
require improved recycling technology that is capable of preserving the material’s
quality and purity (Awasthi et al. 2022). When this technology is implemented on
a broad scale, we will be able to begin reclaiming the economic worth of plastics,
which will encourage the recycling and recovery of these materials.
3.5.4 The Business Frameworks
The global population is projected to surpass 9.5 billion by the year 2050, with a
significant decrease in the number of people living in poverty compared to today,
which means that a lot more people have an interest in purchasing a lot more
goods. Developing countries like China, Brazil, and India are the main concern here.
This is a huge step forward for human development, but it poses a serious risk to
the health of our planet unless the companies that manufacture and trade goods
can completely reform the way they conduct business. Companies should consider
recovery and recycling when designing new products. For example, if manufacturers
of lithium-ion batteries for smart phones developed their goods with identical
chemical compositions, it would make it possible for more recycling since recyclers
would be able to standardize their procedure (Mossali et al. 2020). This would
enable more recycling. Instability, such as international conflict implementation,
requires ensuring programs match the local context and including the political will
to translate development programs into long-term, sustainable practices.
3.5.5 Energy System Transformation
There are many obstacles standing in the way of effective mitigation and sustainable
development (Fatimah et al. 2020), and the first and most important is ensuring
that people and policymakers learn from scientific and factual evidence and modify
their perspectives and current consumption patterns accordingly (Maitre-Ekern and
Dalhammar 2019).
3 Circular Economy and Sustainable Production and Consumption
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3.6 Challenges to Implementing Circular Economy in India
India has one of the fastest-growing economies, and it is expected to become the
major economy with the fastest growth rate (Sharma 2021). Coupled with rising
household incomes, this strong economic growth has led to more spending by
consumers, which is expected to reach USD 4 trillion by 2025. With 1.3 billion
people, or 18% of the world’s population, living on only 2.4% of the earth’s surface,
India is poised to face significant resource constraints (Chawla and Kumar 2022).
India must start a model of development that is positive, includes everyone, and is
environmentally sustainable (Akadiri and Adebayo 2021). There is more demand
for land, soil, water, and materials mined from the earth. Between 1970 and 2010,
India got about 420% more of its raw materials from the ground (Sharma 2021).
India depends on the international market to get access to important resources
like rare earth minerals and other things because its reserves are shrinking and it
can’t get them any other way (Verma et al. 2022). The key to leading this change
toward building a low-carbon, resource-efficient economy is to find ways to use the
circular economy. The way India’s manufacturing sector has grown in the past isn’t
compatible with the planet’s ability to provide and replenish resources (Dey et al.
2022). Also, the traditional approach to a linear economy creates a lot of waste at
all stages of a product’s life cycle. A circular economy based on sharing, leasing,
reusing, repairing, refurbishing, and recycling can help decouple economic growth
from resource use. This is done in a (almost) closed loop to keep as many resources
from going to waste as possible.
There is huge potential for the circular economy in India. The estimated size of
the recycled polyethylene terephthalate (PET) business in India is $400–550 million.
According to the National Chemical Laboratory and PET Packaging Association
for Clean Environment, India has a 90% recycling rate of PET, which is higher than
Japan’s (72%), Europe’s (48%), and the United States’ (31%) (Singh et al. 2022).
PET waste in India is recycled by the organized sector (65%) and the unorganized
sector (15%) and reused at home (10%). However, there are various difficulties in
fully implementing circular economy in India.
A circular economy has global issues, such as uncertainty in product supply,
quality, and return time. However, these issues are exacerbated in India due to the
extended life and inadequate maintenance of the products. The first technical stage
in a circular economy after product collection is the disassembly of used goods,
which presents a significant challenge (Rejeb et al. 2022). Unfortunately, a lot of
study has been done on the simplicity of assembly, and as a result, various tools and
approaches for cost-effective assembly have been developed (Dey et al. 2021). The
design for disassembly study has also begun, but the findings are not yet developed
enough for industry use (Pervez 2022).
The circular economy faces institutional, technical, managerial, and societal
challenges (Sohal et al. 2022). The role of the government or government agencies
is crucial to easing the challenges. The government must prepare for infrastructure
needs, build it, and, if necessary, invest in technology development. Important
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choices include the number and location of recycling facilities, the usage of recycled
materials, etc. (Aarikka-Stenroos et al. 2021). In India, the majority of the designated or authorized waste electrical and electronic equipment (WEEE) recycling
facilities are inoperable. However, the unorganized sector recycles a significant
volume of WEEE (Jeyaraj 2021). With the right technology, the idea of urban
manufacturing should be investigated. The lack of legislation, proper enforcement of
legislation, and uncertain future legislation are important governmental challenges
leading to a lack of top management commitment at the industry level (Bhatia and
Jakhar 2021).
At the planning stage, the government should not undermine the importance of
technology creation, particularly indigenous technology. Technological challenges
are huge in the recycling sector if recycling is to become socially acceptable,
environmentally friendly, and economically viable. The government should plan
proper buyback laws that clearly mention the collection, refurbishing, remanufacturing, recycling, and disposal methods for the product. This may force businesses
to partner with the government for recycling technology development. There is a
scarcity of circular economy managers and advisors who can plan reverse logistics
or integrated logistics activities. Even developed countries like Germany are facing
a human resource crunch in this sector (Manniche et al. 2017). India can take
the lead if there are proper technical courses in this sector. Proper courses can be
designed for all three tiers of technical education. Two important social challenges
are the lack of awareness and the lack of public pressure. Additionally, the public
needs to be made aware of the unscientific disposal of CFLs, LEDs, WEEE, and
other items as municipal waste. To avoid creating obsolete plans and wasting public
money, government authorities should be well aware of the latest technologies and
possibilities for recycling hazardous items.
To develop and implement circular economies for various sectors, the government should bring together various stakeholders, including non-profits, social
scientists, and technology professionals. The benefits of a “circular economy” must
be considered in terms of both environmental and social as well as economic
benefits.
3.7 Limitations of Circular Economy
The circular economy is a synthesis of scientific and semi-scientific concepts
(Korhonen et al. 2018). Circularity has over 300 definitions; therefore, it means
various things to different individuals (Kirchherr et al. 2017). Policymakers,
enterprises, business consultants, business groups, and business foundations have
developed and used the theory and its implementations (Korhonen et al. 2018).
Circular economics research communities differ greatly (Korhonen et al. 2018).
The circular economy is fragmented conceptually (Blomsma and Brennan 2017)
and lacks paradigmatic strength (Inigo and Blok 2019). The circular economy is
a new way of manufacturing and using things in industry (Korhonen et al. 2018).
3 Circular Economy and Sustainable Production and Consumption
57
It’s a multiplicity (Corvellec et al. 2020), an umbrella notion that excites people
since it can address many problems. When put into practice, individuals have doubts
about what it implies (Blomsma and Brennan 2017). Circular economy has many
connotations, which may be why it’s popular (Velis 2018), but it’s hard to explain.
“Circular economy” ignores many facts. It ignores the thermodynamic concept
that one cannot create or destroy matter; consumed resources must end up in
the environmental system; they can only be converted and dissipated (Giampietro
and Funtowicz 2020). A future without waste, closed material loops, and infinite
recycling is impossible. Material characteristics and manufacturing and reprocessing processes limit material loop closure (Velis and Vrancken 2015). Dissipation,
pollution, and material wear limit the circular economy (Parrique et al. 2019).
The circular economy doesn’t fully address waste’s complexity (Mavropoulos and
Nilsen 2020) and underestimates the difficulties of connecting waste streams to
production and substituting secondary goods for primary goods (Zink and Geyer
2017). Waste as a resource may increase demand rather than reduce waste volumes
(Greer et al. 2021). A true circular economy approach should take massive stocks
and secondary materials into account (Mavropoulos and Nilsen 2020).
Supporters of the circular economy and circular business models have been found
to have a simplified view of consumption as buying and recycling (Casson and
Welch 2021), of citizens as consumers, and of consumers as users (Hobson 2020).
This means that citizens are expected to accept or reject practices that designers,
engineers, economists, and policymakers have made for them (Hobson 2016).
Circular strategies also don’t take into account the large amounts of used materials
and objects that are stored in homes, businesses, and infrastructures (Fellner et al.
2017). The circular economy is a way of doing business and doing research that
focuses on flows instead of stocks. And yet, the potential rebound effect, also called
Jevon’s paradox, is an unsolved problem for the circular economy. This is because
efficiency improvements at the level of individual products are offset by a rise in
consumption and use of materials (Schroder et al. 2019). Eventually, these effects
could be especially noticeable in developing economies (Zink and Geyer 2017).
Also, the way goods move around may keep hazardous substances in the economy
that should be phased out, which would increase the spread of dangerous elements
(Johansson et al. 2020).
Circular economic techniques have been used without explicit system constraints (Inigo and Blok 2019). Its technocentric view bridges a gap between
a comprehensive approach and end-of-pipe strategies that focus on growth and
competitiveness rather than social and environmental concerns (Friant et al. 2021).
Policy instruments are offered to get things moving, not to stop the linear economy.
In the waste industry, implementation attempts adopt a top-down approach that
favors a single, centralized waste treatment technology, ignores how hard it is to
anticipate the future, and makes it difficult to adapt. Unknown system boundaries,
the unpredictability of the waste industry, and imprecise governance make it
impossible to evaluate, appraise, and enhance economic circularity (Schroder et al.
2019). This increases the possibility of less-than-ideal practices (Webster 2013) and
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makes it difficult to determine what type of circular future is being built (Volker et
al. 2020).
A linear business model is validated when a certain number of products or
services are sold; a circular model is validated when recirculated products are sold
(Linder and Williander 2017). Technical barriers include insufficient technology
or a lack of technical support and training; economic barriers include high initial
costs or uncertain returns and profits; institutional and regulatory barriers include
a deficient legal system or an inadequate institutional framework; and social and
cultural barriers include consumer rigidity. Companies lack the skills needed to
adapt innovative business models for the circular economy (Pieroni et al. 2021),
so the concept is rarely implemented (Khan et al. 2021).
The circular economy promises “green growth” and the decoupling of economic
and environmental growth. Building circular material flows is considered by some
as a way to decouple but not as an objective in itself (Blum et al. 2020). Circular
economy and sustainability are often confused, despite the latter’s comprehensive
nature. The dubious conceptual link between the two conceptions has yet to be
adequately described (Millar et al. 2019).
There is a clear need for conceptual coherence about definitions, plans, implementations, and modes of evaluation before the circular economy can become
mainstream and move beyond the realm of sustainability and circular economy
professionals. This is because, in the absence of coherence, the expansion of
new knowledge could be obstructed by deadlocked debates or collapse entirely
(Kirchherr et al. 2017).
3.8 Recent Initiatives in Circular Economy
In a large country like India, 1.2 billion people live in urban areas. Together, they
make about 62 million metric tons of municipal solid waste (MSW) every year. By
2030, this amount should reach 165 million metric tons per year (Cheela et al. 2021).
Because of this, the already huge amount of greenhouse gas (GHG) emissions from
municipal solid waste (MSW) is expected to double by 2030, adding up to 41 million
metric tons of CO2 emissions (Sharma and Sinha 2023). The NAMA (Nationally
Appropriate Mitigation Actions) Support Project (NSP), “India—Waste Solutions
for a Circular Economy,” has the goal of achieving a low-carbon transformation
of the Indian waste sector. This will be accomplished by increasing and de-risking
investments as well as strengthening the regulatory framework. This will ensure
uptake of the Reduce, Reuse, and Recycle concept as well as leverage the strengths
of the informal recycling sector. In addition, the NAMA Support Project (NSP)
makes it easier to carry out extended producer responsibility (EPR) by providing
channels that promote the coordinated engagement of a variety of stakeholders
(Khatri-Chhetri et al. 2021). The project is expected to result in direct GHG
emission reductions of more than one million metric tons during project execution
3 Circular Economy and Sustainable Production and Consumption
59
and approximately seven million metric tons cumulatively 10 years after project
completion.
AAKAR Innovations is the sole manufacturer of entirely compostable and
biodegradable sanitary napkins. Access to sanitary napkins is crucial for the
social inclusion of women, and the biodegradable design eliminates the enormous
environmental impact of commercial plastic pads. They are also attempting to
increase awareness about Menstrual Health Management (MHM) and intend to
educate communities about the significance of feminine hygiene. Women are also
empowered during the manufacturing process, which takes place in villages across
India and Sub-Saharan Africa (Zhongming et al. 2021).
PlastiCircle, which is funded by the European Union’s Horizon 2020 research
and innovation program, is introducing advanced techniques for garbage collection,
transportation, sorting, and recycling with the goal of converting plastic packaging
waste into valuable products (Roche Cerasi et al. 2021). They are developing
smart containers to boost the collection rate of plastic rubbish, cost-effective waste
transport systems linked to IoT cloud platforms, breakthrough optical sorting
technologies to improve sorting, and innovative recycled plastic commodities with
added value. They are also attempting to redefine business ideas and promote replication of recommended solutions through training and awareness-raising actions
for individuals, institutions, and private businesses. They are doing so throughout
Europe, most notably in their three pilot cities: Alba Iulia, Romania; Valencia,
Spain; and Utrecht, the Netherlands (Habek and Villahoz 2018).
The German government has set a target of 15 million electric vehicles on the
road by 2030 in order to meet its climate goals (Sun et al. 2020). Consequently, the
growth of electromobility will continue to accelerate over the next few years. The
demand for lithium-ion batteries for the vehicle’s drive system (traction batteries) is
increasing as the number of electric vehicles increases. Since lithium-ion batteries
are a crucial component of electric vehicles, it is becoming increasingly important
that these batteries are produced, utilized, and recycled in an environmentally
responsible manner. The primary objective of the Battery Pass project is to
contribute to an internationally accepted battery passport by the end of 2024 (Zhao
et al. 2021). The project encompasses content-related and technological standards,
cooperation with stakeholders, demonstration, and analytic benefit evaluation. The
creation of scientifically sound material, co-created by industrial partners and
approved by actors in civil society, will maximize acceptability and benefit. The Battery Passport promotes the circular and sustainable management of vehicle traction
batteries by providing a digital infrastructure for the documentation and exchange
of fundamental information and up-to-date technical data (Schaarschmidt et al.
2022). In particular, statistics that exhaustively characterize the sustainability and
accountability of the supply chain are documented, including the GHG footprint,
working conditions in raw material extraction, and battery condition determination.
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3.9 Conclusions
By 2050, the annual amount of waste produced globally is projected to increase
dramatically, from 2.01 billion metric tons per year to 3.4 billion metric tons per
year. Loss of biodiversity, air, soil, and water pollution, resource depletion, and
unsustainable land use are all increasing threats to Earth’s ability to sustain life.
The concept of a “circular economy” may prove to be an efficient method of waste
disposal. The minimization of waste and the maximization of resource utilization are
essential tenets of this system. It explains how we can protect our natural resources
by implementing a set of social and economic policies in tandem with advances
in science and technology. Principles of the circular economy include reducing
resource use, waste production, and energy needs, all of which have positive effects
on the environment and society. The agricultural industries’ adoption of the circular
economy appeared to be a promising one to seal nutrient loops, prevent leakage, and
raise the value of each loop. Circular systems, such as cradle-to-grave and performance economies, have a lot to offer the cause of sustainable development, and this
is brought to light by the connection between the circular economy and sustainable
development. Waste treatment facilities, recycling technology difficulties, a profitdriven corporate model, and other obstacles all stand in the way of a more circular
system. There are still problems with the circular system paradigm. It’s impossible
to conceive of a world without garbage, closed material loops, and endless recycling.
Considering the intricacy of waste, the circular economy falls short. However,
with the goal of creating a more sustainable and environmentally friendly society,
many new circular system-based projects have been launched, including the NAMA
Support Project (NSP), AAKAR, and PlastiCircle. Furthermore, the government
should work with non-profit organizations, social scientists, and technology experts
to expand opportunities for the implementation of the circular economy concept in
various commercial and domestic sectors, taking into account the environmental,
social, and economic benefits of such a paradigm.
Acknowledgments AS is grateful to the Head of Department of Botany, Mount Carmel College
(Autonomous), Bengaluru, India. AG is thankful to Head of Department of Life Sciences, Central
University of Jharkhand, Ranchi, India. AG is also thankful to Department of Science & Technology, INSPIRE, India, for providing financial assistance in the form of DST-INSPIRE Faculty
Fellowship. BP and SS also acknowledge the Director, CSIR-CIMFR, Dhanbad, Jharkhand, India.
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Chapter 4
Green Human Resource Management
and Circular Economy
Abhay Punia, Ravindra Pratap Singh, and Nalini Singh Chauhan
Abstract The term “green human resources management” refers to the application
of human resources management techniques to support environmentally sound
behaviour and heighten employee dedication to environmental sustainability. The
circular economy, green human resource management, and the push for “zero
waste” have all received a lot of attention in the previous 10 years as major
approaches to addressing environmental challenges. Furthermore, without being
impacted by outside variables like market demand, competitor commitment, or
technical support for circularity, green human resource management helps the move
to a circular economy. Business is crucial to this change, and an increasing number
of organizations have made sustainability commitments that include waste reduction
goals. The various green human resource management techniques, including green
hiring, green training and engagement, and green performance management and
rewarding, all have a unique impact on an organization’s success. Tools for
sustainable consumption and production have been cited as both supporters of
circularity and the accomplishment of sustainable development objectives. The
highlighted practices included green employee empowerment and involvement,
green incentive and compensation, green performance management and appraisal,
green training and development, and green management of organizational culture.
However, little research has been done on how green human resource management
might aid in the shift to a more circular economy. Therefore, research is required
to evaluate how green human resource management affects the circular economy,
economic strength, and environmental reputation of a business.
Keywords Environmental sustainability · Green job · Circular economy · Zero
waste · Sustainable development
A. Punia
Department of Zoology, DAV University, Jalandhar, Punjab, India
R. P. Singh
Central Public Works, New Delhi, India
N. S. Chauhan ()
P.G Department of Zoology, Kanya Maha Vidyalaya, Jalandhar, Punjab, India
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_4
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4.1 Introduction
Sharing, employing, reusing, repairing, and recycling of already-existing commodities and services are prioritized in a circular economy (CE), a production and
consumption paradigm (Geissdoerfer et al. 2017). The three main principles of
the concept are focused on in CE, which aims to address challenges like pollution,
waste, and the loss of biodiversity as well as climate change. The three fundamentals
required for the switch from the traditional linear economy to a circular economy are
eliminating waste and pollution, reusing goods and resources, and renewing nature
(Sillanpaa and Ncibi 2019).
Worldwide awareness of environmental challenges has increased in the twentyfirst century, regardless of related industries like government, the public, or trade.
The growing interest in sustainability throughout the world is due to specific
global climate change conventions (Kyoto 1997; Bali 2007). The degradation of
environmental resources and its negative impacts on people and civilization in
general have been slowed down, and in some cases even reversed, by NGOs
and government organizations around the world. This is because of poisonous
chemicals and other adverse impacts of industrial pollution and waste materials
(Christmann and Taylor 2002; Shrivastava and Berger 2010). In light of the current
circumstances, companies need to develop strategies for dealing with ecological
footprint minimization in addition to financial difficulties. Organizations nowadays
must focus on social and environmental elements in addition to financial and
economic considerations in order to achieve success within the corporate world
and to make it easier for stockholders to achieve profit (Camilleri 2017). Strong
leadership and a clear procedure are both necessary for the effective implementation
of these sustainable business strategies inside a company (Zu 2019). As the business
community becomes more aware of the benefits of implementing “green” practices
into strategic planning, the sustainability problem is quickly rising in significance.
However, most human resource professionals feel uncomfortable discussing the
subject (Wirtenberg et al. 2007).
The human resource management unit is the most significant contributor to
the implementation of any company’s environmental programme among the many
organizational units, including HR, Marketing, IT, Finance, and so on. Without
a question, the business community is a significant player in the debate over
environmental concerns and as such, conforms to be a crucial component of the
solution to the environmental threat. Employee commitment to and satisfaction
with businesses that actively promote becoming green is a strong indicator that
a significant portion of the workforce in the business sector cares deeply about
the environment. Green management perspectives were also made possible by the
business sector’s active implementation of environmental management methods
(Lannelongue et al. 2014).
Human resource management (HRM) is an essential component of management
since people are a company’s most important resource. In the context of HRM,
sustainability is currently being investigated on all fronts. In addition, we contend
4 Green Human Resource Management and Circular Economy
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that green human resource management is the key element of sustainability. This
chapter’s exclusive focus is on the subject of green human resource management
(GHRM), in which human resource management (HRM) is involved in managing
the environment within an organization. Rani and Mishra (2014) define green HRM
as the adoption of HRM policies to support the sustainable use of resources inside
commercial organizations and advance environmental concerns, further increasing
employee morale and satisfaction. Some define “Green HRM” as the use of HRM
policies, attitudes, and practices to promote the effective use of corporate resources
and prevent any unintended repercussions brought on by environmental challenges
in organizations (Zoogah 2011). An aspect of more comprehensive corporate social
responsibility programmes is green HRM. The two primary elements of green
HR are the protection of intellectual property and environmentally responsible HR
practices (Mandip 2012). The primary building blocks of every business inside an
organization, whether it be a successful or sustainable one, are human resources and
their processes. They are in charge of planning and implementing these eco-friendly
activities to promote a green atmosphere.
The CE is the basis of the concept of “green civilization and green jobs”,
which is defined by coexistence of people and the environment, peaceful social
growth (Sulich and Sołoducho-Pelc 2022). The CE evolves both qualitatively and
quantitatively with new processes and jobs being created to span material cycles
(Gottwald 2012). Green HRM is directly related to the generation of green jobs,
and green jobs will ease the transition from linear to the circular economy. A
more long-lasting and sustainable economic model is proposed by the CE (Castillo
and Angelis Dimakis 2019). Additionally, the CE has established procedures that
complete resource loops (e.g., through recycling) and work to minimize material
losses through landfill and incineration (Mishra et al. 2018; O’Connor 2021). The
“green recovery” is an area of economic and social growth that is supported by
the circular economy and green human resource management (Hao et al., 2020).
Thus, the present chapter focuses on the relationship between green human resource
management and circular economy.
4.2 Circular Vs. Linear Economy
The “take-consume-throw away” economic model that governs linear economy
utilizes resources inefficiently (Gubeladze and Pavliashvili 2020). Because of this,
the issues of resource scarcity and environmental degradation are getting worse
every day. Use of non-renewable resources; prioritizing sales of new items; a lack
of cooperation; and an inability to develop or adapt are characteristics of linear
commercial activity (Jeyanthan and Ilankumaran 2019). An alternative to the takemake-dispose-based linear economy is the circular economy. The supporters of this
economic model claim that it’s a practical way to attain high levels of sustainability
without affecting the company’s profitability or the range of goods and services
it offers (MacArthur 2013). In other words, a circular economy offers a systematic
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transition that fully alters the economic system rather than only attempting to correct
the flaws of a linear economic system (Sariatli 2017). The primary distinction
between linear and circular economies is that the former is largely focused on
products, while the latter is oriented on services (Bonviu 2014). In a circular
economy, biodegradable components are used to create items that can be recycled
or returned to the environment. The circular production system is environmentally
friendly, but the linear method is not since it feeds the market and is not sustainable
(Morone 2020).
In a circular economy, the vitality of the final product is used as fundamental
resources throughout the production process, as opposed to a linear economy
where the life of the finished product ends when the customer utilises it. While
the circular economy prioritises services, the linear economy’s business model
stresses both goods and services (Bocken et al. 2016). Many ecologists and
environmentally conscientious economists believe that the circular economy is an
important paradigm for the twenty-first century (Morone 2020). The entire process
is not only ethical and sustainable, but also good to the environment. One of many
difficulties that must be overcome before the adoption of this circular system is the
absence of formal laws or a specific implementation guide for the circular economy
(Homrich et al. 2018). Without it, the implementation of the circular economy might
easily give rise to worries and issues, since the unexpected consequences of a badly
managed process could dramatically raise product costs and obstruct efficient waste
disposal.
4.3 Circular Economy and Green Jobs
The concept of the “Circular Economy” has grown in popularity since the 1970s
(MacArthur, 2013). Pearce and Turner (1989) are acknowledged in a number of
articles, including Andersen (2007), Ghisellini et al. (2016), and Su et al. (2013)
for introducing the idea. They describe how natural commodities have an impact
on the economy by acting as sinks for outputs in the form of waste as well as
inputs for production and consumption, thereby illuminating the linear and openended characteristics of contemporary economic systems. This draws inspiration
from Boulding’s (1966) theory, which contends that as the earth is a closed, circular
system with a limited capacity for absorption, the economy and the environment
should coexist in harmony.
Stahel and Reday (1976) explored certain elements of the circular economy with
a focus on industrial economics. To explain industrial waste reduction, regional
employment growth, resource efficiency, and dematerialization programmes, they
devised the concept of a loop economy. According to Stahel (1982), selling use
rather than product ownership is the most suitable sustainable business model for
a loop economy. This strategy enables businesses to generate revenue without
externalizing waste-related expenses and risks. The Circular Economy as it is currently understood has developed to encompass many components and contributions
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from several ideas that share the concept of closed loops in economic systems and
industrial processes.
MacArthur (2013) provided the most well-known description of the Circular
System, defining it as “an industrial economy that is restorative or regenerative
by intention and design”. The Circular Economy is similarly defined by Geng
and Doberstein (2008), who concentrate on the Chinese application of the idea,
as the “realization of a closed loop material flow in the whole economic system”.
A circular economy is one that is restorative by design and seeks to maintain
goods, parts, and materials at their greatest usability and value at all times (Webster
2021). The “core of the Circular Economy” is thus defined as the circular (closed)
flow of materials and the utilisation of energy and raw materials over a number
of phases (Yuan et al. 2008). The Circular Economy is defined as having “design
and business model strategies that are delaying, shutting, and decreasing resource
cycles”, according to Bocken et al. (2016).
The Circular Economy is often described as a cycle of continuous improvement
that delays, seals, and expands energies and material loops to reduce resource input
and waste, emissions, and energy leakage (Heesbeen and Prieto 2020). This can
be achieved through durable design, maintenance, repair, reuse, remanufacturing,
refurbishing, and recycling. There is an urgent need to transition to more sustainable
socio-technical systems (Weber 2003). Environmental issues include biodiversity
loss, water, air, and soil pollution, resource depletion, and excessive land usage
pose a growing threat to the planet’s life-support systems (Stokstad 2005; WWF
2014). Social expectations are not being met as a result of issues like high
unemployment, unfavourable working conditions, social vulnerability, the poverty
trap, intergenerational equity, and escalating inequities (Prahalad 2004; Banerjee
and Duflo 2013). Microbusinesses and entire economies are affected by financial
and economic instability as a result of economic problems such as supply risk, shaky
ownership structures, unregulated markets, and flawed incentive systems (Palley
2012).
Although not entirely new, the Circular Economy concept has recently gained
importance on policymakers’ agendas in order to address these and other environmental concerns (Urbinati et al. 2017). The Circular Economy has also grown
significantly as a field of academic research over the past 10 years, as seen by the
steep increase in publications on this topic. In addition, businesses are starting to
recognise the opportunities presented by the circular economy and the potential
advantages it may have for both themselves and their stakeholders (Park et al. 2010).
Inconsistent, varied, and not always applicable to the same types of activities, the
terminology used to describe work in the environmental sector. As a result, it would
be challenging to list all of the professions that will be impacted by the switch from
a linear to a circular economy.
The structure of the labour market will be significantly impacted by the shift from
a linear to a circular economic model. Reuse, services, and open-loop recycling
will capillarize, whereas remanufacturing, bio-refining, and closed-loop recycling
processes will polarize (Larrain et al. 2020). The circular economy’s “green” and
“greening” effects will significantly increase the need for workers with specialized
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knowledge across all economic sectors, educational levels, and professions, which
will help the battle against regionalization and structural unemployment. However,
if there aren’t many new jobs created (Horbach et al. 2015). As the economy
changes towards green jobs, workers will need to develop long-term ecological and
sustainable thinking to carry out their operations. According to research in green
supply chains, green accounting, green marketing, and green management (Peattie
and Charter 1992; Bebbington 2001; Jayaram and Avittathur 2015), all disciplines
are pertinent (Haden et al. 2009). For example, in the marketing sector, new trade
types, such as bulk commerce, are emerging. The circular economy will affect the
availability of financial and insurance products, as well as the terms and conditions
of bank loans and hedging contracts, at the level of banking and insurance. Sellers
will need to incorporate the circular economy’s concepts into their sales pitches,
and marketers will need to do the same with their marketing strategies (product,
price, communication, and distribution) (Tian 2018). In terms of development and
research, engineers, designers, and other innovators will need to specialize in ecodesign (Cicconi 2020). It will be their responsibility to design a product that is
environmentally friendly during its entire life. Therefore, increased transversality
and employability will benefit both green vocations and jobs that are greening
(Auktor 2020).
4.4 Green Thinking for Circular Economic Growth
Sustainable development is seen as a branch of the “triple bottom line” accounting philosophy, which combines social, ecological, and financial considerations
(Elkington 2006). Triple bottom-line analysis looks at organization effectiveness
from multiple perspectives rather than just the bottom line. According to Daily and
Huang (2001), Ramus (2002), and Sroufe (2003), the environmental sustainability
refers to maintaining a balance between growths of the company and safeguarding
natural resources for the next generation. Although environmental sustainability is
emphasized as a key goal, there is no agreement on the methods that the organizations use to accomplish this. Investigating the steps that agencies have taken to
prevent environmental disruptions and achieve sustainable growth is crucial. Given
the lack of research in this area, it is important to identify any gaps and potential
solutions (Renwick et al. 2013; Clark et al. 2018). According to research, certain
human activities frequently lead to environmental disruptions. The human behaviour
that causes these disruptions should be identified and changed for environmental
sustainability (Ones and Dilchert 2012). Few organizations investigate internal
factors, such as how human behaviour affects environmental change (Ones and
Dilchert 2012), as the majority of them focus on ecological sustainability projects
that take place outside of their limits (Uzzell and Moser 2009). Research findings
on green human resource management (GHRM) are important because this branch
of the green management philosophy examines how human behaviour influences
environmental management and sustainable growth (O’Donohue and Torugsa 2016;
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Al Ghazali and Afsar 2021). GHRM, in the words of Opatha and Arulrajah (2014),
refers to an organization’s green initiatives, practises, and systems that encourage
its staff to think in terms of society, the environment, and business. Using a
variety of human resource techniques, such as recruiting and selection, performance
evaluation, compensation and benefits, and training, an organisation can build a staff
that understands and promotes green behaviour (Mathapati 2013; Mishra 2017).
Green HRM, often known as “green HR”, is the incorporation of ecological
sustainability into human resources management policies (Ullah 2017). From the
worker’s integration until his or her exit, it impacts the whole HR function
(Renwick et al. 2013). According to a review of the literature, there are five
major concerns for green HR (Cherian and Jacob 2012a, b): a decrease in the
business’s environmental impact; an enhancement of the company’s branding; a
rise in the industry’s attractiveness (number of applications); a boost in employee
retention; and a higher level of performance. According to data, staff participation
in environmental initiatives increases the “efficiency” of the business’s general
effective conservation policy (Bangwal and Tiwari 2015). This efficiency is based
on how closely employees commit to the company’s core values for sustainable
growth (Lok and Chin 2019). In other words, a team’s ability to interact effectively
determines the quality of the outcome (Collier and Esteban 2007). To be more
precise, discretionary behaviours are equally relevant to organizational outcomes
as in-role or non-discretionary behaviours since “both lead to organizational success
through value creation” (Dumont et al. 2017). It is customary or non-discretionary to
refrain from smoking in public spaces. The employee does not exercise “discretion”
in doing so. It results from a general rule. The law, the job contract, and the company
policies all forbid it. Off-duty or discretionary conduct, however, is up to the
individual employee. It is the outcome of one person taking the initiative. Because
work and personal lives interact, some authors even go so far as to make an argument
that human resources could perhaps play a role in encouraging ethical behaviour
both inside and outside of the workplace, in accordance with a logic of ecological
balance between work and personal life (Muster and Schrader 2011). Because of
this, there is a link between individual involvement and general green business
practices (Kim et al. 2019; Lok and Chin 2019). Particularly, this connection is
highlighted in the research on hiring, training, and compensation (Kothiswari 2018).
4.5 Employee Participation in Green HR Practices for
Circular Economy Growth
Employees at any company are a diverse group with unique backgrounds, passions,
and perspectives. As a result, they engage in a variety of daily behaviours that
have varying impacts on the environment (Daily and Huang 2001; Soderholm
2010). Some people adopted activities that harm the environment, while others
adopted ecologically sustainable practices. Employees that are passionate and
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actively involved in environmental management may play a significant influence in
developing and implementing more desirable or successful environmental strategies
for circular economy growth. Promoting human resource policies that offer more
appealing or satisfying prospects for improvement connected to waste depletion
may give employees the ability or capacity to embrace certain environmental
management principles (Cherian and Jacob 2012a, b). Participation of employees
in green projects increases the likelihood of effective ecological sustainability.
Employee involvement in green HR practices has improved environmental
management systems at work, such as effective and efficient resource usage,
reduction of waste, and minimization of pollutants that have harmful or toxic effects
from workplaces (Florida and Davison 2001). Employee involvement is crucial
to the successful implementation of policies and practices in every organization.
To this end, innovative green ideologies, Green awareness initiatives, and ecofriendly concepts should be welcomed by the staff in order to pique their interest
in environmental issues, best utilize their practices, and encourage or increase their
willingness to adopt such concepts (Wehrmeyer 1996; Ishaq and Di Maria 2020).
This means that the achievement of green targets by effort, talent, or bravery
and the procurement of those targets will be significantly dependent on employees’
desire to work together (Collier and Esteban 2007). Consumers’ perceptions
of value, knowledge, and real benefits have a significant impact on employee
involvement (Rothenberg 2003; Fisher and Vallaster 2010). Forman and Jrgensen
(2001) discuss employee involvement in environmental activity inside the firm.
The examples help identify those circumstances when environmental work is being
shaped in an organization and alternatives are being made with regard to employee
participation: (1) The need for management to include individuals in the ecological
work; (2) the development of personal skill; and (3) the normalization of ecological
work into forms and practices.
4.6 Green Human Resources Management and Sustainable
Business Solution
Ullah (2017) focuses at environmental adaptability in HR and green HR and
found that implementing green HR in an organization is likely to produce efficiencies, practical resource utilization, reduced waste, better job-related demand,
or improved work/private life, lower costs, improved professional execution, and
assistance that aid the organization in ensuring a friendly environment, asset
positive working and socially conscious work environment. Employee involvement
in environmental management frameworks has a favourable impact on ecologically
responsible attitudes and behaviour in an employee’s private life (Al-Shami and
Rashid 2022). Deepika and Karpagam (2016) found that HR professionals may
make a significant contribution to the organization’s green growth and play a
significant role in motivating, inspiring, and empowering staff to create new trails
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in environmentally friendly business sustainability. According to Rana and Jain
(2014), many organizations are openly moving toward putting green practices into
practice. In this process, green HR practices support an organization and its staff
by enhancing employee retention, improving transparency, enhancing sustainable
asset usage, and expanding commercial opportunities (Bangwal et al. 2017). It
is obvious that sustainability issues are essential to how modern organization
function (Bateh et al. 2014). Environmental practices boost business performance
and provide it a competitive edge (Asiaei et al. 2022). Given that it is a component of sustainable human resource management (SHRM), green human resource
management may be crucial to sustainable development (Bombiak and MarciniukKluska 2018). Its nature is to integrate ecological objectives into all HRM sub-areas,
from employment planning through recruiting, selection, employee motivation and
development, to their assessment and influence on working conditions. This is a
novel method for realizing the HR function. In order to provide stakeholders with
additional value, it is necessary that the HR function be designed to focus on
both ecological and economic interests (Kramar 2014). Thus, Green HRM reflects
the degree to which human resource management practices have been made more
environmentally friendly (Ahmad 2015), whereas its implementation necessitates
that specific phases of human resource management be changed and tailored in
order to become green, or environmentally friendly (Jyoti, 2019). The primary goal
of initiatives carried out as part of green human resource management is the creation
of an ecological workplace and environmentally conscious employee attitudes (Jyoti
2019; Farooq et al. 2022). Green HRM, which refers to the use of HR policies to
encourage the sustainable use of company resources and to assist ecology (Rani
and Mishra 2014; Ahmad 2015), is therefore a component of a larger framework
of corporate responsibility (Sharma and Gupta 2015). Its main goal is to increase
employees’ ecological awareness and help them understand how their actions may
impact the environment. This is about inspiring people and making them feel good
about taking part in environmental projects. In this approach, Green HRM aids in
the development of a green workforce that comprehends, values, and engages in
ecological activities (Sabokro et al. 2021). The use of personnel practices to enhance
environmental performance is occasionally included in the definition of “green
HRM” (Roscoe et al. 2019; Nisar et al. 2021). This is because the establishment
of a global sustainable culture (Mishra 2017) and the effective implementation
of sustainable development policies both heavily rely on HR processes (LabellaFernández 2021). Green HRM unquestionably strengthens the role of HRM in
bringing the idea of sustainable development to life (Aust et al. 2020). It emphasizes
how important HR departments are to the establishment of a sustainable workplace
culture (Dupont et al. 2013) and the effective execution of environmental policies
(Jabbour et al. 2019). Organizations can benefit from implementing Green HRM,
fostering a green organizational culture, and encouraging employee behaviour
that is environmentally responsible (Al-Swidi et al. 2021). Today’s businesses
depend more and more on their reputation to succeed in the market. Given the
foregoing, adopting voluntary environmental initiatives rather than only abiding
by legally enforceable environmental protection requirements is turning into a
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way to achieve a competitive advantage (Suharti and Sugiarto 2020). Consumers
look for environmentally friendly items, while corporate partners are interested in
environmental certifications. Companies are compelled to adopt an environmentally
conscious outlook in order to keep their market dominance. Because of this strategy,
businesses are increasingly adopting a new management philosophy in which
spending on ecological protection is no longer just considered as an expense but
rather as an investment in the growth of the company.
4.7 Green Human Resources Management Techniques for
Circular Sustainable Economy
4.7.1 Selection and Hiring
According to research, job applicants frequently are informed about the corporate
strategy for environmental sustainability and consider it when deciding whether or
not to accept a position (Stringer 2010). Implementing a green human resources
strategy effectively through the employee’s integration in accordance with a general
direction of “zero paper, zero fuel”, green recruitment and selection rely on
sustainable procedures (Saini and Shukla 2016). In other words, hiring talent who
is conversant with sustainability and conservation principles is known as “green
recruiting” (Bangwal and Tiwari 2015). More precisely, effective adoption of a
sustainable performance management strategy inside the organization depends on
new hires’ awareness of techniques that support such an approach (Wehrmeyer
2017). An online advertising will signal the start of the green recruiting process.
Online applications are encouraged for decreasing the quantity of paper and gasoline
utilized for travel during the pre-selection process and interviews are also performed
over the phone or through video. The job descriptions used to create the interview
questions during the selection process contain characteristics of responsible conduct
(Saini and Shukla 2016). During the pre-selection stage, HR managers can also
evaluate these traits. They are able to evaluate how closely the applicant aligns
on environmental responsibility. As a result, the effectiveness of implementing a
sustainable performance management plan will be determined by the employment
descriptions that identify and act as a benchmark for sustainability in the workplace
(Mandip 2012).
4.7.2 Training and Growth
Training is the second most important green HRM component. In terms of
productivity, the main difficulties are creativity and development. According to
Upadhayay and Alqassimi (2018), the transition from a linear to a circular economy
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will lead to employment transfers, and it is crucial to invest heavily in training to
support these transfers. To put it another way, technical and management expertise
are both necessary for the effective implementation of green projects in businesses
(Callenbach et al. 1993). Technical skills are business abilities are necessary for
green occupations because they help to monitor, prevent, regulate, and restore the
harm that human activity has caused to the environment.
It is crucial to include employees in resolving environmental issues in order to
reverse the loss by adopting sustainable development through knowledge, expertise,
skills, and attitudes (Zoogah 2011). To improve how its staff members consume
alcohol, Nestlé partnered with CleanCup, a fresh start-up, in May 2019. Eliminating
the usage of throwaway cups is the goal of CleanCup. They have installed machines
for this purpose. The machine is easy to operate; after depositing one euro, the
customer receives a clean glass bearing the company’s emblem. After finishing their
drink, they return their glass to the machine, get their money back, and the system
generally cleans the glass on site. A green training policy’s effectiveness would thus
depend on participatory and strengthening management practices that support ecointrapreneurship, in addition to the technical and group training that is technically
outlined in the training programmes.
4.7.3 Pay and Benefits
When there is a salary and benefits approach is provided after fulfilling a duty,
employees are more likely to take it seriously (Forman and Jorgensen 2001).
To promote the development and use of green skills at work, companies may
provide both monetary and non-monetary benefits. Financial incentives can take
the form of bonuses tied to environmental goals or outcomes, for instance. Nonmonetary benefits might take the form of gifts, proactive internal communications,
or a connection between career progression prospects and an employee’s level of
environmental responsibility (Jabbar and Abid 2014). These programmes go beyond
recycling activities. They may entail voluntarily working from home or embracing
flexible schedules, which would help to lower pollution peaks (Jackson and Victor
2011). As a result, remuneration and benefits are still another powerful tool for
advancing a green HRM strategy and assisting in the achievement of the company’s
sustainable development goals (Milliman and Clair 1996). Therefore, the right green
recruiting would be the first step in a management policy.
4.8 Conclusion and Future Perspectives
Exploring green HRM techniques that are currently being used and will be used by
businesses and other organizations will make a substantial intellectual and practical
contribution to the global circular economy. It is essential to align GHRM with
78
A. Punia et al.
the circular economy to assist the transition from the linear to circular model.
According to Marrucci et al. (2021), GHRM makes a positive difference on how
well an organization performs in the circular economy. However, while focusing
on the individual GHRM activities, only hiring and involvement had a direct
impact on circular performance. Unexpectedly, training is not significantly related
to circular economy growth. This may be due to the fact that circular economy
concepts and practices are still in their beginnings and that organization has not
yet designed training modules to improve staff members’ skills and expertise on
circular economy. So, more focus should be on training programs that will help in
shifting from linear to circular economy. The training programmes for new workers
may be structured to aid their integration into the organization’s green culture.
Employee environmental training alleviates the impact of environmental ethics on
environmental performance (Singh et al. 2019). Joshi and Dhar (2020) revealed
that green training boosts an organization’s green innovation, while Pinzone et al.
(2019) showed that green training raises employee work satisfaction. All university
students, high school students, residents, and aspiring businesspeople must be
educated on critical global concerns, according to UVED.
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Chapter 5
Economies of Scale in Green Circular
Economies
Vicent Hernández-Chover, Lledó Castellet-Viciano,
and Francesc Hernández-Sancho
Abstract The benefits of the transformation towards a CE model should be analysed through a social, environmental, and economic perspective. The application
of tools capable of measuring the efficiency of this model could help to identify
the best practices and, consequently, maximize the recovery of products to obtain
non-conventional resources. There exist different efficiency models capable of
identifying the number of resources needed in the processes, and the residues (subproducts) generated could be recirculated or used in the same or other processes.
Increasing the obtention of other by-products that could be reintroduced in the
loop giving a secondary use in other sectors would generate beneficial results both
environmentally and economically. According to the principle of economies of
scale, in economic terms, the cost of recirculating the sub-products of the processes
will progressively decrease the more sub-products are reused. Moreover, from the
social and environmental point of view, the benefits of implementing a circular
model in a particular sector will extend to other dimensions: from economic, to
social and environmental spheres or from local, to regional, national, and even
global levels.
Keywords Wastewater · Efficiency · Economies of scale · Non-conventional
sources · Circular economy
5.1 Introduction
The increase in world population generates a series of consequences associated with
the increased demand for water and food, mainly. Numerous authors (Oberle et
al. 2019; Allan and Ojeda-García 2022) claim that the increasing exploitation of
natural resources to satisfy production and consumption demands has now reached
V. Hernández-Chover · L. Castellet-Viciano () · F. Hernández-Sancho
Inter-university Institute for Local Development (IILD-WATER). Water Economics Group,
University of Valencia, Valencia, Spain
e-mail: vicent.hernandez@uv.es; lledo.castellet@uv.es; francesc.hernadez@uv.es
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_5
85
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unsustainable levels. The economic model that governs our society is a linear and
unidirectional one, in which natural resources are extracted from the environment
and then used as raw materials for different products that will be consumed and
finally discarded. The premise of this “extract-produce-use-dispose” model was
that natural resources are abundant, easily accessible, and affordable to manage as
waste (Lieder and Rashid 2016). In order to minimize the environmental impact
that the current economic system is generating, the European Commission has been
working for several years on the development of plans, packages and proposals
aimed at moving towards a circular, rather than a linear, economic model. The first
step towards the transition to a circular economy model by the European Union
began in 2014 with the communication “Towards a circular economy: a zero-waste
agenda for Europe” with the aim of reducing the waste generated. This publication
was followed by the “Action Plan for a circular economy in Europe” published in
2015 in which the European Commission proposed a series of measures that go
beyond the reduction of waste and affect all stages of the life cycle of products.
In 2018, the “Circular Economy Legislative Package” was presented in which the
“European Strategy for Plastics in a Circular Economy” and the “Sustainability
Strategy for Chemicals” stand out. In order to mainstream the implementation of
the circular economy, the “New Circular Economy Action Plan for a cleaner and
more competitive Europe” was recently published in 2020 and is a key element in
the European Green Deal, Europe’s new programme for sustainable growth.
The “green economy” synthesizes all those actions aimed to reduce the consumption of energy, raw materials and water, minimizing the generation of pollution
and greenhouse gases, and encouraging the reduction of waste reuse. In a green
economy, economic sector investments focus on reducing carbon emissions while
increasing efficiency in production processes, reducing energy and non-renewable
resource consumption. As a result, investments generate employment growth while
avoiding the loss of biodiversity and ecosystem services. Green economy and
circular economy are closely linked. The circular economy aims to reduce the
consumption of non-renewable resources and to use waste as a new source of
sustainable resources. In order to achieve this goal, the green economy takes into
account the environmental impact generated, for example by monitoring the carbon
emissions generated by production processes. The combination of both concepts
implies generating new forms of supply and production with less environmental
impact, as well as ensuring sustainable economic growth. In Spain, for example,
there is the Spanish Circular Economy Strategy, Spain Circular 2030, which lays
the foundations for the promotion and implementation of the circular economy in
the following axes: production, consumption, waste management, secondary raw
materials and water reuse. This last aspect, the reduction and reuse of waste is based
on considering waste as resources and integrating them into the production chain,
this concept is defined by Circular Economy whose objective is to keep materials
and products as long as possible in the loop, converting waste into resources,
improving the efficiency of processes and extending the useful life of products
(Zajac
˛ and Avdiushchenko 2020).
5 Economies of Scale in Green Circular Economies
87
While global policies are essential to make the transition to the circular economy,
cities have a key role to play. Firstly, because they are centres that concentrate a
great amount of human activity, and are consequently large consumers of resources
and producers of waste. And secondly, because although cities are complex socioeconomic and political-administrative systems (Turcu and Gillie 2020), from an
administrative and legislative point of view, they have the required competences
to promote some actions within the framework of the circular economy. Currently,
more than half of the human population is concentrated in urban centres, and this
number is expected to increase when cities in developing countries reach the rate of
urban residents in advanced industrialized countries. So, not only for sustainability
reasons, but for economies of scale, it is much more realistic to reuse, recycle and
recover post-consumer materials on a large scale.
It should be kept in mind that one of the main limitations to the implementation
of circular models is the high cost of investment in technology and systems that
enable the recovery, reuse and recycling of products and materials (Grafström and
Aasma 2021). One way to address this barrier is to maximize the amount of products
recovered and to improve the efficiency of product and material recovery, reuse and
recycling processes. To demonstrate how advantageous could be the economies of
scale in the implementation of circular economy actions, the following sections of
this chapter will use as an example the urban water cycle, focusing on the wastewater
treatment sector.
5.2 Status of Water Resources
One of the most vulnerable resources is water. Water is a very valuable resource
that is not only essential for human life and organisms, but also for many economic
sectors. Water pollution affects health, the economy and the environment, while it
also represents a risk to the sustainability of resources (Damania 2020). The main
causes of contamination of water bodies are determined by inadequate sanitation;
in a large number of population centres there are no connections from the sanitation
networks to the treatment plants, and there are no separate networks, which
increases the volume of water to be treated and often exceeds the treatment capacity
of the plants. This is aggravated by runoff from farmland, which may contain high
concentrations of fertilizers. This scenario can be further complicated if we take
into account the rapid increase in population. This increase in population implies an
increase in the resources consumed (Swilling et al. 2018).
According to the FAO (Food and Agriculture Organisation of the United
Nations), water consumption in the last century was twice as high as population
growth. According to the United Nations World Water Development Report, current
world water consumption is approximately 4600 km3 and is expected to increase by
20–30% in the coming decades due to population growth and, consequently, waterintensive agricultural and energy production. Taking this projection into account,
global water consumption in 2050 is estimated to be 5500–6000 km3 . Figure 5.1
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Fig. 5.1 Evolution of water availability in line with population growth. (Source: Prats-Rico 2016)
shows a graph representing population growth and water resources availability per
capita. Simultaneously, by 2025, agricultural and energy production are expected
to increase by approximately 60% and 80%, respectively. However, given the
imminent population growth, it is expected that water use will not be as high as
in the previous century due to the development of more efficient techniques and
technologies that allow greater use of water.
Water availability is one of the main risks worldwide; it is estimated that by 2030
there will be a 40% global water shortage if the current water resource management
model is maintained (Voulvoulis 2018). The main reasons that will lead to this
situation are the pressure exerted by humans on this resource, together with a
climate scenario in which average global temperatures will rise, the presence of
longer periods of drought and more frequent extreme phenomena, thus changing the
dynamic water cycle. Generally speaking, water scarcity occurs when water is not
available in sufficient quantity or quality, or when there are no adequate mechanisms
or technology for its use, such that human needs cannot be met.
Therefore, the transition to a circular economic model is key to water resource
management. Water is essential for maintaining life and the sustainability of
ecosystems, but also for economic development. It is estimated that only 1% of
the existing water on our planet can be used for human and productive activities.
This scarcity of water in terms of quantity and quality has consequences for the
environment and the economic and social sphere.
The role of the CE is particularly important in the context of the water sector.
The availability of freshwater, both in quantity and quality, is a key element
for generating and sustaining economic development. However, this economic
development has come at the cost of overexploitation and pollution of water
bodies. Moreover, water availability is worsening year after year due to increasingly
5 Economies of Scale in Green Circular Economies
89
frequent and prolonged periods of drought attributed to climate change (Eurostat
2009; Gössling et al. 2012; Hof and Schmitt 2011).
Due to the increasing demand for water and the high levels of pollution of water
bodies, Wastewater Treatment Plants (WWTPs) play a fundamental role within
the framework of the circular economy. In this new management model, WWTPs
are no longer only focused on wastewater treatment to protect people’s health
and minimize the environmental impact of wastewater disposal, but also become
a source of non-conventional resources with a high economic and environmental
value.
Wastewater reuse is an alternative water resource that ensures water availability
while reducing pressure on water bodies, guaranteeing their sustainability. The
possibilities of using waste as a resource make the water sector a high potential
within the CE framework. Wastewater treatment is a source of clean energy
production and is also rich in substances that could have a secondary use (Sfez
et al. 2019). For example, nitrogen and phosphorus, and organic matter could
be recovered and valorized as fertilizers and biogas for profitable gain (GuerraRodriguez et al. 2020; Verstraete and Vlaeminck 2011). In May 2014, phosphate
rock was listed as a critical raw material by the European Commission (Ferro and
Bonollo 2019), so alternative sources of phosphorus have gained importance. Recent
estimates show that phosphorus reuse within the EU using established technologies
and practices will be able to replace about 30% of the mineral used in agriculture by
2030 (Tonini et al. 2019). Similarly, the use of nitrogen recovered from WWTPs has
great potential to be used in agriculture, as it is removed in the same way as it is used
through nitrogen fertilizers, which are obtained through energy-intensive industrial
processes. Nutrient recovery from WWTPs coupled with more efficient agricultural
and food management practices could help transform the current economic system
into a more circular one (Schneider et al. 2019; Withers et al. 2018).
In this sense, WWTPs could become essential in the implementation of the CE
in urban areas, whose aim will be guaranteeing the sustainability of water resources
by adapting the quality of the effluents discharged into the environment, reducing
the concentration of pollutants in the effluent and ensuring adequate quality of
water bodies. Therefore, addressing the production of resources in WWTPs, from
an economic perspective, would allow identifying the best practices in wastewater
treatment in order to obtain the largest possible amounts of resources in the process.
This fact implies increasing the resources generated in the treatment of wastewater
while minimizing the environmental impact of discharges. In this sense, those
infrastructures that perform better in terms of removing pollutants or obtaining
other products, such as biofuels, bioplastics, adsorbents, ashes, proteins, enzymes,
and nutrients (Gherghel et al. 2019), can be understood as bio-factories capable of
providing more resources to the society. In short, these infrastructures are capable
of generating feedback loops and reducing the use of non-renewable resources
(Furness et al. 2021).
Obtaining these resources implies a significant change at a strategic level in
these infrastructures. Directive (91/271/ECC) regulates environmental criteria on
effluent quality. Furthermore, in order to carry out an efficient management, it
90
V. Hernández-Chover et al.
implies adopting an approach that minimizes the costs generated by the wastewater
treatment process. However, in the framework of the Circular Economy, all the
resources that the WWTP is able to offer to other sectors can be valorized, implying
an economic benefit. In this sense, these infrastructures represent, like any other
industry, a productive process that requires a series of inputs to produce a series
of resources. Therefore, monitoring the different WWTPs and identifying which
ones are capable of obtaining the largest amounts of resources using the minimum
inputs is doubly beneficial from an environmental and economic point of view. To
measure the efficiency of the WWTPs, the use of the Data Envelopment Analysis
methodology allows to compare the different infrastructures under the same criteria,
offering as a result an efficiency index that permits to identify which are the
most efficient units. In addition, the subsequent analysis of the results allows to
relate the physical characteristics that may influence on a better performance and,
consequently, to establish action plans that help to set strategic objectives.
This chapter analyses the efficiency of the wastewater treatment plants and,
ultimately, the optimal management of the process, not only considering the
characteristics of the WWTP but also the amount of pollutants that the facilities are
capable of removing, reinforcing the benefits that this fact has on the environment.
5.3 Assessing the Economies of Scale in the Wastewater
Treatment Sector
5.3.1 Existing Methodologies to Assess the Existence
of Economies of Scale
In order to carry out the wastewater treatment process, WWTPs require a series
of resources (energy, staff, reagents, maintenance, etc.) to extract the pollutants
contained in the wastewater. In this sense, the quality parameters of the effluent
are defined in the Directive 91/271/EEC. The quality requirements established in
this Directive depend on various factors relating to the organic load, volume of
wastewater treated and place of discharge, among others. Like any other industry,
WWTPs must obtain a sufficient effluent quality while minimizing the use of
resources necessary for wastewater treatment (Ostrom and Wilhelmsen 2012). To
achieve this criterion an efficient management of the WWTPs is crucial. Efficiency,
in the context of CE, is defined by the maximum elimination of contaminants that
can be valorized, minimizing the use of resources used in the process. In addition,
higher pollutant removal will generate a higher volume of treated water of higher
quality for other uses. Therefore, the most efficient process will be defined by the
lowest use of resources and the highest amount of products generated.
Different methodologies can be used to assess the efficiency of processes.
Parametric methods require the establishment of the production frontier, whereas
non-parametric methods allow efficiency to be assessed without establishing the
5 Economies of Scale in Green Circular Economies
91
production frontier a priori, thus being more flexible. In the latter case, data envelopment analysis (DEA) has been widely used. Data Envelopment Analysis (DEA),
developed by Charnes et al. (1978), is the most commonly applied method. This
methodology has been used in different sectors, from the water sector (Carvalho et
al. 2012; Díaz et al. 2004; Gupta et al. 2012; Kulshrestha and Vishwakarma 2013)
to transport or financial firms (Stewart et al. 2016; Sueyoshi and Goto 2012). To
evaluate the efficiency of the wastewater treatment, these authors have considered
as inputs the economic costs of the different resources used in the process, such as
energy costs, costs derived from the use of reagents, costs linked to maintenance
tasks, costs associated with waste management, and administrative costs, among
others. While the outputs used have been, mainly, the volume of wastewater treated,
and the quantity of pollutants removed from the wastewater in the process.
In order to obtain the efficiency level for each input and output used by
the decision-making units (DMUs), in this case the WWTPs, and to be able to
generalize the results in any direction that may be considered, a non-radial data
envelopment analysis (DEA) model will be used. In particular, a modified version of
the weighted Russell directional distance model (WRDDM) will be used (Fuentes
et al. 2020), which improve the quality of the results by limiting the amount of
pollutants to be eliminated to the existing level in the influents, thus increasing the
options for data analysis even more (Chen et al. 2010).
Being the set of positive real numbers with i dimension, there exists k .∈ RK
+
DMUs that use several inputs represented by the vector x .∈ RN
to
produce
several
+
desirable outputs defined by the vector y .∈ RM
+ though the use of a technology
given by the set:
T = {(x, y) : x can produce y}
(5.1)
∀ (x, y) ∈ T ∧ y ≤ y ⇒ x, y ∈ T
(5.2)
.
For which:
.
which assumes that there is free availability of outputs, that is, it is possible to obtain
a lower amount of output using the same level of resources.
In turn, the directional distance function that would aim to increase the outputs
by reducing the inputs would be:
−
→
D (x, y; g) = sup θ : x + θgx , y + θgy ∈ T
.
(5.3)
where the directional vector g = (gx , gy ) = (−x, y) establishes the direction in which
the level of inputs and outputs will be modified in the aforementioned sense. If a
DMU (WWTP) were just above the efficiency frontier, it would be efficient and
−
→
with . D (x, y; g) = 0. In case of being inefficient, it would be below the frontier, for
−
→
which, . D (x, y; g) > 0 and θ would be the distance from the assessed DMU to the
frontier (Fuentes et al. 2020).
92
V. Hernández-Chover et al.
With the above, the WRDDM that would calculate the level of inefficiency of the
assessed DMU (DMU0 ) would be:
⎛
⎞
N
M
J
−
→
. D x0 , y0 , b0 ; g = θ0 = Max ⎝
ωn0 βn0 +
ωm0 βm0 +
ωj 0 βj 0 ⎠
n=1
m=1
j =1
s.t.
K λ y ≤ x + β g , ∀m : 1, . . . .N
k=1
k nk
n0
n0 xn
K
k=1 λk xmk ≥ xm0 + βm0 gym , ∀n : 1, . . . .M
K
.
λk = 1
(5.4)
k=1
βm0 ≤ Y s m0 , ∀m : 1, . . . .M
λm0 ≥ 0, ∀k : 1, . . . .K
where K, N and M dimensions are the set of positive real numbers and β n0 and
β m0 would be the specific inefficiency levels for each of the n inputs and m outputs
of the DMU0 respectively and would be the weights obtained as a solution to the
programme which express the weight of each DMU in the peer group of the DMUo.
The closer their values are to zero, the less efficiency level they will present. On
the other hand, ωnk and ωmk are the weights or the level of importance that each
of the inefficiency values of the inputs and outputs has when calculating the total
inefficiency of the DMU0, that is, θ0 . Since there is no justification to optimize
one resource or pollutant removal at the expense of another (Fuentes et al. 2020,
Molinos-Senante et al. 2016), in the present paper, predefined values given by the
model are used for these weights ωnk and ωmk, giving them the same importance
in the computation of θ0 , so that, by using N inputs to produce M outputs, the input
weights would have a common value equal to 1/N and those of outputs of 1/M.
5.3.2 Empirical Approach
To demonstrate the existence of the economies of scale and how they affect in the
process and subproduct recovery in the wastewater treatment process we use as an
example 133 WWTPs placed in the Valencian Community (east of Spain), that use
the same treatment technology: extended aeration with nutrients removal (nitrogen)
but have different sizes in terms of equivalent inhabitants treated (p.e.). Therefore,
the sample is divided into three groups as follows: (i) the first group is made up of
those infrastructures that treat less than 20,000 p.e./year, (ii) the second is composed
by plants that treat between 20,000 and 50,000 p.e./year, and (iii) the third group
includes all those WWTPs that treat more than 50,000 p.e./year.
To carry out the wastewater treatment process, similar to any other industrial
process, some resources (inputs) are required. The variables used as inputs are the
5 Economies of Scale in Green Circular Economies
93
Table 5.1 Characteristics of the wastewater treatment plant analysed. Source: data facilitated by
the Valencian Wastewater Treatment Agency (EPSAR) in 2018
Inputs
Outputs
p.e.
Energy (kWh/year)
Staff (A
C/year)
Maintenance (A
C/year)
Waste management (A
C/year)
Other (A
C/year)
SS (kg/year)
COD (kg/year)
N (kg/year)
Group 1
4758
110,393
42,740
9960
4664
1826
37,201
87,240
7646
Group 2
33,566
554,473
175,517
33,676
24,667
16,176
249,205
575,970
40,770
Group 3
120,673
1,510,284
342,979
85,638
65,483
42,845
1,036,427
2,088,894
140,388
following: energy consumption, personnel, reagents, maintenance (involve repair
and maintenance tasks to keep the equipment and the infrastructures performing
in optimal conditions), waste management (large volumes of waste that should be
managed are generated) and other (administrative issues, for instance). It should be
noticed that apart from the energy consumption, the remaining resources used in
the process are expressed in economic terms (Hernández-Sancho and Sala-Garrido
2009). To measure the performance of the wastewater industries analysed and the
opportunity that the process offers to recover nutrients we are going to measure the
quantity of pollutants that the wastewater treatment plants are capable of removing.
To this end, the outputs of the process are represented by the number of suspended
solids (SS), carbon oxygen demand (COD), and nitrogen (N) removed.
As it can be observed in Table 5.1, the costs of the process are mostly
explained by the energy consumption, staff costs and maintenance. The facilities
in group 1 require on average 110,393 kWh per year for wastewater treatment, the
infrastructures in group 2 require approximately 554,000 kWh and finally those in
group 3 reach 1,510,000 kWh per year. Similarly, the personnel requirements are
approximately 42,700 A
C, 175,500 A
C and 342,000 A
C per year for groups 1, 2 and
3, respectively. Maintenance costs refer to preventive and repair work on the assets
that make up these infrastructures, amounting to 9960 A
C, 33,676 A
C and 85,638 A
C
per year for groups 1, 2 and 3, respectively. Waste management and other expenses,
mainly administrative, account for the smallest amounts, on average per year.
If we analyse the costs involved in the process per unit of wastewater treated
it can be observed that there are great variations depending on the size of the
facilities. The treatment costs of small WWTPs (group 1) per unit of wastewater
treated are usually higher than medium and large WWTP (group 2 and group 3).
Figure 5.2 shows that the greatest differences among the groups are related with
personnel costs, according to the sample small WWTPs (group 1) spend 0.55 A
C/m3
3
3
in personnel costs, compared to 0.20 A
C/m and 0.11 A
C/m for group 2 and 3 plants,
respectively. As for maintenance costs, there is a downward trend as the volume of
treated water increases, ranging from 0.13 A
C/m3 (group 1) to 0.02 A
C/m3 (group 3).
The costs incurred for waste management are very similar in the 3 groups analysed,
94
V. Hernández-Chover et al.
0.60
0.55
Cost (€/m3)
0.50
0.40
0.30
0.20
0.10
0.16
0.13
0.20
0.03
0.03 0.02
Group 1
Group 2
0.06
0.11
0.02 0.02 0.03
0.00
Personnel
Maintenance
Waste
Group 3
Other
Fig. 5.2 Expenses per volume of wastewater treated
0.70
0.64
Energy consumpon (kWh/m3)
0.60
0.60
0.49
0.50
0.40
0.30
0.20
0.10
0.00
Group 1
Group 2
Group 3
Fig. 5.3 Energy consumption per volume of wastewater treated
at around 0.03 A
C/m3 . Finally, the costs of others fluctuate between 0.16, 0.06 and
3
0.03 A
C/m for groups 1, 2 and 3, respectively.
Regarding the energy consumption, a similar pattern is observed. Energy consumption stands at 0.64 kWh/m3 for group 1, while the consumption of group 2 is
0.60 kWh/m3 , and 0.49 kWh/m3 for group 3. These consumptions imply a reduction
of approximately 24% for the larger facilities (Fig. 5.3).
5 Economies of Scale in Green Circular Economies
95
Table 5.2 Pollutants removed by the WWTPs of the sample
Group 1
Group 2
Group 3
Pollutants removed that the
Directive requires (kg/year)
SS
COD
N
31,531
67,412
6025
216,004
465,370
32,272
919,802
1,707,804
112,301
Extra number of pollutants
removed (kg/year)
SS
COD
N
5670
19,828
1621
33,201
110,600
8498
116,625
381,090
28,087
It should be mentioned that the quantity of pollutants that WWTPs remove
is related with the parameters established by the Directive 91/271/EEC on urban
wastewater treatment. However, it has been observed that the facilities assessed are
removing more quantity of pollutants than the required by the legislation (Table
5.2).
Regarding the average removal of SS beyond the requirements of the Directive,
group 1 removes 5670 kg/year, while group 2 and group 3 remove 33,201 kg/year
and 116,625 kg/year, respectively. According to the extra quantities of COD
removed by the plants are 19,828 kg/year, 110,600 kg/year and 381,090 kg/year,
for groups 1, 2 and 3, respectively. When the amount of nitrogen removed beyond
the Directive reaches 1621 kg/year, 8498 kg/year and 28,087 kg/year for groups 1,
2 and 3, respectively.
5.3.2.1
Efficiency Analysis of Wastewater Treatment Plants
Although the ratio between the costs and the volume of wastewater treatment
plants gives some clues about the economies of scale in the wastewater treatment
process, it is necessary to apply an efficiency analysis as explained in the previous
section in order to analyse the efficiency considering several variables at the same
time: resources used in the process, volume of wastewater treated, and pollutants
removed. Therefore, making use of the efficiency method mentioned before we can
obtain an efficiency index of the process for each one of the facilities of the sample.
The higher the index is, the more efficient the plant is. Accordingly, those WWTPs
that get lower efficiency indices imply that have a greater capacity for improvement,
that is, a reduction in the resources used in the process as well as a greater removal
of contaminants.
Concerning pollutants removal, a higher removal rate of pollutants results in
several benefits. On one hand, there is a positive environmental impact since lower
concentrations of pollutants in the effluent help to protect water bodies. On the
other hand, WWTPs could obtain a direct economic benefit if they can remove more
pollutants that could have a secondary use in other fields such as the use of nutrients
(N and P), to produce fertilizers in the agriculture. These results can be expressed as
percentages of overall reduction required by the inputs to achieve efficiency in the
process. The efficiency indices obtained for each of the analysed groups explain that
96
V. Hernández-Chover et al.
0.91
0.82
0.72
GROUP 1
GROUP 2
GROUP 3
Fig. 5.4 Global Efficiency Index
the improvement capacity for smaller facilities is lower (0.72), followed by 0.82 for
group 2and 0.91 for group 3 (Fig. 5.4).
The results show that the WWTPs of group 1 (<20,000 p.e.) achieve an average
efficiency index of 0.72, group 2 achieves an efficiency index of 0.82 and finally,
group 3 achieves an index of 0.91. Thus, the efficiency indices obtained are directly
related to the sizes of the WWTPs analysed. Therefore, the infrastructures decrease
the use of the necessary resources as production increases.
Greater efficiency implies the use of fewer resources in the process as well
as a greater removal of pollutants (SS, COD and N). These results confirm the
presence of economies of scale in the wastewater treatment sector, as stated by other
authors (Carvalho et al. 2012; Worthington and Higgs 2014; Hernández-Chover et
al. 2018). By using the Kruskal-Wallis test, a non-parametric statistical test that
checks whether different samples are equally distributed and therefore belong to the
same distribution, it is found that the differences between the different groups are
statistically significant and that economies of scale therefore exist.
Moreover, the methodology used to carry out the empirical approach also offers
an individual efficiency index for each one of the inputs (resources) used in the
process. Fig. 5.5 shows the individual efficiency indicators obtained for each one
of the groups. A similar trend to that observed in the overall efficiency index can
be seen in the individual indices, that is, larger WWTPS, according to p.e., achieve
greater efficiencies in each of the inputs, energy, personnel, maintenance, waste and
others.
The difference between the efficiency index obtained and the maximum value
that they could achieve (that is 1) represents the potential for improvement of
the facilities. The input efficiency indices can be very useful to assess to which
extent WWTPs should reduce their inputs to improve their efficiency. Apart from
the energy consumption that has not been measured in monetary units, the other
Group 1
Group 2
WASTES
0.77
0.9
0.88
0.84
0.72
0.88
0.67
0.73
MAINTENANCE
0.72
0.87
STAFF
0.84
0.77
0.72
ENERGY
0.95
97
0.98
5 Economies of Scale in Green Circular Economies
OTHER
Group 3
Fig. 5.5 Inputs efficiency index
Table 5.3 Individual WWTPs efficiency indices
Energy efficiency index
Personnel efficiency index
Maintenance efficiency index
Waste efficiency index
Other efficiency index
Global efficiency index
WWTP 34
(12,000 p.e.)
0.63
0.61
0.64
0.73
0.57
0.63
WWTP 89
(41,000 p.e.)
0.72
0.84
0.69
0.86
0.86
0.79
WWTP 123
(67,000 p.e.)
0.79
0.94
0.88
0.91
0.94
0.89
inputs could be used to calculate the economic savings that wastewater treatment
plants could achieve. In this particular case, we focus on the minimizing the use
of resources rather than maximizing the number of pollutants removed, since all the
WWTPs are already accomplishing with the quality requirements established by the
regulation. However, this analysis becomes even more important when it is carried
out individually for each plant, as each plant will have to take different actions to
improve its efficiency, taking into account its own circumstances. The table below
shows three different examples of WWTPs efficiency indices that belong to each
one of the WWTP groups (Table 5.3).
The average score obtained for the input energy is 0.72, 0.77 and 0.84 for
groups 1, 2 and 3, respectively. However, WWTPs 34, 89 and 123 obtain higher
scores for this input: 0.63, 0.75 and 0.82 respectively. These values suggest that
approximate reductions of 12%, 7% and 6% would increase the relative efficiency
of the evaluated plants, placing them at the average of the group to which they
belong. Regarding the scores for personnel input, the results are 0.79, 0.84 and
98
V. Hernández-Chover et al.
0.94, which are slightly above the average scores obtained by the different groups.
In the case of group 1, an average score of 0.67 is obtained, suggesting that the
evaluated plant should reduce personnel costs by approximately 9%. In the case
of group 2 and 3, the score obtained is 0.87 and 0.98, so the cost reduction
necessary to achieve the average efficiency of the groups would be 3.5% and 4% for
WWTP 89 and 123, respectively. As other studies affirm (Castellet and MolinosSenante 2016), we observe that energy and personnel represent the highest costs
of the treatment process in the WWTP and, therefore, the ones with the greatest
capacity for improvement. When maintenance costs are analysed, a similar trend
is observed, following the average behaviour of the group to which they belong,
the required improvement capacity for WWTP 34 would be 12% and for WWTP
89 approximately 7% and finally, WWTP 123 would get a score like the average.
Concerning the waste management, the plants of the sample show an efficient
behaviour, which implies greater efficiency compared to the average of the groups
evaluated. Finally, the score associated with other process costs offers 0.57, 0.86 and
0.94 for WWTP 34, 89 and 123, respectively. The improvement capacity needed to
reach the average performance of the group to which they belong is 26% for the first
group, 5% for the second group and 2% for the third group.
5.3.2.2
Link Between Process Efficiency, Nutrients Recovery
and Economies of Scale
In this section, the contaminants obtained in the wastewater treatment process
and their relationship with the efficiency results are analysed. The objective is to
quantify the potential contribution of WWTPs to the circular economy by recovering
nutrients from wastewater, as well as sludge for other uses. The fact that large
WWTPs are more efficient in terms of the use of resources in the process and the
quantity of pollutants removed above the regulation requirements has a very positive
impact on circular economy due to the fact that larger WWTPs could offer a greater
number of resources (fertilizers, water, sludge, etc.) to be reused, while consuming
less resources (kWh, staff, reagents, maintenance . . . ).
In order to confirm statistically the existence of a linear relationship between
plant dimensions and a higher pollutant removal (above legal requirements), the
Spearman’s rho correlation test (Gauthier 2001) is used. This test measures the
degree of correlation between different variables with non-normal distribution and
its value ranges between 1 and −1, thus confirming the existence of a significant
relationship between the variables analysed (Table 5.4).
As it can be seen in Table 5.3, there is a positive correlation between the
pollutants (SS, COD, N) and the p.e. processed by the WWTPs (Table 5.5). The
largest amounts of SS and COD obtain 0.74, then P obtains 0.72 and finally N
obtains 0.65. Thus, larger dimensions of the infrastructure regarding the volume
of wastewater treated achieve greater results in terms of pollutants removal.
Increasing the flows of treated wastewater plants would help to rise the efficiency
obtained in the process. In this sense, the design flows of the WWTPs determine the
5 Economies of Scale in Green Circular Economies
Table 5.4 Correlation
between p.e. and pollutant
removal
99
Spearman’s rho
Sig. (2-tailed)
N
SS
0.746a
<0.001
133
DQO
0.720a
N
0.653a
a Correlation is significant at the 0.01 level (2tailed)
Table 5.5 Kruskal-Wallis
test per concentration influent
(mg/l) per groups’ p.e
Kruskal-Wallis H
Df
Asymp. Sig.
SS
7.422
2
0.181
COD
3.533
2
0.396
N
0.837
2
0.908
maximum flow that the facilities can treat at a specific moment, usually responding
to criteria related to the organic load and the volume of wastewater and possible
changes in the conditions of the untreated wastewater during rainfall and seasonality
(Bragadin and Mancini 2010; Wong and Mui 2007). Therefore, some of these
infrastructures would have greater technical capacity (defined by the design flow)
and could increase the flows of treated wastewater annually, for example, by
reinforcing and renewing the sewage network system in order to guarantee a greater
inflow.
Accordingly, a greater or lesser concentration of pollutants in the inflow (mg/l)
could generate variations in the quantities extracted by the plants. Consequently, it
is important to statistically corroborate that the inflow characteristics are homogeneous for the different groups of WWTPs. Next, in order to assess whether there are
significant differences in the concentration of pollutants in the inflow for each of the
groups, the Kruskal-Wallis test is used (see Table 5.5).
As it can be seen, a p-value > 0.05 does not allow rejecting the null hypothesis,
confirming that there are no significant differences in the concentration of pollutants
in the inflow for the groups studied. In this case, the results obtained suggest that
the greater removal of pollutants (in kg.) is mainly due to the greater flow rate
treated, as suggested in the previous section. This difference in the removal of
pollutants among the groups presents significant differences with a p-value < 0.05,
thus, larger WWTPs would obtain greater amounts of SS, COD and N. This greater
removal of pollutants in the wastewater treatment is doubly beneficial from the
perspective of circular economy, firstly, it allows greater amounts of resources to
be reincorporated into other sectors (Van Vuuren et al. 2010; Cordell et al. 2011;
Mihelcic et al. 2011), whether industrial or agricultural (fertilizers, cogeneration,
etc.) and, secondly, obtaining a higher quality of water offers the possibility of
maximizing its use in the agricultural sector. This is because a higher concentration
of nutrients in the effluent limits the amount of water to be used, in order to avoid
an excess amount of nutrients that could harm the crops (Cornel and Meda 2008).
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5.3.2.3
V. Hernández-Chover et al.
Potentialities of Wastewater Treatment Process within
the Circular Economy Framework
The results obtained in the empirical approach represent an important advance.
The corroboration that the influence of economies of scale involves the recovery
of the 3 pollutants included in this study and, specifically, in the case of nitrogen,
a larger size according to p.e. treated would help increase resources and obtain
greater value from them with less use of resources. This information is a double
benefit in the framework of the Circular Economy, from the environmental point
of view, larger infrastructures achieve a greater extraction of pollutants, beyond
the minimum established by the Directive 91/271/EEC, reducing the impact on the
environment. And secondly, these infrastructures allow the recovery and production
of larger amounts of resources: sludge for use in composting and the recovery of
nitrogen to produce fertilizers, among others, therefore, reducing the pressure on
non-renewable conventional resources. This last aspect is of great importance for
the operators and managers of wastewater treatment plants, this is due to the fact
that a centralized network design would proportionally generate larger quantities of
resources, thus multiplying the positive effects of the implementation of a circular
economy. In previous sections, it is verified that larger WWTPs are capable of
removing larger quantities of pollutants above legal requirements. The implications
are of great importance in the framework of the circular economy since obtaining
higher quality water enables its use for other uses, as well as the sludge obtained in
the process, suitably treated, could be reused in other sectors such as agricultural or
industrial. In this way, increasing the time that the products remain in the production
system and minimizing the use of raw materials obtained from natural systems
(Zajac
˛ and Avdiushchenko 2020; Castellet-Viciano et al. 2022), thus following the
basic principles of CE.
Wastewater is rich in nitrogen and phosphorous, their removal and recovery
could increase the availability of these resources and replace the extraction from
conventional sources. Moreover, larger WWTPs remove a greater quantity of
nutrients, exceeding the quality requirements established by the legislation, which
increases the potentiality of WWTPs to produce more quantities of resources. It
is known that both nitrogen and phosphorus have a high value as a resource for the
agricultural sector. Its use as fertilizer permit to increase the agricultural production,
rise the productive potential of crops, improve the quality of products, as well
as increase their nutritional value and their resistance to abiotic stresses (drought,
high temperatures, decreased rainfall, etc.) (Henneron et al. 2015). For this reason,
fertilizers are widely used in the agricultural sector. Total sales of manufactured
fertilizers in the EU27 reached 15.5 million tons in 2019 and an important part of
the EU’s fertilizer needs to be covered by imports (85% potassium, 68% phosphate
and 30% nitrogen in the year 2020) (Eurostat 2022). In addition, to be running
out of raw materials reserves, fertilizer production itself is highly energy intensive.
According to the European Commission, the cost of natural gas could represent
between 60 and 80% of variable production costs, significantly affecting the final
prices of fertilizers and, consequently, their demand and their production value.
5 Economies of Scale in Green Circular Economies
101
5.4 Conclusions
In the framework of the circular economy, wastewater treatment plants present a
great opportunity. In addition to being a non-conventional water source, they recover
a large amount of resources and are capable of generating clean energy. This chapter
looks at wastewater resource recovery from an economic perspective. It analyses the
different aspects that would facilitate the transformation of agricultural and urban
systems towards a circular economy. To this end, the maximum pollutant removal
capacity is assessed based on the analysis of 133 WWTPs using extended aeration
technology and nitrogen removal. The results confirm that these infrastructures are
able to remove more than the quantities required by Directive 91/271/EEC. This is
very beneficial, e.g., removing larger amounts of nitrogen means generating more
resources, such as fertilizers for the agricultural sector. From an environmental point
of view, a lower concentration of nutrients in the effluent reduces the impact on the
environment.
Next, the existence of economies of scale is analysed. For this purpose, the
quantities of SS, COD and Nitrogen are included as output, differentiating the
minimum quantity of pollutants to be eliminated and the quantity eliminated
above the Directive, thus improving the quality of the results obtained. This last
aspect is of utmost importance for operators and managers of wastewater treatment
plants because opting for a more centralized network design would generate more
resources, thus multiplying the positive effects of the implementation of an EC.
In conclusion, this study demonstrates that, with the available technology, these
infrastructures can achieve higher water quality, while increasing the production
of other by-products, favouring and promoting the practical integration of Circular
Economy in the wastewater treatment sector. However this is only an example of
the benefits that economies of scale could have on circular economy strategies, and
similar results could be found in other sectors or actions.
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Chapter 6
Temporal Study of the Interrelationship
Between Economics and Environmental
Degradation
Niloy Sarkar, Amit Singh, Pankaj Kumar, and Mahima Kaushik
Abstract Environmental degradation has long been considered a negative externality in the course of economic growth. However, for mankind to make long-term
inclusive and sustainable economic development, one must better understand the
relation between both factors and find a suitable future compromise. In this chapter,
we will examine economic growth and environmental degradation with regard to
time from the perspective of landmark transitions of human society. We have started
with prehistory, dominated by a hunter-gatherer mode of life than studied preindustrial age including antiquity and feudal age, characterized by the primarily
agrarian mode of life and localized sustenance. This is followed by the industrial
age dominated by the rise and conflict between nation states, mass production,
colonialism, and increasing socio-economic democratization. Our analysis will
conclude with the information age, the hallmark of which is the unprecedented
dissemination of information and awareness, especially about the environment
leading to global consensus on sustainability, along with technological innovations
allowing for more efficient means of production.
Keywords Economics and environment · Temporal study of economics and
environment · sustainability · economics environmental interdependence
N. Sarkar · A. Singh · P. Kumar · M. Kaushik ()
Nano-Bioconjugate Chemistry Lab, Cluster Innovation Centre, University of Delhi, Delhi, India
e-mail: mkaushik@cic.du.ac.in
N. Sarkar
Department of Environmental Studies, University of Delhi, Delhi, India
A. Singh · P. Kumar
Department of Chemistry, University of Delhi, Delhi, India
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_6
105
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N. Sarkar et al.
6.1 Introduction
Economics is the branch of social science, which is concerned with the production,
consumption, and distribution of goods and services. However, as human population
increases and societies become more complex, it creates increasing demand for
said goods and services. The production of increasing amounts of these goods and
services creates negative externalities such as environmental degradation. Therefore,
it can also be clearly said that the magnitude of environmental degradation depends
on the type of economic demand by the society. Hence, by exploring the nature
and structure of human societies through time; with special emphasis on landmark
anthropogenic events, we can better understand the inter-relationship between
economics and environmental degradation.
The summarized and simplified relation between the various factors of economic
supply and demand fulfillment and environmental degradation is given in Fig. 6.1.
Humans extract raw materials and intermediates from the natural world, which may
be considered as inputs into the economic system. After production which itself is
dependent on factors such as labor, technology, and adherence to environmental
protection sentiment or laws, the goods are traded as per demand on a market.
Consumption, and wastage of the goods can also lead to environmental degradation.
Economic growth is defined as the increase of the market value of goods and
services produced by a country or region with respect to time. It can be summed
up as accumulation of wealth. Economic development is a more complex notion;
however, it can be simplistically explained as the betterment of living standards of
Fig. 6.1 A simplified summary of the interrelationship between economics and environmental
degradation and the factors involved therein
6 Temporal Study of the Interrelationship Between Economics. . .
107
a population over time. Therefore, it can be said that while economic growth is a
quantitative term, economic development is a qualitative measure.
6.2 Pre-history (Stone Age)
6.2.1 Hunter-Gatherer Societies (HGS)
HGS are the simplest societies and rely mostly on foraging for their immediate
needs of food, shelter, clothing, etc. It was humanity’s first adaptation in the
world and it spans 90% of human history (Lee et al. 1999) lasting from the
upper paleolithic age, through the Mesolithic and all the way up to the Neolithic
Revolution. The socioeconomic system of HGS can be described as roughly
egalitarian. Marx had termed this practice as primitive communism. The economic
rationale of this egalitarianism displayed by simple hunter-gatherer societies can be
explained through the concept of demand sharing where food transfer or sharing
of food, mainly hunted meat or game, acts as a form of buffer against highly
unpredictable food sources and limitations in its long-term storage (Lewis et al.
2014). Comparative by a little is known about environmental degradation in ancient
societies. This is because the environmental degradation caused by ancient societies
were minor, which were followed by rapid natural restoration (Makra 2019). Basic
resources were taken from nature and consumed without much processing. However
thick layers of soot were found on the walls of caves attesting to the fact that smoke
must have been a significant indoor pollutant (Makra 2019).
6.2.2 Neolithic Revolution
The first landmark in the evolution of humans can be considered as the Neolithic
Revolution, also known as the agricultural revolution. Agriculture emerged almost
simultaneously in seven to eight regions globally in the windows of 11,500 to
3500 years ago (Bocquet-Appel 2011). The Agricultural Revolution began near the
start of the Holocene Epoch independently in several regions; The Levant, North
China, South China, New Guinea, Ethiopia, Eastern North America, Meso America,
and Southern America (Bocquet-Appel 2011). The economic rationale behind this
transition over centuries has been postulated to be the need for optimal use of
labor resources in the face of growing population (Bowles and Choi 2019). This
growing population and increasing dependency ratio were one of the incentives
in the transition from exploiting less densely spread natural resources found in
the environment to dense resources resulting from agriculture and pastoralism
(agro-pastorialism); therefore, this transition has also been termed as the First
Economic Revolution. The Neolithic Revolution greatly altered the structure of
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N. Sarkar et al.
human societies over the next hundreds of years from small nomadic bands to large
sedentary communities around villages and towns. The evidence for this assertion
is mainly archeological. Archeological evidence not only hint to the increase in the
number of sedentary settlements around the world but also the abrupt increase in
the number and proportion of juvenile (5-year to 19-year-old individuals) skeletons,
demographically termed as 5P15, which leveled off after a millennia after the
establishment of these communities (Bocquet-Appel 2011). Paleo-anthropological
data is relatively well dated, hence it is able to provide simple and relatively accurate
demographic information (Bocquet-Appel 2002). This phenomenon is also called
the Neolithic demographic transition (NDT). From the reproductive biological point
of view, this addition to the population pyramid can be explained via a decrease in
postpartum interval brought on by a shift from low calorific food such as mostly
meat to much higher calorific foods such as cereals and pulses (Bocquet-Appel
2011). From a socioeconomic point of view, settled societies led to intensification of
division of labor and emergence of new professions. Healthy males were involved
in hunting, fishing, animal husbandry, making tools or weaponry whereas women
were involved in cultivation-foraging, and other domestic chores. This transition
from free-roaming foragers to settled agro-pastorialists also marked a significant
change in the relation between humans and their relationship with their land.
Whereas HGS relied on a more varied diet and were flexible in adapting to climatic
conditions by simply relocating, agropastoral societies did depend heavily on a
few selected food options with high productivity, therefore lacked the temporal
flexibility to face climatic and other natural uncertainties. As output from a plot of
land is directly proportional to the invested energy in the form of; tilling, fertilizing,
removing pests, selective breeding, irrigating, harvesting, etc., transition into bigger
and more diverse settled societies also marked the emergence of ownership of land
and conflicts resulting out of the same. This phenomenon eventually led to the
emergence and crystallization of feudalism for the management and protection of
land resources.
These newly formed settlements began to in turn influence their surrounding
environment, perhaps no impact was more profound than that of its effect on
the natural vegetation. Modern forests can be said to originate at the end of the
Ice Age about 10,000 years before present and it’s extent and composition has
remained dynamic as examined by paleo-botanists (Williams 2000). The closer
we look back in history, the more uncertain we are as to whether the vegetation
composition is a natural response to geo-climatic factors or anthropogenically
induced (Williams 2000). Anthropogenic change in vegetation can be classified into
deforestation and change in vegetation type. The latter itself can be divided into
anthropochores (non-native species introduced & propagated) and apophytes (native
species favored and propagated) (Behre 1988). The primary Neolithic humans were
labeled as primitive agriculturalists who must have practiced slash-and-burn shifting
agriculture; clearing a forest patch, cultivating crops, and moving to a new patch
when it got exhausted (Williams 2000). Settled Neolithic agropastoral for the first
time needed long-term removal of forests and it had been estimated that for a model
European settlement of 30 individuals, an area of 6 km2 would be required for
6 Temporal Study of the Interrelationship Between Economics. . .
109
crops, pastoral land, timber, etc. (Lemmen 2009). It has been simulated that from
10,000 to 2000 BC about 29 gigaton of anthropogenic carbon was released into the
atmosphere due to the deforestation of croplands with the carbon release rate being
almost linear from 6000 to 2000 BC (Lemmen 2009).
6.3 Pre-industrial
For the sake of sociopolitical economic and environmental impact studies, we have
combined the ages between the Neolithic and Industrial Ages, i.e., Chalcolithic –
Bronze Age, Iron Age, Classical Antiquity, and Feudal Age. The main attribute
of a pre-industrial society is a subsistence form of living, leading to most of
the labor force being involved in agriculture. This caused most of the population
to live in the countryside as compared to cities. Centralization of the territory
was based on a multitude of factors both geopolitical and geographical. The first
enlarging settlement assumed the form of city-states with a ruling priest-king and
associated noble elite maintaining administrative control over an urban center,
city, and surrounding area. The importance of agriculture in such a setup cannot
be underscored, as they arose near important rivers where agriculture could be
practiced, e.g., the ancient Sumerian city states of Ur, Uruk, Lagash, Kish, etc. near
the Euphrates, the cities of the Indus Valley Civilization; Harappa, Mohenjodaro, on
the banks of the river Indus and its many tributaries. These city states gave way to
early empires as the dominant political entity sought to bring increasing territories
and resources under centralized control. Lack of advances in communication and
transportation was a limitation in the formation of early large empires. The major
economic commodity was agricultural produce which was grown firstly along river
basins and stockpiled to maintain a buffer stock. Records were kept either on clay
tablets or papyri using indigenously developed number systems as a form of account
keeping by dedicated scribes. Ancient law codes such as the Code of Hammurabi,
Arthashashtra, etc. greatly expound upon the need for maintaining accurate account
of grain transactions.
Technology was relatively limited, leading to under-specialization of the labor
force causing relatively simple and limited production processes. Majority of luxury
goods in the ancient world were either primary goods or made so with very little
processing, e.g., precious metals, gemstones, silk, wine, spices, timber, etc. One of
the darker sides of the economics and heavy demand for labor in these times was the
emergence of slavery, which was practiced to some extent in all major civilizations.
Slavery required economic surplus and high population density to be viable which
is why it was rare in the earlier Neolithic period. An economic observation is that
slavery and feudal indebted labor or serfdom is only viable, when land or demand
for labor is large but population or available labor is less, making price of labor
relatively high, this would explain why both slavery and serfdom declined as the
population of Europe increased. Slavery can also be attractive, when the nature of
labor is simple and non-technical.
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Most global pollution happened post Industrial Age, due to unprecedented
growth in population and socio-technological innovations. However, by analyzing
paleo-archaeological evidences the effects of some sources of pollution from prerecord keeping time can be studied. Metal working seems to be a turning point in the
history of environmental degradation. Copper is such a metal, which is a constituent
of the alloy bronze and was so instrumental that an entire age; Chalcolithic –
Bronze Age has been named after the element. A study examining 23 sections
of the Greenland Ice Core Project (GRIP) at depths 619.3–129.3 m by Hong et
al. which covered a period of 2960–470 years before present was done. It was
found that copper concentration of the cores, measured with an accuracy of 10%
using Graphite Furnace Atomic Absorption Spectroscopy (GFAAS) was low in
background concentration, until an increase starting with the Roman period around
2500 years ago and is associated with the smelting and use of the element (Hong
et al. 1996). Another metal of interest along with copper is lead, which was first
extracted on a large scale around 3000 BC from its sulfide ore (Makra 2019). Lead
melts at a low temperature is corrosion resistant, and considerably malleable. The
concentration of lead in the teeth of Neolithic humans has been found to be 0.3 ppm,
whereas the same in Roman, Anglo Saxon and Viking people in Britain has been
found to be 10 ppm or even higher (Makra 2019). Chemical analysis of Greenland
ice cores shows that concentrations of lead started increasing in the fifth century BC,
coinciding with the Greco-Roman times, where it reached up to four times natural
deposition rates (Hong et al. 1994). Lead was recognized as an occupational hazard
by the Romans.
Indoor air pollution, mainly in the form of particulate matter, still plagued the
people of ancient antiquity with lighting, heating, and cooking primarily being
provided by burning biomass. Histological examination of the lungs of ancient
mummies has shown that anthracosis (accumulation of carbon) was a regular
occurrence (Colbeck and Nasir 2010). In ancient Sumer excessive irrigation caused
the water table to rise and salts to precipitate on the soil surface turning it white,
impermeable, and infertile (Makra 2019). Living in such proximity and density
also caused microbial pollution. It has been noted that fertilizing of paddy fields
in ancient China using human feces caused E. coli contamination in groundwater,
boiling the water led to precipitation of salts and water becoming tasteless, therefore
a practice of flavoring the water using tea leaves had evolved (Makra 2019).
6.4 Industrial Age
The Industrial Age begun in 1760 in Britain and from there it spread through Europe
and later in the whole world. This marked the tectonic shift in human history as
economics shifted from labor based (both unskilled and skilled) to mechanization,
from workshops to centralized factories. The Industrial Revolution was first began
in Britain due to the availability of all the prerequisites, that is land (resources),
capital (both financial and technological), and labor (population). The increase in
6 Temporal Study of the Interrelationship Between Economics. . .
111
the supply side availability was accompanied by an increase in demand as well.
This parallel but synergistic development is called consumerism. The consumption
of goods by the consumers promotes the economic growth of the society and creates
jobs for individuals and wealth for the owners. The consumerism was begun in the
late seventeenth century in Europe. Later, it emerged throughout and became a major
part of the society, after that it spread all over the Europe to the rest of the world,
as it became the main part of the economic system (Rees 1992). In the early days, a
lot of consumer goods were used to manufacture from raw materials and then those
were transported and sold to people in different countries. The industrial revolution
started in the eighteenth century in England, when lots of companies, factories,
and mines were emerged (De Vries 1994). The companies and factories utilize the
economic freedom of that time and produced countless number of products.
The human population of the Earth had been increasing steadily since the
paleolithic age, where nutritional input was one of the major limiting factors. During
the Industrial age, the human population began to increase more rapidly due to better
agricultural knowledge and practices, which increased food security and reduced
changes of major famines, at least in Europe. With this, increasing population, there
are many factors which are directly getting affected. The needs of this population
are hard to satisfy with a slowly under developing country, which is still under the
curse of poverty. The living beings are totally dependent on environment for their
survival. The human civilization is growing exponentially, and its adverse effects
can be easily seen on environmental resources. In 2015, the world human population
was near about 7.3 billion. According to United Nations, the population number
will reach 9.2 billion by 2050. This number shows that such a huge amount of
population needs to be fed, clothed, and required shelter for their living and for all
this they are dependent on nature (Michaelis 2003). While when people are busy in
consuming the resources, meanwhile they are also producing so much of waste from
it. The consumer goods, economic growth, human population, and degradation of
environmental resources are interdependent, and they have become a major concern
for our society (Jackson 2005).
The overpopulation leads to various climatic consequences by promoting the
burden on the environment resources. This not only hinders the economic growth
of the country but also majorly affects the atmosphere in infinite ways. From 1960
to 2000, the population growth rate was around 2% per annum, which means that
in every 35 years, the population is expected to double. The recent advancement
in agricultural area, industrialization, improved medical facility like antibiotics,
improved medicine, surgical techniques, etc., caused numerous transitions and lead
to decline in mortality rate. If we try to study the distribution of population around
the world then we will find that developing countries have high number of birth rates
due to less education and poverty whereas in developed countries, the birth rate is
low. According to a survey, around 80% of population lives in developing countries.
The mid of eighteenth century was the time of industrial era, when different types
of factories were established to produce consumer goods. The underdeveloped
countries followed the rough practices like improper discard of chemical wastes
directly into the rivers from factories, contaminating the air by removal of toxic
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Fig. 6.2 Summary of sources, types, and effect of common pollution types
gases directly to the environment and dumping lot of plastic or non-biodegradable
waste into the ground (Nathaniel et al. 2019). The overproduction causes various
types of pollutions and leads to numerous diseases to the mankind, which are listed
in Fig. 6.2.
Industrial era was of new inventions and discoveries, which greatly increased
the rate and efficiency at which natural resources could be exploited, turned into
products, and distributed to satisfy the demand of an ever-increasing population.
The invention of the steam engine was a watershed moment for mechanization
and unfortunately for emissions as well. It enabled the development of mechanical
textile mills, which when combined with ancillary inventions such as the flying
shuttle, spinning mule, Jacquard mill, etc., led to the shifting of the textile industry
from a domestic one to a capital, energy, innovation, and labor-intensive industrial
affair. The extensive use of coal as a fuel also started local deposition of soot and
significant global emission of carbon dioxide.
The industrial revolution is one of the big reasons for the environmental
degradation and pollution and the major causes for it are shown in Fig. 6.3.
Industries were established initially to satisfy human needs but now they are costing
us our lives by making our atmosphere a poisonous chamber for us to live in. The
industrial pollution is affecting our ecosystem since last many years. Most industries
required a lot of water for working which later gets contaminated due to heavy
metals, pesticides, radioactive waste, etc. Most of the waste get dumped into large
open oceans or rivers, which affects the life of aquatic ecosystem. Same water is
then used for irrigation purpose in farming, which affects the food quality and later
these toxic heavy metals reach humans and cause several diseases. The industrial
expansion also affects the wildlife, most of the species are already extinct and many
more are under the threat of extinction (Pearson et al. 2014). The industrialization
causes deforestation, habitat loss, global warming and wildlife endangerment, etc.
(Hanif et al. 2019).
The modern era is attracting more people from villages to urban areas, which
is leading to its expansion to the wildlife further results into extinction of many
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Fig. 6.3 Major causes for the environment degradation and pollution
species, disturbance in the ecosystem, and threats to the biodiversity, which
indirectly affects the climate cycle. The major problem, which is observed by the
nation worldwide is the loss of ecosystem especially because of water, air and
soil pollution, and promotes natural disasters like floods, drought, etc. (Renaud and
Bogardi 2006).
Before the beginning of the industrial era, different countries started the early
trading system which was known as mercantilism. According to the same, the
nation’s exports their goods to increase their power and wealth by collecting
precious metals like gold and silver. It was started in 1500s from Europe, which
changed their old policy of feudal economic system. In England, which was the main
center of British Empire had low natural resources. So, to increase their wealth they
introduce a new fiscal economic policy which means that for the demand of goods
and services they must use government spending and follow tax policies. To increase
the monopoly of countries, they started trading in foreign market via water transport.
The navigation act of 1651 bans the foreign trading along the British coast and for
trade they required colonial exports to pass through them before being redistributed
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to the other parts and this resulted in the increase of British wealth (Deane and
Deane 1979).
Perhaps the biggest effect of mercantilism was the race for the acquisition of
colonies as European powers constantly blockaded each other’s trade routes and
waged wars on the European continent, a natural consequence was to simply militarily take over the overseas raw material source and defend it by the strength of arms
until absolute supremacy could be established. The concept of colonialism cannot be
divorced from sentiments of blatant racism and exploitation where economics was
intimately intertwined with physical subjugation of distant lands and exploitation
of its resources. This exploitation was often justified by disguising it as liberation
of the natives and upliftment being a “white man’s burden.” The British colonial
mercantilism showed the effect on its home colonies, they controlled the production
and trade by the colonies which restricted their trades to foreign countries. The
triangulated trade between the British Empire, its home colonies, and the foreign
markets promotes the expansion of slave trade in America and West Indies as cheap
labor was required to manage plantation crops. The British Empire’s solidifies its
economy by taxation and inflation from its colonial states. The biggest and famous
mercantilism was the British and Dutch East India companies. It maintained trade
between China, India, and Britain. Now mercantilism is an outdated policy the
current era is of free trade. The free trade policy has various advantages over the
previous policy like more affordable and variety of goods, and more benefits to the
consumers (De Vries 1994). In essence it can be said that the economic goal of
colonialism system was to dismantle the craftsmanship and domestic industry of
the host country through export restrictions, taxation, and prohibitory import tariffs.
All the while, making them non-competitive against European goods which were
produced from raw materials acquired from the same host countries. The socioeconomic consequence of colonial legacy was widespread exploitation, poverty,
inequality, regional instability, and conflict, the effects can still be very much felt
today.
In the beginning of Industrialization no one would have any idea that the burning
of fossil fuels will affect our climate so badly. The warming started in some regions
in the 1830s (Mason 1997). The global warming is the phenomenon of heating of
earth’s surface which is due to the presence of greenhouse gases like water vapor,
nitrous oxide, carbon dioxide, methane, and chlorofluorocarbon. These gases trap
the heat from the surface and reflect back to the surface. Industries were established
initially to satisfy human needs but now they are costing us our lives by making our
atmosphere a poisonous chamber for us to live in. Human activities are increasing
the natural amount of greenhouse gases (Fig. 6.4).
Carbon dioxide is one of the naturally occurring gases. It is mainly produced
from animal respiration, volcano activity, weathering of rocks, etc. But from the
past few decades, the consumption of fossil fuels and oils have been increased
which drastically increased the concentration of carbon dioxide in the atmosphere.
According to data, since 1751 total amount of CO2 emitted has been increased over
1.5 trillion tons. This emission increased the global temperature by average of 2 ◦ C.
This will lead to warmer conditions like melting of glaciers, reduction in yield of
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Fig. 6.4 Green house gases such as CO2 alter the albedo of Earth, trapping thermal energy, leading
to global warming Source: https://commons.wikimedia.org/wiki/File:Greenhouse-effect-t2.svg
crops. In the last 125 years, the industrial activities raised the atmospheric CO2 level
from 280 parts per million to 412 parts per million which is much higher than the
restricted CO2 limit (300 ppm) (Held and Soden 2000).
Chlorofluorocarbons (CFCs) have been used extensively since the 1960s.
It is one of the most useful compounds ever developed for refrigerant
purpose in air conditioner, refrigerators, etc. The mainly used CFCs are CFC11 (trichlorofluoromethane – CFCl3 ), CFC-12 (dichloro-difluoromethane –
CF2 Cl2 ), CFC-113 (trichloro-trifluoroethane – C2F3Cl3), CFC-114 (dichlorotetrafluoroethene – C2 F4 Cl2 ), and CFC-115 (chloropentafluoroethane – C2 F5 Cl).
CFCs are non-carcinogenic, non-flammable, and non-toxic gas but when they
reached the earth atmosphere and remain stable for years. Once it reaches the
stratosphere, the sunlight breaks the CFC molecule and release chlorine atom. The
free chlorine atom undergoes a series of free radical reactions with ozone molecule
which results in thinning of the layer and allows the harmful ultraviolet rays of the
sun to reach the earth surface (Hansen et al. 1989). The mechanism of action is
shown in Fig. 6.5.
CFCs have much greater tendency of global warming than CO2 . It can cause
16,400 times more warming than CO2 and it can remain active for over 500 years.
When the use of CFCs becomes the major reason for the depletion of ozone layer
then many countries come forward to restrict the use of CFCs. In 1978, Sweden
was the first which banned the use of CFCs. The biggest step was taken in 1985,
when first 23 nations came forward for the Montreal protocol and till now over 189
countries have joined. The agenda of this is to replace the reactive CFCs with no or
less reactive gases (Benhadid-Dib and Benzaoui 2012).
The most abundant greenhouse gas present in our atmosphere is water vapor.
Water vapor as a greenhouse gas sounds very unthreatening. The water vapor
indirectly participates in global warming. The emission of other greenhouse gases
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Fig. 6.5 Mechanism of action of CFCs break down ozone
causes increase in the temperature of the earth surface and water bodies. This
increase in temperature leads to evaporation of sea and river water and results
in increase in humidity in atmosphere. The water vapor has the tendency to trap
infrared radiation emitted by earth surface (Held and Soden 2000). We have many
instruments to monitor the other greenhouse gases like CO2 , N2 O, etc. But for the
water vapor there is no suitable instrument to check the global increment and decline
in its atmospheric concentration.
Methane (CH4 ) is the third most abundant greenhouse gas present in our
atmosphere. It has extremely high radiation absorbing tendency as compared to
CFCs, N2 O, CO2 and its lifetime is around 10–12 years. It can produce 86 times
more heat than CO2 (Howarth 2015). In 1978, the atmospheric concentration of
methane was 1.52 parts per million by volume (ppm). Methane occurs naturally
and by anthropogenic sources. The natural source of methane are swamplands, coal
mining, cattle excrete, and rice fields. Currently, the methane concentration in our
atmosphere is approximately 1.77 ppm (Janzen et al. 2006).
Another greenhouse gas is nitrous oxide (N2 O); the main source of nitrous oxide
is the overuse of fertilizers and pesticides. In 1700s when the industrial era was just
begun the concentration of N2 O started rising and the scientist predicted that till
2050 the concentration will become double (Kroeze et al. 1999). The nitrous oxide
has 300 times more heat-absorbing capacity than CO2 and it can remain active for a
century. The nitrous oxide has ozone-depleting potential, but its activity is sensitive
to different environment conditions (Reay et al. 2012).
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6.5 Information Age
The information age is a period of history starting from the twentieth century
which marked the rapid shift of economic activity from traditional industry which
had dominated the previous industrial age to an economy based on information
technology (IT). The invention of solid-state transistors can be taken as a landmark
in this transition as it enabled the development of an entire platform of digital
electronics. This current era is also synonymous with various other new developments which have taken place and effected the relation between human economics
and the environment across the various previously mentioned parameters of, labor,
technology, demand, environmental consciousness and legislation, logistics, etc.
However, this shift has not been universal as decolonization has led to large number
of developing nations striving to undo the economic inequality and improve the
standard of living of their citizens. This age has been a dichotomy between accelerated environmental degradation and every emerging environmental consciousness.
Therefore, with respect to environmental conservation, the focus has shifted from
merely economics to more inclusive development in recent times.
Information and Communication Technologies (ICT) have both negative and
positive impacts on the environment and had been a widely debated topic over the
years. It is well known that, ICT is among the highest contributors to the growing
levels of CO2 emissions keeping in view the manufacturing of ICT devices and
machinery, electronic waste recycling and their disposal, and energy consumption.
However, it also contributes in controlling CO2 emissions globally by developing
transportation facilities, industrial processes, smart cities, and energy-saving gains.
Both these effects work together opposite to one another, forming an inverted-U
relationship between CO2 emission and ICTs (Higón et al. 2017). The ICT sector
is estimated to contribute about 2% of the worldwide greenhouse gas emissions
(Mingay 2007). In contrast to this, ICT could also be considered as “ICT for
green” as a feasible solution to various environment issues. Thus, making ICT
as a promising solution in confronting with the climate changes and associated
environmental problems (Elliot 2011; Watson et al. 2012; European e-Business
Report 2010; Gholami et al. 2013; Melville 2010).
In the Global e-Sustainability Initiative report (GeSI 2008) well known as
SMART 2020 report, it was stated that an estimate of around 2.8% inflation of
the overall global CO2 emission would be due to the ICT. In addition, it also
stated that ICT would be able to downgrade CO2 emissions by approximately
15% of the overall global CO2 emissions predicted for 2020. The ICTs have
utmost opportunities in logistics, dematerialization, smart motor systems, grids, and
buildings (GeSI 2020). The understanding of the significance of ICT on environment
is an important aspect. However, the observational proof of how ICT strengthens
environmental sustainability mainly at the economical and global level is limited
(Higón et al. 2017).
Economically this age, especially the post Word War period, can be summed
up as the exponential economic growth, fueled by unsustainable exploitation of
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natural resources, consumption of non-renewable energy sources, destruction of
biodiversity, emission of greenhouse and ozone-depleting gasses and have triggered
a global environmental crisis. The first link of this economic chain, demand,
that is population has attracted the attention of several renowned demographers
worldwide. Historical demographers estimate that global human population stood
at 1 billion in 1800 AD which increased to 1.65 billion in 1900. One way of
expressing the exponential growth in population brought about by the unprecedented
rise of nutrition, hygiene, and medical care is using the concept of doubling that,
the number of years it’ll take for the global population to double. Based on the
United Nations Department of Economic and Social Affairs population estimates
and interpolation of the same global population doubling time has consequently
decreased from 123, 47, and 50 years between 1800 AD and projected up to
2024 AD. However, a slim glimmer of hope is offered by the fact that the world
population growth rate peaked between 1965 and 1970 at 2.1% per annum as per
the World Population Prospects (2019) report of the UN and since then it has halved,
for the last half century. Nowadays, we are living in a world where population
growth rate is falling. Demographic transition happened in developed countries and
continues to take place in developing countries. This population explosion resulted
in new consumers being created for basic survival and luxury goods and thus, also
exponentially increased the economic demand globally. In the twenty-first century
global population increased by 3.9, GNP was multiplied by 18.6, and per capita
income by 4.9, with the fastest growth being registered between World War II
and Oil Crisis (1950–1973) (Maddison 2008). This rise was fueled by an array
of favorable factors which can be divided into labor and technology. In terms of
labor, this period saw an increase in productivity due to increasing population, life
expectancy, mean working years, as well as greater urbanization which have further
facilitated economies of scale and increased the economic productivity, and in turn
increased aggregate demand as well. Socially, this age has been remarkable as it
saw the theoretical legislative end of grossly exploitative practices such as slavery,
colonialism, institutionalized racism, casteism, etc., and a move toward a more
democratized society where the narrative shifted from merely economic growth
to a broader and more inclusiveness economic development and social justice.
Proliferation of positive social goods such as health, education, and social security
has increased the labor force efficiency.
Technologically, this age has provided with many advantages which have allowed
for this rapid economic growth which can be briefly divided into categories, energy
exploitation, and productivity. This energy mainly come in the form of cheap
petroleum which was discovered and extensively exploited in the Middle East.
However, this overdependence and exploitation of one resource for energy has
produced a carbon bubble. The cost of exploitation and extraction for successive
reserves of hydrocarbons is becoming more extensive. The maximum demand
for hydrocarbons is dependent on several factors: price of extraction, extraction
technologies, economic demand, efficiency of production, regulations, renewable
energy alternatives, geopolitics, etc. Therefore, prediction of the date of maximum
oil supply or demand “peak oil” is difficult and controversial. However, the
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International Energy Agency (IEA) predicts that globally we have already passed
“peak oil” production, however, international demand for crude oil will not decrease
significantly before 2035 (Miller and Sorrell 2014). Much of these petrochemicals
are used for the manufacturing of plastics, which were greatly exploited in consumer
goods after the 1950s, with both exponential increase in their quantity and variety.
In a recent report, Plastic & Climate: The Hidden Cost of a Plastic Planet by the
Center for International Environmental Law (CIEL) it has been stated that in 2019
the production and incineration of plastics will add more than 850 million metric
tons of greenhouse gasses into the atmosphere. Two events can be thought of as
the watershed moments of the information age; one is the previously mentioned
semi-conductor or information revolution and another was the conclusion of World
War II which brought about tectonic changes in global technology and economics,
respectively. Technologically, this age has been very eventful with the advent
of several technologies which has directly or indirectly affected economics and
environment. These technologies can be summarized into two categories: energy
and productivity. New discoveries such as nuclear power and renewable energy
sources such as solar cells, wind turbines, hydro dams, etc., have established the
potential for cleaner energy.
The technological development and environmental problems go hand-in-hand.
Thus, technology offers a great reliance to overcome the environmental challenges
faced globally, due to the worldwide reluctance that would be necessary to decline
the growth in manufacturing and utilization (Beder 1994). Figure 6.6 depicts the
various factors responsible for the determination of environmental impacts.
The policies of sustainable development aids to provide an alternative for the
nature of economic progress instead of limiting it. In a limited world, it is hypothesized on the belief that continuous growth could be achieved through the capabilities
of technology, which would facilitate us to discover fresh sources or alternatives
for an exhaustively used resource. The limited resources what we are left with can
be utilized more efficiently with the help of technology. The legislative measures,
economic machinery, and consumer pressures collectively are the key tools for
obtaining sustainable development (Beder 1994). The sustainable development
aims for achieving technological modifications like material substitution, recycling,
transformed production practices, waste minimization, and use of resources with
Fig. 6.6 Schematic illustration of the factors determining environmental impact
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greater efficiency and pollution control. For achieving these goals efficiently, mainly
two types of energies could be made use of, i.e., nuclear energy and renewable
energy.
Every energy source has its beneficial and injurious effects with respect to
sustainable development. For providing a satisfactory input in achieving sustainable
development goals, nuclear energy needs to sustain its high standards of electricity
production along with the safety of environment. Utilization of nuclear energy as a
source of electricity production contributes equally to the environment, and socioeconomic development. Nuclear energy yields tremendous quantity of practically
carbon-free energy at reliable cost, providing both environmental and economic
aspects of sustainable development, significantly (Mourogov 2000). Along with
these benefits, use of nuclear energy also carries accident risk and disposal issues
of radioactive waste which reduces its contribution to sustainable development. The
sustainable development could be attained up to a great extent by using renewable
energy source of energy, also known as sustainable energy. Technologies consisting
of renewable source of energy contribute significantly to sustainable development
and helps in greenhouse gas emission mitigation (Güney 2019). A few important
renewable energy technologies are solar power plants, solar heating, biomass,
wind power, geothermal energy, biofuels, marine energy, hydrothermal plants, etc.
(Dincer 2000).
The second technological advancement was in the consumer electronics category
whose demand was driven by increasing consumerism. This consumerism was
fueled by advertisement on mass media, inbuilt obsolescence as industrial design,
greater physical access to products, later on the fall of the Berlin Wall and
dissolution of the USSR would bring this capitalist consumerism even to previously
untapped markets, thereby greatly accelerating the process of consumption, industry, exploitation, and environmental degradation. Human activities have contributed
to more than thousand times the extinction rates than found in nature. This culture
of consumption can be considered as the most universal and unifying nature of
human nature, surpassing any geographical, ethnic, or political barriers. However
not everyone has benefited from this consumption boon as the Credit Suisse, Global
Wealth Report (2012) shows that the riches 10% own 86% of and that the bottom
half owned less than 1% of the world’s assets (Anand and Thampi 2016).
It is abundantly clear, that this type of economic growth at the rate of accelerated
environmental degradation is neither sustainable nor equitable. The World Wide
Fund for Nature (WWF) Living Planet Report (2014) found that humankind was
already using resources of 1.5 times of the Earth could sustain. However, the same
technologies which are leading to accelerated environmental degradation also have a
silver lining. ICT is also giving rise to a growing conscience and concern over issues
such as global warming, rising sea levels, ocean acidification, loss of biodiversity,
depleting ozone layer, gross inequality, etc.
In order to stabilize the global financial system expediently for sustainable
development, the lessons learned from the experience of the feudal and the industrial
ages are considered. Keeping track of the above and applying them, a global
consensus came out which is being implemented by most of the countries of the
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121
United Nations, to overcome the inevitably associated fields of social, economic,
and environmental issues (Costanza et al. 2016). Many scientific studies, summits,
and treaties have been made globally to take account of the cause, a few of them are
the Paris Agreement of Climate Change and Sustainable Development Goals, the
2030 Agenda of the United Nations. These global accords focus on the requirements
necessary to pursue sustainable development globally. In a meeting held in mid2015, the WHO set 17 sustainable goals to tackle the key barriers to sustainable
development, which covered almost each and every aspect of environmental
dimension in sustainable development. The 17 sustainable development goals are
shown in Fig. 6.7.
Science plays a vital aspect in expanding our understanding toward the impacts
of sustainable development as a key answer for most of the problems faced by
countries all over the world. Many scientists work tirelessly on the above, but
it takes years to establish scientific learning into policies, as it requires great
assistance and communication. For developing a sustainable world, it would require
an interdisciplinary approach. A unified scientific pathway can be anticipated
for upholding the sustainable development, which could be committed on the
supporting grounds of interdisciplinary collaborations (Wuelser et al. 2012).
The summits on sustainable development are done in order to bring about
great and noble minds of different countries from diverse fields to deliberately
exchange knowledge on all aspects related to sustainable development. These
summits are done with the motive to spread public awareness on the requirement
to bring together environment and development. The United Nations Conference on
Sustainable Development (UNCSD), also known as Rio conference or Earth Summit,
Fig. 6.7 Objectives of the Sustainable Development Goals (SDGs). (Source: https://commons.
wikimedia.org/wiki/File:Sustainable_Development_Goals.svg)
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which first took place in 1992, drew attention of 109 heads of state, to address the
alarming concerns of the socio-economic development and environment protection.
Other than this, there are numerous summits that take place globally, on an annual
basis to raise awareness regarding sustainable development, for example, the ‘World
Sustainable Development Summit’ organized by the United Nations, the ‘SAARC
Summit’ organized by the South Asian Association for Regional Cooperation
(SAARC), etc.
Since the last three decades, an array of treaties globally had been put into action
to overcome the alarming global concerns such as socio-economic development and
environmental conservation. For the implementation of treaties globally, numerous
new regimes have been formulated for climate change, desertification, biosafety,
investment and trade liberalization, biodiversity, and agriculture and seeds. At the
first Earth Summit held in 1992 in Rio De Janerio, the Framework Convention
on Climate Change and the Convention on Biodiversity was signed and adopted
Agenda 21 for attaining sustainable development. The following were the goals
where the above played a direct and significant role: (a) Sustainable human
settlements; (b) Integration of social, economic, and environmental objectives;
(c) Freshwater; (d) Capacity building; (e) Changing consumption and production
motifs; (f) Sustainable tourism; (g) Transfer of environmentally sound technologies;
(h) Making trade and environment mutually supportive; (i) Energy; (j) Education
and Awareness; (k) Transport; (l) Sustainable Tourism; (m) Forests; (n) Toxic
Chemicals, and (o) Atmosphere.
Another important treaty that is the Montreal Protocol was implemented after
the outbreak of the ozone layer. It was signed on 16th Sept 1987, and got
implemented from 1st Jan 1989 in which over 197 parties took part, making it the
first United Nations globally ratified treaty (UNEP press release: “South Sudan Joins
Montreal Protocol and Commits to Phasing Out Ozone-Damaging Substances”).
The Montreal treaty mainly focused on the various halogenated hydrocarbon groups
that were the major cause of the ozone depletion. The substances containing
bromine or chlorine also known as the ozone-depleting substances are controlled
by this Montreal Protocol. Under this treaty, the following three main plans were
proposed:
(i) Chlorofluorocarbons (CFCs) Phase-Out Management Plan.
(ii) Hydrochlorofluorocarbons (HCFCs) Phase-out Management Plan.
(iii) Hydrofluorocarbons (HFCs) Phase-out Management Plan.
One of the recent treaties that could become a breakthrough in the field of climate
change is the Paris Accord under the United Nations Framework Convention on
Climate Change (UNFCCC), which deals with the transformation, finance, and
mitigation of the greenhouse gas emissions. Around 196 state parties of the United
Nations took part in this and were signed on 22nd April 2016 at the UNFCCC 21st
Conference organized in Le Bourget, near Paris, France. The main objective of this
accord is to reduce global average temperature/global warming
6 Temporal Study of the Interrelationship Between Economics. . .
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(a) By reducing the increment in the global standard temperature to less than 2 ◦ C
over pre-industrial levels and to endeavor the limit of increasing temperature to
1.5 ◦ C over pre-industrial levels, perceiving that it could compellingly reduce
the impacts and hazards of climate change.
(b) Growing the capability to adjust to the situations of unfavorable effects of climate change and flexible foster climate and reduced greenhouse gas emissions
growth, in such a way that does not intimidate production of food.
(c) Developing steady financial support for achieving the goal of reduced emission
of greenhouse gas and making climate-supply growth.
The above discussed are a few important treaties implemented globally to overcome
the inter-disciplined global issues of socio-economic and environmental development.
The Paris Accord which deals with the climate change is seen to become a failure
as no limitation over the global greenhouse gas emission is seen even in 2020, as
fore-mentioned in a review by some renowned professionals published in May 2017
(McAdam 2017). In order to avert the severe effects of climate change, we all must
adequately diminish the usage of substances which causes greenhouse gas emissions
in the near future. While efforts by a single person can help in reduction of harmful
emissions, their significance is inadequate if this practice does not take place on
an extensive level. For rapid decrement in the emissions, the policies, rules, and
technologies that frame energy for various uses must transform in a manner that
intensify sustainable development.
6.6 Conclusion
Until most of human history, humans were merely an integral part of the environment and as reliant on it as any other organism. However, what separated
humans from other animals was the ability to change the environment as an
evolutionary strategy for survival. Human economics evolved along with this desire
and ability of humans to mold and change the environment to satisfy his demands.
This relationship between economics and environment can be thought of as an
attempt to firstly secure survival with the advent of agriculture to reduce the
nutritional uncertainty. This was followed by industrialization and mass production
for accumulating profit and geopolitical dominance. With the present transition into
the information age we stand at a crossroads where global environmental crisis is at
an unprecedented level, but so is the awareness and actions to rectify the same.
Therefore, it’s the need of the hour to amend the economic philosophy of one
of mere consumerism to efficiency and inclusiveness to stave off and if possible,
reverse the environmental degradation it has caused.
Acknowledgments N.S. would like to acknowledge his fellowships as UGC − CSIR fellowship
no. F.16-6(DEC 2016)/2017(NET), and A.S. would like to acknowledge his fellowship from the
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University of Delhi. P.K. would like to acknowledge his fellowships as CSIR fellowship no.
09/045(1646)/2019-EMR-1.
Conflict of Interest None to declare.
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Chapter 7
Cities as Emerging Centers in a Circular
Economy: An Assessment of Indian Cities
Anindita Roy Saha and Garima Gupta
Abstract Cities in the twenty-first century are the major centers of economic
production and consumption activities. The rising levels of natural resource use,
greenhouse gas emission, and waste generation in the urban centers pose threats to
attaining sustainable development in a world constrained by resource scarcity and
ecological limits. A circular approach to managing consumption and production
in the cities may help address the challenges in the urban ecosystem and bring in
economic, environmental, and social benefits. The circular city model recognizes
and incorporates the principles of Circular Economy (CE) and tries to establish an
urban system that is regenerative, accessible, and where nothing is waste. While
the RESOLVE framework rests on regenerate, share, optimize, loop, virtualize,
and exchange, the recent circular city model focuses on three circular actions,
namely, looping, regenerating, and adapting and four supporting actions, namely,
optimization, sharing, substitution, and localization. As a result, the circular cities
can eliminate and/or reduce waste, keep assets always at their highest value,
become digitally enabled and can thereby generate prosperity, improve livability,
and develop resilience for the cities and communities. This paper attempts to
review the applicability of the circular city approach in the Indian context and to
scrutinize the agenda of sustainable cities and communities (SDG 11). The concepts
of sustainable cities and circular cities overlap in terms of efficient resource use,
waste management, and so on. The performance of the Indian cities may further
help analyze the achievement of sustainability which is the goal of CE.
Keywords Circular city · Sustainable development · Waste management ·
Regeneration · Looping · Supporting action · Circular action
A. R. Saha ()
Department of Economics, Indraprastha College for Women, University of Delhi, Delhi, India
e-mail: asaha@ip.du.ac.in
G. Gupta
Department of Environmental Studies, University of Delhi, Delhi, India
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_7
127
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7.1 Introduction
The notion of Circular Economy (CE) has gained prominence as a tool for sustainable development in recent decades. According to estimates from the European
Union (EU) Commission, transitions to the CE can produce an annual economic
gain of 600 billion Euros for the EU manufacturing industry, compared to 1000
billion dollars per annum for the Global Economy (COM 2015) (Finland’s Independence Celebration Fund & Mckinsey 2015). A CE is conceptually opposite
to a linear economy, traditionally defined as a system that operates on the “take,
make, and dispose” model of production (Murray et al. 2017). On the other hand,
the CE principles rest on the four Rs: reduction, reuse, recycle, and recovery. This
method focuses on economic growth that is both sustainable and ecologically sound.
The Ellen MacArthur Foundation (EMF) definition of CE covers a range of valuebuilding strategies not associated with the use of limited resources but rather to the
use and flow of materials (EMF 2015a, b). CE refers to a model that substitutes
the concept of “end of life” with the 4Rs approach at multiple process levels, such
as production, distribution, and consumption. CE works at the micro (manufacturers
and consumers), meso (industries, SEZs, etc.), and macro (city, region, country, etc.)
levels to achieve sustainable development and ultimately, economic development,
social fairness, and ideal environmental quality (Kirchherr et al. 2017).
With the increased awareness among the people about the environment, circular
business and manufacturing models were born, which promote the idea of keeping
resources in the product cycle for as long as feasible. In general, business models are
primarily built on the ideas of how the value of an organization’s goods and services
is created, supplied, and captured (Osterwalder and Pigneur 2010). Circular business
models, on the other hand, are a new type of business model in which “after the
usage, the value creation of goods is entrenched in the products themselves, and
to exploit the value for new sorts of market offerings, a system of return flows
from end users to producers is required, eventually through arbitrators” (Linder
and Williander 2017). When the notion of CE is used in the industrial sector, it
transforms into circular manufacturing (Acerbi et al. 2021). Circular Manufacturing
Systems (CMS) relate to the methodically organized recovery of material, energy,
and product value by reusing, recycling, and re-manufacturing (Asif et al. 2018)
and eventually in the attainment of desirable economic, social, and technological
growth while minimizing environmental damage (Garza-Reyes et al. 2019). Postmanufacturing circular business models are supposed to be Green Business Models
or Sustainable Business Models (Rosa et al. 2019).
Beyond manufacturing, business, and distribution, CE must proliferate and
percolate to consumption too. This means that until people engage in circular
consumption, CE and sustainable development can never be accomplished. Sustainable Development Goal 12 (SDG 12) of ensuring responsible consumption and
production patterns aims to achieve the same. Therefore, consumers have a critical
part in making CE a success story. However, J. Kirchherr’s study explains and
emphasizes that a lack of consumer knowledge and interest is one of the primary
7 Cities as Emerging Centers in a Circular Economy: An Assessment of Indian Cities
129
hurdles in the adoption of CE. He also provides that only 19% of the research
publications describing the CE took consumption into account (Kirchherr et al.
2017). Similarly, the city which is the major center of economic activities of both
production and consumption and thereby waste generation should also be given due
importance in the designing and implementation of the models of CE. Although
cities are included in the classifications of CE at the macro level, it is yet to receive
due focus in both policy designs, planning, and implementation.
This paper aims to discuss the issue of the less talked about component of CE,
namely, the circular cities through alternative approaches. A detailed review of two
such models has been analyzed here. Subsequently, the Indian cities have been
assessed through the lens of the defining principles of the circular city model. This
work further examined the current status and potential of Indian cities to develop as
circular cities.
7.2 Role of Cities in Circular Economy
Cities, or urban centers, serve as hubs for a variety of activities. In addition, cities
nowadays are the engine of economic development, accounting for up to 80%
of global GDP. Today, cities house 55% of the world’s population (UNCTAD
2020; World Bank 2020). They also consume two-thirds of world energy while
accounting for about 70% of global greenhouse gas emissions and 50% of global
garbage creation (World Bank 2020). The world’s metropolitan centers are the
primary drivers of the climate change that we are currently experiencing. According
to the World Bank and the United Nations, the population of cities is estimated
to increase by 66% of the total global population by 2050 (World Bank 2020).
Increased urbanization has resulted in higher pressure on land values in cities
and the surrounding urban agglomeration regions, either driving farmers to sell or
turn their property into high-value businesses. Issues such as water shortages, food
safety, and energy are on the rise every day, not only in cities but also in the periurban neighborhoods. That means that resource usage and energy consumption will
increase, as will the emissions of trash and greenhouse gas. Thus, cities are critical
for the implementation of the CE.
A circular approach to resource use and production in cities could assist
in alleviating some of the problems that cities face. The Circular City Model
recognizes and includes the CE principle and aims to create a regenerative and
accessible urban system in which nothing goes to waste. The circular city is one that
incorporates CE concepts into all its functions. Such cities can eliminate or reduce
wastes, always maintaining assets at their best worth, and are digitally enabled. A
circular city has the potential to promote wealth, livability, and resilience for the city
and its residents. Furthermore, it has the potential to divorce the generation of value
from the consumption of scarce resources (EMF 2019).
Implementing a CE concept in cities can have enormous economic, social,
and environmental benefits. It has the potential to promote the formation of a
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“Thriving city,” “Livable city” and “Resilient city.” Through the CE100 initiative, a
pre-competitive innovation program that supports the business and public sectors
in their transition to a CE, the EMF collaborated closely with some selected
cities such as Brussels, Charlotte, London, Milan, Phoenix, and Toronto (EMF
2019). Subsequently, they proposed a framework for CE called RESOLVE. An
alternative city’s circular approach has been developed with three main goals –
to reduce consumption of resources and waste, secondly, to preserve natural
capital, ecosystem services, and finally, to develop negative economic, social, and
environmental externalities linked to waste of resources, the degradation of capital
and urban ecosystems (Williams 2019a, b).
A circular city must aim to promote prosperity, increase decency, and improve
adaptability for the city and its citizens, while attempting to detach the production
of major value from the consumption of finite resources. The basic objectives of
circular cities are:
(i) To create an atmosphere that is both healthy and flexible, using healthy
materials and minimizing the usage of virgin materials.
(ii) To develop energy systems that are robust, renewable, localized, and uniformly
distributed, allowing for effective energy use, lowering energy costs, and having
a good impact on the natural environment.
(iii) To generate a system of urban mobility that is accessible, affordable, and
effective for everybody. A mobility system that prioritizes remanufacturing,
durability, efficiency, and ease of maintenance while building vehicles.
(iv) To plan urban bio-economy, in which nutrients are returned to the earth in an
appropriate manner, generating value and reducing food waste.
(v) To design production systems that promote the formation of “local value loops.”
This implies higher local production and a more diverse exchange of value in
local economies.
In addition, circular cities must fulfill the criteria of “proximity of people and
materials in urban environment,” “scale of the effective markets,” “the ability of
city governments to shape urban planning and policy,” and “technology and the
digital revolution” (Ellen MacArthur Foundation 2015). With these broad guiding
principles, two alternative models of circular cities have evolved, with certain
principles overlapping and certain contrasting.
7.2.1 The RESOLVE Framework
The RESOLVE platform, originally designed for CE, is an acronym that covers the
following set of six activities:
(i) Regenerate: Suggests switching to renewable energies and renewable materials
to restore the health of the ecosystem and restore its biological resources from
the biosphere.
7 Cities as Emerging Centers in a Circular Economy: An Assessment of Indian Cities
131
(ii) Sharing: Suggests making products available to different users, which can help
keep the product cycle low-speed as well as maximize the use of the product.
(iii) Optimize: Includes increasing product productivity and efficiency, and eliminating waste in the production cycle and supply chain.
(iv) Loop: Envisages that components and materials should be kept in closed
loops/cycles through reduce, reuse, recycling, and recovery, and gives priority
to internal cycles.
(v) Virtualization: This means that the use of resources can be dematerialized,
ensuring the virtual utility of resources.
(vi) Exchange: Provides the ability to replace products and services with options
that consume fewer resources.
While the objectives and targets of RESOLVE are impressive, executing the
system in metropolitan places has certain constraints. The RESOLVE structure is a
plan of action and its parts are restricted to business cycle as it were. With regard to
execution in urban communities the parts are various, mind boggling, and dynamic.
The business is only one part of the city or the metropolitan biological system, which
itself is made of three interconnected frameworks of common habitat, fabricated
climate, and financial climate. The second problem with the RESOLVE paradigm
is that it concentrates on production rather than consumption, even though cities are
centers of both. Furthermore, the RESOLVE framework excludes land, which is a
critical resource. The RESOLVE paradigm also ignores infrastructure, which serves
as a lifeline for cities.
7.2.2 The Circular City Framework
A circular city strives to generate wealth, improve livability, and boost resilience
for the city and its residents, while attempting to decouple value of production
from the consumption of finite resources. These advantages can be realized through
altering how urban systems are planned, developed, and funded, as well as how
they are built, used, and recycled (EMF 2019). J. Williams proposes three main
goals of the circular approach to cities in addition to the three principles, six
activities of the RESOLVE framework, and the gaps present in the framework
(Table 7.1). The first goal is to limit resource use and waste production. The
second goal is to protect natural capital and ecological services. The third and
final goal is to eliminate the negative externalities associated with resource waste,
degradation of the city’s natural assets, and ecosystem services. Along with these
three primary goals for accomplishing the circular city goal, it is necessary to
discuss the components of a city, which is a complex hub of numerous activities.
Manufacturing, building, shopping, education, travel, tourism, and so on are all tied
to the city’s consumption, production, and operation, which is dependent on the flow
of materials and resources. As a result, under the Circular City framework, these
ranges of activities have been separated into two groups of acts: circular actions
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Table 7.1 RESOLVE and circular city frameworks
RESOLVE
Preserve Natural
Capital
CIRCULAR CITY
The preservation and enhancement of natural capitalby
The ecosystem supporting the city is constantly regenerated,
controlling finite stocks and balancing renewable resources Preserving its natural capital and essential ecosystem
flow
services
Resource consumption is reduced (by sharing, optimising,
The optimization of resources yeilds by circulating products,
localising and substitution) and all remaining waste produced
Principles Optimize Resource Use components and materials in use at the highest utility at all by urban activities is looped. Urban infrastructure is also
times in both technical and biological cycles
adapted and renewed for new contexts avoiding wastage
Design out Negative
Externalities
Fostering the system effectiveness by revealling and
designing out negative externalities related to resouce use
Designing out negative environmental, economic and social
externalities related to waste in city
System
Economic
Urban Ecosystem
Resources
Materials, Energy, Water
Complexity
Less Complex- a single business or industrial sector
National/International (business or industrial sector)
Materials, Energy, Water, Land and Infrastructure
Very Complex- Multiple Diverse actors, resources and infrasystems
All scales (with particular focus on city/local)
Focus
Focus on systems of production
Focus on lifestyles, social practices and systems of provisions
Sector
Single sector
Manufacturing, supply, transportation and disposal- relating
to the production, distribution and disposal of
goods/resources
Keep components and materials in closed loops (reuse,
recycle, recover, remanufacture) and prioritise inner loops
Multi-sector, Cross-sector
Travel, shopping, leisure, education, manufactruing,
construction, agriculture- relating to consumption, creation
and operation of the city
Closing resource loops through recycling, recovery and reusing resources
Plan and design cities to allow for the adaptation and
renewal of urban infrastructure
Scope Scale
Activities
Loop
Adapt
N/A
Regenerate
Shift to renewable energy and materials; regenerate the
health of ecosystems and return recovered biological
resources to the biosphere
Localize
N/A
Actions
Substitution
Share
Optimize
Regenerating natural capital and urban ecosystem services
Localization of resource flows and activities (consumption
and production) within the city-region to develop local
symbiotic capital and encourage pro-environmental
behaviour
Substitution of non-renewable resources with renewable
Virtualise and exchange. Dematerialise resource use by
resources in the supply chain; resource based activities with
developing utility virtually. Replace products/services for
service-based activities; and physical with virtual activities;
lower resource consuming options
non-durable with durable infrastructure
To keep product loop speed low and maximise utilization of Sharing resources in cities across a range of activities (e.g.
products, by sharing them among different users
living, working, travel)
Optimise the consumption of resources by producers and
Increase performance/efficiency of a product; remove waste
consumers through the use of efficient technologies and
in production and supply chain; leverage big data
addressing resource redundancies with the urban system
Source: Williams (2019a, b)
and supporting actions. Looping, renewing, and adapting are three circular actions
that are essential for a circular city. The four supporting actions are optimization,
sharing, substitution, and localization (Williams 2019a, b).
Looping can be seen in cities through waste-to-energy plants, building renovations, and other means. Urban ecosystems and urban capital are conserved and
rebuilt through regeneration using green and blue infrastructure. Examples include
7 Cities as Emerging Centers in a Circular Economy: An Assessment of Indian Cities
133
the use of green roofs, pond restoration, and urban farms and woods that can
be included into urban development. Finally, the final cyclical activity occurs,
which is adaptation, which implies planning and developing the city in such a way
that it can adapt as well as making renewed use of existing infrastructure with
zero/lower resource waste. The term “optimization” refers to the improvement of
output and consumption through the application of efficient technology and process
methods. It is possible to achieve this using smart data, smart design, regulatory
instruments, and so on. Sharing refers to the sharing of resources throughout the
city through a variety of activities such as co-housing, co-working spaces, and so
on. Substitution refers to the replacement of nonrenewable resources with renewable
resources, the replacement of resource-based activities with service-based activities,
the replacement of physical activities with virtual ones, and so on. Examples
include the use of renewable energy and telecommunication to replace physical
activity. Localization refers to the localization of resources or the promotion of local
products, both of which can assist to reduce the amount of energy used to move nonlocal resources while simultaneously lowering GHG emissions. This will also serve
to raise consumer awareness and encourage environmentally responsible behavior
(Williams 2019a, b).
However, it is critical to understand the potential impediments to cities adopting
a CE in order to facilitate the transition. Implementing looping actions has several
drawbacks. Some of the difficulties originate from the necessity for societal
cultural transformation and economic reorganization to sustain looping activities.
Others speak of the challenges of creating the regulatory, institutional, educational,
technical, and political levers required for such transition to take place. J. Williams
found 58 obstacles to cities’ looping acts. The obstacles differ depending on the
resource and the type of activity taken. These 58 looping action challenges were
divided into eight categories: sociocultural, economic and financial, information,
regulatory, political, institutional, environmental, and technology. Reuse and recycling activities encounter more hurdles than energy recovery. Nonetheless, there
are five issues that affect both resources and actions: a lack of political will, a
well-coordinated regulatory framework with clear standards, data, and institutional
capacity (Williams 2019a, b).
On the other hand, Paiho et al. suggest that the holistic approaches to circular
cities, including real activities and means, are lacking in the scholarly literature.
The emphasis is mostly on visions, goals, and methods. The majority of studies
offering actual measures and numerical evaluations of CE solutions in cities focus
on specific topics like trash flows, material flows, and food-sheds (Paiho et al.
2021). Paiho et al. divide the obstacles of CE in cities into four categories: business,
policy, technology, and knowledge. In the marketplace, there is insufficient demand
for secondary materials, which is at least partly owing to the low cost of virgin
resources. The environmental and social costs of production processes, as well
as the use of virgin resources, are not factored into product prices, weakening
the benefits of moving toward circularity (Williams 2019a, b; Navarro and Jonker
2018; Paiho et al. 2020). Similarly, existing norms and regulations are frequently
rigid and unable to adapt the move to circularity. Law enforcement may also be a
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problem. The current tax system’s heavy taxation of labor rather than non-renewable
resources creates a barrier to greater adoption of circularity. Long-term political
support for circular projects can be difficult to come by. The current infrastructure
lacks circular architecture or integrated nexus solutions, resulting in technological
lock-in to linearity. Most products on the market today have a linear design flaw,
which includes intentional obsolescence. Furthermore, waste treatment at the city
level may fall short of adequately separating technical nutrients (such as plastics
or metals) from biological nutrients (such as food or wood), despite the fact that
this separation is critical for toxicity reduction and quality assurance before these
materials are returned to the value chain (Paiho et al. 2020, 2021; Williams 2019a,
b).
7.3 Assessing Indian Cities for Circularity
According to the 2011 Census, the urban population in India accounts for around
31.6% of the overall population (Census 2011). By 2020, the share has climbed
to more than 34.93%, with forecasts for 2030 and 2050 as 40.14% and 52.84%,
respectively. Based on current trends and estimates, India is steadily moving toward
urbanization (UNCTAD 2020). Annual material consumption has increased six
times to 7 billion tons by 2015, up from 1.18 billion tons in the 1970s. By 2030,
yearly material consumption is expected to triple to 14.2 billion tons as a result of
population growth, urbanization, economic mobility, and the resulting rise in percapita resource demand. India currently extracts primary materials of around 1580
tons per acre, more than twice the global average of 450 tons per acre (Karthik
2020). Given the population size, economic size, and future predictions it becomes
imperative that the Indian cities, too, get included in the circularity concept.
7.3.1 SDG 11 and Sustainable Cities in India
Sustainable cities and circular cities overlap in terms of the basic principle of
generating cleaner environment, managing wastes, having resource efficiency, and
so on. Both aim to make city life easier, safer, and livable for the mass. SDG 11
spells out targets and objectives for developing sustainable cities and communities
by encouraging urbanization that is both inclusive and sustainable. As part of
global agenda, India has set targets to reduce the negative per capita environmental
effect on cities by 2030, by focusing on air quality, safety and security, municipal,
and other solid waste management. Furthermore, the Indian government aims to
significantly increase the number of cities and human settlements that adopt and
implement integrated policies and plans aimed at promoting inclusion, resource
efficiency, climate change mitigation and adaptation, disaster resilience, developing
and implementing holistic disaster risk management at all levels, in accordance
7 Cities as Emerging Centers in a Circular Economy: An Assessment of Indian Cities
135
with the Sendai Framework for Disaster Risk Reduction 2015–2030 (SDG India
2020–2021). The concept of circularity is embedded in these declared policy targets.
For instance, the “Swachch Bharat Mission” (SBM) which aims to make India
cleaner, promotes the idea of recycling and reuse of the waste. Similarly, the concept
of “regeneration of natural capital of city,” implicit in the “Nagar Van Yojana”
(Urban Forests), which aims to establish 200 Urban Forests across the country over
the next 5 years.
In order to meet the targets of SDG 11, India established eight national-level
indicators, which encapsulate only three of the ten SDG targets for 2030 articulated
in this goal (Table 7.2). The overall performance, based on the set indicators, is
good enough. As per the NITI Aayog report India stands as a “Front Runner” in
the overall performance (SDG India 2020–2021). For some indicators the overall
performance of the country is incredible, such as for “percentage of individual
household toilets constructed against target (SBM-U)” and “percentage of wards
with 100% door-to-door waste collection (SBM-U).” On the other hand, for some
of the indicators the overall performance at the country level is too low, such as
for “percentage of urban households living in katcha houses,” “installed sewage
treatment capacity as a percentage of sewage generated in urban area,” and for
“deaths due to road accidents in urban areas (per 1,00,000 population).”
Table 7.2 India’s performance in SDG 11
SDG 11 indicators
Percentage of urban households living in katcha houses
Percentage of urban households with drainage facility
Percentage of individual household toilets constructed
against target (SBM(U))
Deaths due to road accidents in urban areas (per 1,00,000
population)
Percentage of wards with 100% door-to-door waste
collection (SBM(U))
Percentage of MSW processed to the total MSW
generated (SBM(U))
Percentage of wards with 100% source segregation
(SBM(U))
Installed sewage treatment capacity as a percentage of
sewage generated in urban area
Total score
Source: NITI Aayog
Targets achieved (%)
0.80
87.6
105.00
Set targets
0
100
100
12.20
7.05
96.77
100
68.1
100
78.03
100
38.86
100
79
100
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A. R. Saha and G. Gupta
7.3.2 Policies and Schemes for Promoting Circularity
in Indian Cities
A favorable legislative environment can play a significant role in promoting CE
across industries. In the same vein, the Government of India established the Indian
Resource Panel (InRP), an advisory group under the Ministry of Environment,
Forest, and Climate Change, to analyze resource-related challenges in India and
advise the government on a comprehensive resource-efficiency strategy.
In 2017, NITI Aayog released a report on this endeavor, emphasizing the
importance of an enabling policy environment to mainstream resource efficiency
across sectors (NITI Aayog 2017; PIB 2019). The government has also implemented
numerous steps to promote resource sustainability, such as the Zero Defect, Zero
Effect scheme, which attempts to improve the quality of Indian manufacturing while
avoiding negative externalities (Table 7.3). The Ministry of Environment, Forests,
and Climate Change, on the other hand, established the Indian Resource Panel to
collaborate with other governmental ministries and private/public organizations to
facilitate the use of recycled materials, act as a resource efficiency hub, and provide
policymakers with the appropriate policy and technology support (FICCI 2018).
Along with this, the government has enacted a number of sector-specific rules that
can aid in the acceleration of circular business models.
In addition to the above-mentioned policies and schemes, there are some other
examples of circularity in city planning and development schemes. The government
of India has released the theme of SBM 2.0 and Atal Mission for Rejuvenation
Table 7.3 Policies/frameworks of Government of India inducing CE
Rule/policy/scheme
The plastic waste
management rules
(amended in 2018)
E-waste management
regulations
Year
2016
Construction and
demolition waste
management rules
Steel scrap recycling
policy
National non-ferrous
metal scrap recycling
framework
2016
2016
2019
2020
Action
The laws require producers and brand owners to implement
collect-back procedures in accordance with expanded
producer responsibility.
The manufacturer is responsible for collecting and recycling
e-waste generated during the manufacturing of any
electrical/electronic equipment, according to the rules. An
EPR extends producers’ responsibilities to collect end-of-life
E-waste and appropriately store, transport, and treat it before
recycling or disposal.
It requires local governments to use 10–20% construction and
demolition waste in municipal and government contracts.
This strategy is the result of the National Steel Policy 2017,
which intends to develop the CE in the steel industry.
To reduce scrap imports, the Ministry of Mines has released
this framework for scrap recycling of non-ferrous metals such
as aluminum and copper. It aims to improve the efficiency of
the mineral value chain process by employing a life cycle
management method.
7 Cities as Emerging Centers in a Circular Economy: An Assessment of Indian Cities
137
and Urban Transformation (AMRUT) 2.0. The SBM-U 2.0 tries to focus on solid
waste source segregation through applying the 3R (Reduce, Reuse, and Recycle)
principles. AMRUT 2.0, on the other hand, will adhere to the CE principles and
promote the conservation and regeneration of surface and groundwater bodies (PIB
2021). Moreover, here is a requirement for explicit verifiable standards or criteria
for identifying circular goods and services, such as the BIS’s initiative. The BIS has
released BS 8001, the world’s first practical framework and advice for enterprises
wishing to embrace CE principles. These guidelines can aid in the development of
circular business models in India by bringing consistency and transparency to the
process (FICCI 2018) although they are not enough to achieve the holistic target of
circularity. There is a need of action-specific initiatives, in order to make our cities
circular. The following section analyses the initiatives and status of Indian cities by
examining their preparedness through the lens of the circular city framework.
7.3.3 Initiatives for Circular Actions
There are several examples of initiatives that promote the idea of circularity into the
cities in India. While some have been taken by the central and/or local governments,
some have been adopted by the NGOs, SHGs, enterprises, and even by individual
levels.
(a) Looping: It is the first circular action under the Circular City framework which
aims at closing the loop of various activities. Some major initiatives of looping
actions in Indian cities are as follows:
(i) In 2011, Chennai became the first city to use plastic for road construction.
Since then, Chennai has used over 1600 tons of plastic garbage to build
roads totaling 1035.23 km in length (S.K. 2015; Lee 2021). In 2015,
Rajagopalan Vasudevan, a professor at Madurai’s Thiagarajar College of
Engineering, proposed a method for creating roadways out of recycled
plastic garbage. Afterward, the Union government, in 2015, made the use
of plastic in road construction compulsory. Since then, several cities have
built roadways out of plastic garbage. Furthermore, the Guidelines on the
Use of Plastic Trash in Road Construction, 2019 were announced by the
government of India. The same concept then was adopted by various other
cities as well, such as Pune, Indore, and Jamshedpur.
(ii) In an individual effort, Scrapshala run by Shikha Shah, a small startup
of Varanasi is trying to deal and manage the waste in an innovative
manner. The startup makes décor items out of the waste collected from
the neighborhood. This initiative not just helps to deal with the solid waste
in innovative manner but also creates job for the local women, artisans, and
the disadvantaged section of the society (Scrapshala 2021).
(iii) Tata’s Jaguar and Land Rover, for example, sell leftover aluminum from
vehicles back to Novelis, the supplier of aluminum. In just1 year, the
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A. R. Saha and G. Gupta
project has allowed for the recovery of almost 50,000 tons of aluminum,
while also assisting the supplier in reducing its GHG emissions by 13%
(FICCI 2018).
(iv) MSTC (a mini-ratna public sector enterprise) and Mahindra Accelo have
formed a joint venture to shred end-of-life automobiles and recover
precious metallic and non-ferrous components (FICCI 2018).
(b) Regeneration: this is the second circular action that aims to rebuild and conserve
the urban ecosystems and natural capital.
(i) Jal Shakti Abhiyan – Catch the Rain campaign: As a Jan Andolan (mass
movement), the government started the “Jal Shakti Abhiyan: Catch the
Rain” campaign to encourage water conservation at the grassroots level
through active participation of people.
(ii) Urban Greening Project in Jaipur City: The city of Jaipur began developing
these forest lands into urban green spaces and botanical gardens in order to
promote and safeguard urban green spaces and urban forests by investing
in successive restoration and enrichment of local biodiversity. This concept
will provide multi-functional urban reserves as well as in-situ biodiversity
protection in small forest fragments that exist around Jaipur (Singh et al.
2010).
(c) Adaptation: This is the third cyclical activity, which attempts to make the city
adaptable and capable of making new use of existing infrastructure with zero or
low resource waste.
(i) Wastewater – From Waste to Resource: This water reuse project, which
began operations in 2015, aims to reuse municipally treated wastewater
from Nagpur city for cooling purposes of the power plants (Water Global
Practice 2019).
(ii) Reuse of existing infrastructure in Indian cities: the first case is of Alembic
Industrial Heritage Development, Vadodara Gujrat. Karan Grover and
Associates renovated Vadodara’s oldest Alembic Industrial building, which
is now about 113 years old, in 2018. This monument, which was originally built to manufacture penicillin, is now a museum containing art
studios, exhibition spaces, and display areas. The second case is of Haveli
Dharampura, Chandni Chowk, Delhi. Haveli Dharampura was established
in 1887 A.D. in the bustling Shahjanabad neighborhood of Old Delhi in the
Late Mughal style of architecture. The original wooden doors, windows,
marble jali work, and brackets were restored during its repair in 2011 by Mr.
Vijay Goel and Siddhant Goel. This Haveli is now a magnificent Mughal
Restaurant (Sood 2021).
7 Cities as Emerging Centers in a Circular Economy: An Assessment of Indian Cities
139
7.3.4 Initiatives for Supporting Actions
Along with several circular actions, some cities in India are showing signs of
supporting actions too.
(a) Localization: This is the first supporting action that aims to promote the use
of local products in order to reduce the energy consumption required for
transporting the product.
(i) Vocal for Local Campaign: Under the “Atmanirbhar Bharat” initiative
the government of India and the prime minister put emphasis on use and
promotion of local products. In this regard, the Indian government has
launched the Fund of Funds for Startups Scheme and the Startup India Seed
Fund Scheme to help the country’s startups (PIB 2021).
(b) Substitution: This is the second supporting action that aims to replace the use of
non-renewable resources with renewable resources or resource-based activities
with service-based activities or physical activities with virtual ones.
(i) Diu Smart City: Until last year, Diu imported 73% of its electricity from
Gujarat. However, the Diu Smart City has now become India’s first city to
run entirely on renewable energy during the day, creating a precedent for
other towns to follow. The city has built a 9-MW solar park on 50 hectares
of rocky barren ground, as well as solar panels on the roofs of 79 municipal
buildings, generating roughly 1.3 MW each year. Due to low-cost solar
energy, the city saves roughly 13,000 tons of carbon emissions per year
(PTI 2018).
(ii) Green City Campaign: In December 2020, the Ministry of New and
Renewable Energy proposed a new concept of a “Green City in Every
State.” The goal of this effort is to create greener, smarter cities that are
fueled by renewable energy sources in all 50 states. The government hopes
to mainstream environmentally friendly power usage with this initiative,
which will use solar technology, electric transportation systems, and wasteto-energy plants (IBEF 2021; Rodl & Partner 2021).
(c) Share: This is the third supporting action that refers to the sharing of resources
throughout the city through a variety of activities.
(i) Co-working Spaces in Indian Cities: In the view of the decreasing land and
increasing land prices, new ways of utilizing the spaces have come into
being. Co-working offices are one such example of these innovative ideas.
There are currently more than 1000 shared workspaces in all of India’s
main cities.
(ii) Share Living Spaces: In major cities of India, such as Delhi, Mumbai, etc.
there is a concept of shared living spaces. People who come to these cities
for work/studies share the same rooms/flats.
140
A. R. Saha and G. Gupta
(iii) Shared Mobility: The informal sector of transportation in Indian cities is
an example of shared mobility. Also shared services of OLA Cabs, Uber
Cabs, etc., which provide transport service to the common people may fall
into this category.
(d) Optimization: This is the final supporting action of the circular city framework.
It aims to optimize consumption, i.e., it promotes the idea of SDG 12: Responsible Consumption and Production, through the use of efficient technologies and
addressing resource redundancies with the urban system.
(i) India has made enormous progress in terms of the use of technology
for various activities. But when it comes to optimized consumption, this
actually fails to achieve this target. Instead, the use of technology has
actually increased the rate of consumption over the period, as the use of
technology has made it easy for people to shop while sitting in their homes.
Philosophically, however, India and Indian culture have always encouraged
optimized consumption and discouraged consumerism. For instance, the
phrase “Simple living and high thinking” has this hidden message of using
lesser resources for living. Similarly, Mahatma Gandhi also followed this
philosophy as his way of living and propagated that “Nature has enough to
meet our need but not enough for our greed.”
7.4 Concluding Remarks
As cities continue to urbanize, the need for resources grows, as does consumption.
According to McKinsey, urban consumers will account for 81% of total worldwide
consumption by 2030, with 91% of total global consumption growth occurring
between 2015 and 2030. Only 32 large cities will account for about $23 trillion of
the total expected consumption growth, while the remaining 100 cities will account
for 45% (McKinsey & Company 2016). In the last 30 years, the global population
has increased by 2.5 billion. Developing economies accounted for more than 90%
of this expansion. During the next 30 years, the world’s population is predicted to
grow by 2 billion people, with the developing countries bearing the greater brunt of
the increase. Along with the growing population and rapid urbanization, cities will
face greater resource scarcity as well as security challenges. The number of waterstressed cities is rapidly increasing (UN Habitat 2020; UN 2018). Thus, cities with
high population density, high consumption, and high trash generation must strive to
become circular. The Circular City framework can help in moving cities closer to
circularity and thereby achieve the global goals of sustainable life on the planet.
Serious measures are being taken globally to address the challenges emanating
from climate change, environmental degradation, and poor quality of life. Following
the global call, policies have been initiated in India for a transition to CE. While
circularity in manufacturing and business has received attention, the potential of
Indian cities has not yet been utilized to develop as circular cities. Although Indian
7 Cities as Emerging Centers in a Circular Economy: An Assessment of Indian Cities
141
cities are performing well in some ways, there are large amounts of untapped
opportunities. The concept of circularity exists in Indian cities in certain indirect
forms and needs improved policy attention to strategically design and develop
circular cities. The recent COVID-19 pandemic resulted in better air quality in cities
all over the world including the ones in India. For example, Delhi recorded an air
quality index of 63.8 in the month of August 2020 during the nationwide lockdown
(The Hindu 2020). Digitization received a boost in all sectors including education,
online shopping, and so on. The culture of work for home resulted in several circular
benefits in travel and transport. However, these were temporary impacts, and the
high cost of pandemic in terms of losses of lives and livelihood cannot be considered
as an indication of sustainable development and trade-off for circularity.
Recourse to CE promises to be a solution toward a sustainable future. Transitioning to CE needs a methodical and well-thought-out implementation strategy,
which can only be designed and implemented through collaboration among varied
stakeholders. Because of their size and influence, the government and private sector
are well placed to design this roadmap. Involving all sectors, places, and agents is
crucial for a successful transition to CE. Circular cities can contribute significantly
in this journey toward sustainability. India needs to formulate a national-level
strategy with guiding principles and a legislative framework for CE, incorporating
the circular city models which may guide the Indian cities to move forward with the
idea of circularity.
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Chapter 8
Trade and Management of Waste
Shouvik Chakraborty
Abstract With the increased generation of waste, and their rates projected to
increase further by 73% in 2050, the management and trade in waste assume
increasing importance, especially in the context of developing countries. There is
a substantial regional disparity globally, with the North American region generating
almost five times on average compared to Sub-Saharan Africa. Due to the lower
disposal costs and less stringent environmental regulations, developing countries
have become the developed world’s waste havens. Despite the need for more sophisticated technologies for waste processing, almost 90% of the waste is disposed of
in landfills and open dumps in low-income countries. Among the different waste
categories, this chapter focuses on wastepaper and cardboard, ferrous and nonferrous waste, and plastic waste to discuss their trading patterns and management
globally. Considering plastic as a particular case study, and with China’s changing
role in the international scenario, a case is made that the developing countries need
to push for further amendments in the Basel Convention so that the environmental
rights of these countries are protected. This chapter argues for technological transfer
from the developed countries to the developing ones for advanced waste processing
like recycling and to completely stop the open dumping of waste into the latter’s
land.
Keywords Waste · Waste trade · Waste management · Plastic waste · Waste
generation · Waste disposal · Waste haven · Basel convention
Some sections of this paper have been published (along with Prof. Jayati Ghosh and Debamanyu
Das) as a Working Paper in the Club of Rome’s series on the 50th year celebration of the Limits to
Growth
S. Chakraborty ()
The Political Economy Research Institute (PERI), University of Massachusetts Amherst (UMASS
Amherst), Amherst, MA, USA
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_8
145
146
S. Chakraborty
8.1 Introduction
Waste is the byproduct of various stages of consuming and producing commodities
and services in an economy—it is a natural product of urbanisation, economic
development, and population growth (Kaza et al. 2018, 18). Primarily, the state
and individuals, too, are responsible for the management and international trade
of waste. Poor waste management has contaminated many aspects of life—
from breathing polluted air to eating foods and drinking water contaminated by
pollutants—and polluted environmental bodies like oceans. As an economy grows,
its relationship with waste is twofold: (a) it generates an increasing amount of waste;
(b) the waste management situation evolves, although the social cost of managing
waste increases due to a more informed and educated society. Hence, in the last
half-century, with increasing volumes of waste generation, it initiated the export of
waste from high-income group countries to lower-income countries. It was more
cost-effective for the former to export waste to these lower-income underdeveloped
countries rather than disposing of those wastes within its geographical boundaries.
For instance, in the USA, the cost of dumping wastes in landfills increased from
US$15 per ton in 1980 to US$250 per ton in 1998—a more than 16-fold increase
over 8 years (Strohm 1993). The same waste could be dumped in a landfill in Africa
for US$2.50 per tonne. At the same time, it became a means of earning foreign
exchange for lower-income underdeveloped countries. However, these economies
were not well equipped to properly dispose of and manage these wastes, which was
needed to protect the people’s health, the ecology, and the environment. The global
production structure, political power, and finance facilitated and encouraged the
trade of waste, especially hazardous ones, to the developing countries that needed
foreign exchange.
The history of the waste trade, especially related to hazardous wastes, has
been controversial. Notwithstanding their need for foreign exchanges, these lessdeveloped, non-industrialised countries were unwilling to participate in such trade
and put up a united front—the G77 countries—to prevent it. Most of these
economies felt that waste should not be treated as a commodity trade, either free
or regulated. In principle, this would approve the international trade of waste
materials that hampered both the environment and their future economic prospects.
Several NGOs, including Greenpeace, argued in favour of the G-77 countries.
Instead of finding solutions through trade, these NGOs and the other developing
countries argued that there should be more efforts to minimise waste generation,
including more stringent regulations and disposal standards. This negotiation
process culminated with the Basel Convention (1989)—an international treaty
designed to restrict the movement of hazardous and toxic wastes between countries.
Many developing countries refused to sign on it, and the environmental NGOs
called it a ‘toxic terror.’ This was because of many of the weaknesses pointed
out by the developing countries, like obtaining prior consent before shipment,
vague definitions of ‘hazardous waste’ and ‘environmentally sound,’ the exclusion
of radioactive waste, and the lack of any liability provisions. However, the most
8 Trade and Management of Waste
147
important context that demotivated the developing countries was that there was no
provision to provide incentives for producing such waste in the advanced countries
at the very onset of it. Due to the lack of incentives, the volume of waste generated
has continued to grow exceptionally.
8.2 A Literature Review of the Economics of Waste Trade
The flow of waste from the Northern higher-income countries to the lower-income
countries, primarily located in the global South, as mentioned earlier, occurs due to
differences in the disposal fees and related to it due to the relaxed environmental
regulations in these lower and middle-income countries. Are other underlying
economic factors determining the international waste trade, even to distant lands?
This section will discuss the underlying economic factors that drive the international
trade in waste in the global economy.
Several important economic factors, like differences in disposal costs, taxes,
environmental regulations, shipping costs, technological capabilities, and illegal
criminal activities, have been identified in the economic literature as significant
drivers of the international trade in waste. Clapp (1994) specifies that with the
imposition of stricter regulations and the dramatic rise in the disposal costs of
hazardous wastes in the industrial world in the 1980s, developing countries were
viewed as an inexpensive alternative to dumping toxic industrial by-products and
wastes. Other studies extending this idea found that what also mattered was
the total cost, including the relationship between the shipping distances between
the countries and the costs related to it. Also, they estimated the differences in
total gate fees for waste disposal (Mazzanti and Zoboli 2013, 111). The authors
argue that along with the disposal cost and other drivers like administrative costs,
environmental taxes, tariffs, and non-tariff barriers, what also mattered was the
transportation cost of these materials. Furthermore, firms and governments in any
economy decide to export waste once they determine that waste disposal costs
abroad are lower than the domestic ones. Kellenberg (2012) also did a similar
exercise of the North/South trade model and analysed the shipping costs, the
physical characteristics of the waste, and the trade deficit and concluded that when
shipping costs are low, it demonstrated a waste haven type effect in the developing
countries.
An interesting article by Baggs (2009) disputed that developing countries are
the waste haven of the industrialised North. As the size of an economy increases,
its disposal and waste management capacity rise faster than its waste production.
Such large economies would eventually become net waste importers because of
their capacity to process these wastes. However, the author finds empirical evidence
using the Basel Convention’s self-reported hazardous waste trade data that the highincome countries, a proxy for more environmental regulations, accept lower foreign
hazardous waste for processing within their geographical boundaries. The article,
however, argues that distance and shared borders are strong determinants of the
148
S. Chakraborty
current direction of the waste trade (Baggs 2009, 11). It finds a strong positive
relationship between a country’s import of hazardous waste and a higher capitallabour ratio, implying that countries with more increased technological capabilities
have a higher capacity to process and manage hazardous waste. This observation
seems valid for recyclable wastes and might partially explain the considerable
volume of international trade in the developed world. However, as we present
later, most of the wastes are residual wastes dumped, landfilled, and incinerated
in developing countries because these are non-recyclable.
Kellenberg (2012) makes this point very explicitly in his study. Using the
UN Comtrade data and generating an environmental index, his article finds that
environmental regulations are critical determinants for the waste haven. A 1%
reduction in the environmental regulation gradient variable vis-a-vis the bilateral
trading partner led the home country to experience an increase of 0.32% in waste
imports (Kellenberg 2012, 76). Given that the environmental regulation index of
developing countries on average is 39% lower than that of developed countries,
there is strong evidence in favour of the argument that developing countries are the
waste haven. Therefore, the author concludes that countries that safely handle and
recycle waste can positively impact environmental quality and resource usability.
Whereas those countries with low environmental regulations and discard waste in
an unsafe manner can have severe adverse effects on the environment.
In fact, all waste trade is not in hazardous materials only and not always destined
for disposal. The trade of scrap metals and recyclable materials destined to be
reused constitute a huge chunk of the waste trade. Sugeta and Shinkuma (2012)
studied the trade in these recyclable materials in a two-country set-up where these
recyclable materials can be used as raw materials to produce a recyclable final
good. The authors did not arrive at any definite conclusion about the environmental
benefits of trade in recyclable materials. Depending on the heterogeneity in the
level of recyclability between the two countries, i.e., the relative differences in
the efficiency of upstream recyclers and downstream recycled goods, the trade
liberalisation in recycled goods might be detrimental or beneficial to the economies
and the environment.
In a recent study, Huang et al. (2020), studying international trade in the scrap
metal industry using data from 1988 to 2017, found a tripartite configuration of
trade pattern: the East Asia-America-Oceania community led by China, the USA
and Australia; Europe and the South Asia-Middle East community led by India
and the UAE. The detailed split and merger analysis between these countries using
the weighted and directed annual global scrap metals trade network (GSMTN)
show that geopolitical factors and economic turbulence play a crucial role in the
fragmentation and integration of these trading communities. However, as a positive
development, the authors conclude that the increased recycling activity worldwide
and the boost to the circular economy have helped reduce the excessive consumption
of metal minerals.
Hence, as a summary of this brief literature survey, disposal fees, shipping costs,
and other administrative costs and environmental policies play a crucial role in the
international waste trade. The developing countries have lower disposal costs due
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to less stringent environmental regulations, making them the developed world’s
waste havens. Although some studies disputed this fact, citing examples of the
technology needed to recycle waste, which is captured by the high capital-labour
ratio. Other studies have also shown that until 2017, large economies like China and
the USA occupied central positions in trade in scrap metals and recyclable materials.
Hence, the recent ban on China’s import of solid wastes (including plastic, whose
prohibition occurred in 2018) as of January 1, 2021 would lead to drastic variations
in the scrap metal and recyclable trade, which we discuss later in detail.
8.3 Trends in the Generation, Processing and Trading
of Waste
In general, except for a few instances of decoupling between waste generation
and economic growth, as in France, Hungary, Japan, the Slovak Republic and
Spain, the volume of waste generated generally goes up with economic growth and
population level. The daily per capita waste generation increased from 0.74 kg in
2016 to 0.79 kg in 2020, with the total estimated waste generation worldwide at
2.24 billion tonnes. It is projected that the total waste in 2050 will go up to 3.88
billion tonnes, with the daily per capita waste generated at 1.09 kg. This means the
total waste generated will increase by 73% in 2050. Out of this, in the business-asusual scenario, the residual waste, whose final disposal methods include dumping,
landfilling and incineration—the wastes that cannot be recovered—would increase
to 3.32 billion tonnes, at a daily average per capita rate of 0.94 kg (Kaza et al. 2021,
4).
The global averages, however, fail to capture the disparity across various regions
in the world. Table 8.1 captures the average national waste generation varying by
region in 2016. We find a massive diversity in waste generation, with sub-Saharan
Africa generating the least waste on an average of 0.46 kg/capita/day. In comparison, North America generates the highest level of waste at 2.21 kg/capita/day. Even
the maximum level of waste generation in Sub-Saharan Africa at 1.57 kg/capita/day
is lower than the minimum level in North America at 1.94 kg/capita/day. This is
also true for South Asia when compared to North America. This massive disparity
in waste generation shows that the production structure, high per-capita income
levels, and the ‘consumerist lifestyle’ of affluent North Americans are primarily
responsible for this massive waste generation globally.
There are also variations in the composition of the global waste.
We focus here on municipal solid waste (MSW). The largest waste category is
food and green waste, which comprised more than 44% of global waste in 2016
(Kaza et al. 2018, 29). The dry recyclable waste comprising plastic, paper and
cardboard, metal and glass comprised another 38% of waste. Figure 8.1 shows the
detailed composition of global waste.
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S. Chakraborty
Table 8.1 Regional disparity in waste generation
Sub-Saharan
Africa
East Asia and
Pacific
South Asia
Middle East and
North Africa
Latin America
and Caribbean
Europe and
Central Asia
North America
2016 Average
0.46
Minimum
0.11
25th Percentile
0.35
75th Percentile
0.55
Maximum
1.57
0.56
0.14
0.45
1.36
3.72
0.52
0.81
0.17
0.44
0.32
0.66
0.54
1.40
1.44
1.83
0.99
0.41
0.76
1.39
4.46
1.18
0.27
0.94
1.53
4.45
2.21
1.94
2.09
3.39
4.54
Source: (Kaza et al. 2018, 22)
Fig. 8.1 Global waste composition. (Source: Kaza et al. 2018, 29)
Similar to the aggregate figures, the waste composition also varies across regions
in terms of income level (Fig. 8.2). Food and other green composts comprise more
than half of the waste in upper-middle, lower-middle, and low-income countries. In
high-income countries, dry recyclable waste is almost half of the total waste, while
food and green comprise 32% only. In low-income countries, the other category
comprises almost 27% of the total waste (Kaza et al. 2018, 30).
Variations exist in waste disposal techniques (Fig. 8.3). Almost 40% of the total
waste worldwide is disposed of in landfills, while 33% of the total land is in open
dumps. With the development of recycling technology and increasing awareness,
almost 19% of global waste undergoes material recovery through recycling and
composting. 11% undergoes controlled incineration (Kaza et al. 2018, 34).
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151
Fig. 8.2 Waste composition by income level. (Source: Kaza et al. 2018, 30)
Fig. 8.3 Global waste treatment and disposal. (Source: Kaza et al. 2018, 34)
As discussed in the literature review, recycling-related disposal methods are
usually concentrated in the higher income level countries because they are more
technologically advanced and also, these countries have a comparative advantage in
recycling these wastes because of their capital abundance that offsets the higher
regulatory costs (Baggs 2009, 2). In 2016, the share of recycling in total waste
disposal was 29% for the high-income countries, while the ratio for the other
countries ranged from 4 to 6% (Fig. 8.4). Even the share of modern incineration,
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S. Chakraborty
Fig. 8.4 Waste disposal methods by income level. (Source: Kaza et al. 2018, 35)
an advanced method of incinerating wastes, in total wastes, is also higher in the
high-income and upper-middle-income countries at 22% and 10%, respectively.
Interestingly, it is the opposite when it comes to the open dumping of waste. The
ratio of open dumping in the total waste disposal for low-income, lower-middleincome, upper-middle-income and high-income countries is 93%, 66%, 30% and
2%, respectively.
A similar pattern of waste disposal methods can also be found regarding regional
distribution. In North America, Europe, and Central Asia, which is the home of
some of the high-income countries in the world, the share of recycling in total waste
disposal is high at 33.3% and 20%, respectively. In comparison, the ratio in 2016 for
Sub-Saharan Africa, South Asia, the Middle East, and North Africa was 6.6%, 5%,
and 9%, respectively (Fig. 8.5). In fact, open dumping is the highest in South Asia at
75%, followed by Sub-Saharan Africa at 69% and the Middle East and North Africa
reporting it at around 53%. So, even in regional distribution, there is a pattern in
how the waste is disposed of globally, with more than two-thirds of the waste being
openly dumped in South Asia and Sub-Saharan Africa (Kaza et al. 2018, 34). Even
landfills, usually considered the first step to managing waste sustainably, are less
than 4% in South Asia.
Given the established pattern of waste disposal techniques, with recycling and
modern incineration forming the bulk in high-income and upper-middle-income
countries and open dumping in low-income countries, it would be interesting to see
whether even a similar pattern exists in the international waste trade among these
countries. We analysed the trade pattern data using the UN-Comtrade database from
2010 to 2020, and we also report here the five top importers and exporters of waste
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153
Fig. 8.5 Disposal methods of waste by region
trade for different categories of waste.1 We focus on different waste categories:
wastepaper and cardboard, ferrous and non-ferrous waste, and plastic waste.
(a) Wastepaper and Cardboard.
Figure 8.6a, b show the top five global exporters and importers of waste scrap
paper and paper products. Figure 8.6a shows that the USA is the world’s largest
exporter of waste and scrap paper and paperboard. The share of the USA in the
total world export of scrap paper and paperboard has increased from 33.6% in
2010 to 39.7% in 2020. The United Kingdom was the second-largest exporter,
followed by Japan. China, India, Indonesia, Germany, and the Netherlands are
the top five importers.
Two observations from these graphs need to be highlighted. First, as evident
from the blue line in Fig. 8.6b, the share of China declined dramatically from a
peak of 47.0% in 2017 to 17.7% in 2020—a decline of almost 30% in 3 years. This
dramatic decline is because China announced on August 16, 2017, that it would
stop being the world’s dumping ground and banned importing 24 different kinds of
solid waste materials. We discuss this in detail later in the section focusing entirely
on plastic waste. This ban increased India’s share of global imports from 4.6% in
2010 to 14.1% in 2020. Secondly, one might notice that Germany and Netherlands
appear both in the top five exporters as well as in the top five importers, which
can be confusing. This happens because of a considerable intra-European Union
trade of recyclable materials like wastepaper and paper cardboard. Germany and
1 The top five importers and exporters in the world are based on their average global share from
the period 2010–2020.
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S. Chakraborty
Fig. 8.6 (a) Top five exporters of wastepaper and paperboard. (b) Top five importers of wastepaper
and paperboards. (Source: Authors’ calculations based on UN Comtrade)
Netherlands, Austria, Spain, and Hungary are among the top destinations for paper
and cardboard waste from other EU member countries. Also, the ratio of waste
exported to waste generated is high in Germany. A comparison between Bulgaria
and Germany shows that this ratio for paper and cardboard is 10.3% and 27.8%,
respectively. Hence, it is evident that the waste exported to waste generated trends
are much higher in Germany, which hints that Germany cannot cope with the
massive amount of waste generated without shipping it to third countries (Trinomics
2021, 41). Also, Germany tends to import a higher value of paper and cardboard
waste than Bulgaria. Interestingly, the other factor that plays an essential role in the
8 Trade and Management of Waste
155
export and import of these wastes is the location of these countries. The Netherlands,
Belgium and Luxembourg are the transport hub countries that increased their
proportion of trade volume compared to other countries of similar size in terms
of population and GDP (Trinomics 2021, 93).
(b) Ferrous Waste
The ferrous waste forms a considerable chunk of the solid waste generated.
It is contained in all durable goods such as electrical and other appliances, furniture and automotive parts. Even construction sites and larger locomotives like
rails, ships, containers and packages contain ferrous metals, which eventually
turn into ferrous waste. Figure 8.7a, b show the top five exporters and importers
of ferrous waste globally. Among the exporters, the USA is the world’s largest
exporter of ferrous waste. Its share, however, has come down from 19.4%
in 2010 to 15.4% in 2020. Germany, Japan, the Netherlands, and the United
Kingdom are the other four countries in the top five exporters of ferrous waste.
Turkey is the world’s largest ferrous waste importer, accounting for almost
one-fifth of the global imports in 2020. The other four countries are India, the
Republic of Korea, Germany and Belgium.
Turkey’s position as the leading importer of scrap metal waste is interesting.
Turkey uses most of its scrap metal for domestic production of steel because it
heavily relies (almost 70% of its steel production) on the electric arc furnace (EAF)
technology instead of the blast furnace-basic oxygen furnace (BOF) technology to
produce new steel. The key difference between these technologies is in their inputs
of raw materials, where the former uses recycled steel and electricity as raw input.
Belgium is a prominent importer destination for ferrous metal waste from other EU
Member states in the European Union. The other EU member Germany seems to
have the largest trade volume of ferrous waste moving into and out of the country
because Germany is the largest steelmaker in the European Union, accounting for
over one-fourth of the steel production in 2019. Also, there has been a substantial
decline in the total trade of ferrous waste globally. The total trade in ferrous waste
has declined from US$88.2 billion in 2010 to US$62.3 billion in 2020. For example,
the sharp decline in the USA’s export of ferrous scrap (as evident in Fig. 8.7a) is
because the recycling of ferrous waste has gone up within the USA. The recycling
rate of all appliance materials, including ferrous metal, has increased by nearly 60%
in the USA. As evident from Fig. 8.8, there has been a steady increase in the ferrous
metal waste recycling rate.
(c) Non-Ferrous Waste.
The overall trend in the international trade of non-ferrous metal waste is
similar to that of ferrous metal waste. Figure 8.9a, b show the exports and
imports of non-ferrous metal wastes from 2010 to 2020. The top five exporters
of non-ferrous metal waste are the USA, Germany, the United Kingdom, France,
and Canada. The USA is the world’s largest exporter of non-ferrous metal
waste. However, similar to ferrous waste, the share of export of the USA in
the total world’s export also went down in this category from 19.1% in 2010 to
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S. Chakraborty
Fig. 8.7 (a) Top five exporters of ferrous waste. (Source: Authors’ calculations based on UN
Comtrade). (b) Top five importers of ferrous waste. (Source: Authors’ calculations based on UN
Comtrade)
15.9% in 2020. This is also because the share of recycling in the total processing
of non-ferrous waste has gone up significantly in the USA (Fig. 8.10).
China is still the world’s largest importer of non-ferrous waste in terms of
imports. However, China’s share has gone down significantly in the last decade.
From a peak of 36.1% in 2010, it declined to 16.3% in 2020. Like the paper and
cardboard industry, after China declared its ban on solid waste trade, it experienced
a significant decline in imports. With the Ministry of Ecology and Environment
of China imposing strict restrictions and regulations through the ‘Environmental
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157
Fig. 8.8 Ferrous metals waste management: 1960–2018. (Source: US EPA https://www.epa.gov/
facts-and-figures-about-materials-waste-and-recycling/ferrous-metals-material-specific-data)
Protection for Importing Solid Wastes as Raw Materials,’ the imports of non-ferrous
waste declined substantially. However, the Chinese government later realised the
importance of scrap metals and, in 2019–2020, started relaxing the regulations for
imports of scrap metals. The USA, Germany, India and the Republic of Korea are
among the top five importers. The USA and Germany also figure among the top
five exporters. These industrialised countries generate substantial waste and have
the technology to recycle this waste, similar to ferrous waste. Therefore, there is
a significant generation and processing of non-ferrous metal waste in industrial
production.
(d) Plastic Waste.
The plastic industry has experienced a massive boom since the 1950s. It is
worth mentioning that the international trade of plastic waste has mirrored the
increased production of plastic in the high-income and advanced economies of
the world without them having to bear the direct consequence of social and
environmental damage.
Figure 8.11a, b show the world’s top five exporters and importers of plastic. The
USA, Germany, Japan, and the United Kingdom, all members of the G-7 countries,
are among the world’s top five exporters of plastic. As mentioned earlier, the
geographical location of the countries plays a vital role in the imports and exports
of waste. The position of Hong Kong is one such example, which generally acts as
a transport hub and features among the top exporters and importers in this category
of trade.
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Fig. 8.9 (a) Share of top five exporters. (Source: Authors’ calculations based on UN Comtrade).
(b) Share of top five importers. (Source: Authors’ calculations based on UN Comtrade)
Interestingly, Hong Kong’s export decline coincides with China’s imports. The
top five importers of plastic waste worldwide are China, Germany, Hong Kong,
the Netherlands, and the USA. China’s trajectory seems to be the most interesting
here. China’s plastic waste imports in the world ranged from 65% to 53% from
2010 to 2017, covering more than half of the world’s plastic imports. As mentioned
earlier, China informed the WTO in 2018 to ban plastic waste imports. Since then,
the imports of plastic in China have fallen drastically and stopped entirely in 2019.
Recently, Malaysia, Tukey, and Vietnam are emerging as critical destinations for
plastic waste from the USA, Japan, EU, and other countries. Given the exciting
8 Trade and Management of Waste
159
Fig. 8.10 Other non-ferrous metals waste management: 1960–2018. (Source: USA EPA https://
www.epa.gov/facts-and-figures-about-materials-waste-and-recycling/other-nonferrous-metalsmaterial-specific)
developments that have recently happened in the international trade of plastic
waste globally, it would be interesting to study the plastic waste industry and its
implications for the future in an elaborate way (discussed in the next section in
detail).
China’s notification of the ban on the imports of solid waste to the WTO on
July 18, 2017, caused much stir and initiated lots of discussion among the member
nations of the Basel Convention about the regulations on waste trade. In May 2019,
187 countries significantly restricted international trade in plastic scrap (recyclables)
and waste. This was designed to help address the improper disposal of plastic
waste and reduce its leakage into the environment because of the environmental
hazards associated with plastic waste. Nowadays, the transboundary shipments of
most plastic scrap and waste are either controlled or regulated and for the first time,
it has been covered under a treaty called the Basel Convention on the Control of
Transboundary Movements of Hazardous Wastes and their Disposal, which was
effective January 1, 2021. Henceforth, with these changes in international treaties,
the international movements of most plastic scrap and waste are allowed only with
prior written consent. This led to a significant decline in these materials’ total
trade value (exports and imports). However, due to the recycling technology, the
declining trend of the total global trade in plastic waste started in 2014, when the
total world trade in plastic waste declined from US$16.7 billion in 2014 to $10.8
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Fig. 8.11 (a) The top five plastic exporters in the world. (Source: Authors’ calculations based on
UN Comtrade). (b) The top five importers in the world. (Source: Authors’ calculations based on
UN Comtrade)
billion in 2017. This was also due to China’s ‘Green Fence’ policy in 2013 when
China imposed a temporary restriction on waste imports requiring significantly less
contamination. The decline continued steeply thereafter, with the imposition of
import bans, especially since 2017, and is currently at $4.8 billion in 2020 (Fig.
8.12).
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Fig. 8.12 Top world trade in plastic waste (2010–2020). (Source: Authors’ calculations based on
UN Comtrade)
8.4 The Plastic Waste Industry and Trade
Plastic production in the world came into existence in the 1950s, a post-World
War II development. With the oil industry boom, the plastic industry started to
boom during that period when it was discovered that polyvinyl chloride (PVC)
could be produced as a by-product of its waste. The massive volume of plastic
production displaced the jute industry, although the latter was a much less polluting
and more environmentally friendly alternative (Boyce 1995, 54). Although not a
perfect substitute, plastic had some advantages—it was more lightweight, moistureresistant and cheaper than other substitutes like jute.
Figure 8.13a shows that the annual production of plastic globally increased from
two million tonnes in 1950 to 381 million tonnes in 2015. This industry experienced
a real boom during the late 1960s Vietnam War when there was a considerable
demand for sandbags. It received much funding to expand its productive capacity.
During the 1970s, with the commodity price boom and the First Oil Crisis of 1973,
the world production of plastic doubled from 35 million tonnes in 1970 to 71 million
tonnes in 1980.
In cumulative terms, the figures reached astronomical heights, as evident from
Figure 8.13b. The cumulative estimates become important because plastic is a nonbiodegradable compound that accumulates on Earth. Figure 8.13b shows that until
2015, the global production of plastic had been 7.8 billion tonnes—almost a tonne
of plastic for each person living today. This enormous ever-increasing production
of plastic, and the waste generated thereof, have overwhelmed domestic waste
management infrastructure. Given the limitations of its disposal due to the nature of
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Fig. 8.13 (a) Global plastics production. (Source: Authors’ calculations based on Our World in
Data (OWID)). (b) The cumulative global plastic production. (Source: Authors’ calculations based
on Our World in Data (OWID))
the product, it would be essential to find out the mode of disposal of this particular
product.
Historically and to a substantial extent, even today, plastic waste gets discarded
in open environments and landfills without any prior processing. Before the
1980s, there were neither incineration nor recycling of plastic products. This
non-biodegradable commodity is now pervasive in all environments on earth,
contaminating the soil, marine life, freshwater and terrestrial life, farmland, and
the atmosphere with particulate matter (Environmental Investigation Agency 2021,
7). In an exclusive report, the British newspaper Guardian reported that plastic
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163
Fig. 8.14 How does plastic gets disposed of in the World?. (Source: Authors’ calculations based
on Our World in Data (OWID))
contamination in the form of microplastics was found in human blood (Carrington
2022).
However, even today, as evident in Fig. 8.14, a large chunk of plastic waste is
discarded in the open environment. In 2015, an estimated 55% of plastic waste was
discarded in open dumps and landfills, 25% was incinerated, and 20% was recycled.
The disposal process of plastic waste explains, to a large extent, the North-South
trade in these commodities, which primarily needed to be disposed of in open dumps
and landfills. As discussed earlier, most waste gets dumped in open dumps in lowincome and low-middle-income countries. Hence, the world’s advanced economies
with high levels of plastic consumption exported plastic waste to these low and
low-middle-income countries. For instance, the 38 member countries of the OECD
accounted for more than 87% of all plastic waste exports to these lower-income
countries since reporting these trades began in 1988 (Environmental Investigation
Agency 2021, 7). In 2016, the USA generated the largest amount of plastic waste
globally (42 million metric tons), of which 0.14 to 0.41 million metric tons were
dumped illegally in the USA itself. In addition, 0.15 to 0.99 million metric tons
of plastic waste were imported materials collected in the USA for recycling and
exported to countries where these wastes get inadequately managed (Law et al.
2020, 3).
As Fig. 8.11b noted, China accounted for more than three-fifths of the world’s
imports. China topped the world trade of plastic from 1991 to 2017. Overall, in
the last three decades, Asia has become the dominant recipient of global plastic
waste—on average, it accounted for almost 63.4% of the world’s total trade volume.
The import volumes of Asia were mainly from Europe and North America, which
accounted for almost 97% of the total import volume of Asia (Wang et al., 2020).
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China’s ban on plastic waste in 2017 sent shockwaves throughout the world.
The advanced economies of the USA and the European countries were interested
in cheaply dumping these wastes into these developing countries. After China’s
imports of plastic waste got banned, these high-income countries started searching
for new waste havens and found new destinations like Malaysia, Indonesia and
Thailand and Turkey for these wastes. However, the overall global trade in plastic
waste has declined substantially (Fig. 8.12) because these countries were forced
to process plastic waste within their country. A recent investigative report by the
Guardian shows that more than 68,000 shipping containers of American plastic
waste had been exported to poorer, developing countries, which themselves are
known to mismanage more than 70% of their waste (McCormick et al. 2019).
Moreover, the plastic wastes exported by the USA are mostly contaminated with
food and dirt, which are not easily recyclable and eventually land in these poorer
countries’ open dumps or landfills. This was, in fact, an important reason why China
banned its import of plastic waste from the world, especially that of the USA.
8.5 Some Concluding Remarks
The impact of China’s ban on importing plastic waste is multi-fold for the global
economy. Firstly, there was a decline in the trade volume and a change in the
trade flow of plastic waste from the advanced, high-income countries to the poorer,
developing countries mainly located in the global South in terms of destinations
(Wen et al. 2021, 2). Secondly, there is a mixed impact of this ban on the
environment. Several indicators like fine particulate matter formation (FPMF),
freshwater ecotoxicity (FWE), human carcinogenic toxicity (HCT), and water
consumption (WC) showed improvement (Wen et al. 2021, 4). However, there was
an increase in global warming (GW) through more greenhouse gas emissions. Other
studies found similar results analysing the global plastic world trade (GPWT) that
there was an increasing benefit in reducing GHG emissions. There was a reduction
in the net value of GHG reductions of 8.27 million metric tonnes, nearly 84 times
higher than in 1992. There was an increase in greenhouse gas emissions due to
the transhipment of GPWT to China. Still, it only accounted for around 6% of the
GHG reductions achieved by plastic re-utilisation and recycling in the last 25 years
(Liu et al. 2021, 7). However, the greenhouse gas emissions from the production
and incineration of plastic will add more than 859 million metric tons in 2019
alone—equal to the emissions from 189 five-hundred-megawatt coal power plants
(Center for International Environmental Law (CIEL) 2019). Thirdly, there has been
an impact on the recycling and recycled plastic materials due to a ban on China’s
waste recycling. In the short term, the larger economies have grappled to cope
with the huge demand for recycling plastic waste in this import trade network.
China, too, is facing constraints on recycled plastic and has increased the use of
virgin materials and recycled pellets. Some Chinese plastic recycling factories have
relocated to Southeast Asian countries, Japan, and Taiwan (Yoshida 2022, 77).
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However, the impact of the plastic waste ban on the Chinese economy is marginal.
According to some estimates, it has impacted China’s GDP by a meagre 0.04%
(Huang et al. 2020, 8). Fourthly, the other impact of the ban has been an increase
in illegal activities in the plastic waste trade. The countries in Southeast Asia,
South Asia, and Eastern Europe have experienced a surge in illegal trade in plastic
waste as shipments from North America and Europe are diverted to these nations
after their ban in China. Among the Asian countries, 11 countries—Cambodia,
Hong Kong SAR, India, Indonesia, Laos, Malaysia, Myanmar, Pakistan, Taiwan,
China, Thailand and Vietnam—reported concerns about the growing imports of
illegal plastic waste. In Europe, seven countries were most affected by the illegal
plastic waste trade: the Czech Republic, Germany, Italy, Poland, Portugal, Romania
and Turkey (INTERPOL, 2020). These illegal activities and poor management of
these wastes negatively impact the global environment and local pollution levels
Kellenberg (2015).
China’s ban on importing plastic waste and its effect on the global economy
shows that regulations work. As a result, some positive development started to
take place. Though earlier opposed by the high-income countries, an amendment to
the Basel Convention was adopted in May of 2019, requiring exporting countries
to acquire prior informed consent (PIC) for plastic waste exports destined for
recycling and ‘almost free from contamination.’ This amendment came into force
on 1 January 2021. The more advanced economies have to gear up their role
in managing more plastic waste within their geographical boundaries. Given the
technological advantage that these nations have over the poorer countries, these
advanced economies need to: (a) recycle all of their plastic waste and entirely
stop the usage and export of single-use plastics within their economies and (b)
transfer the recycling technologies free of cost to the poorer countries where they
mainly dump these products. With the help of recycling technology, poorer countries
can use these resources and regulate trading activities to curb illegal ones. The
southern countries need to present a united front (similar to G-77 countries), which
would help them negotiate for better technological resources and higher prices for
recycling these wastes. The poorer countries need to push for further amendments
in the Basel Convention so that there is a complete stop to openly dumping these
wastes into their land.
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Chapter 9
Carbon Emission from Liquid Fuel and
Pollution Haven Hypothesis
Badri Narayanan Gopalakrishnan and Apra Sinha
Abstract In this chapter, using a panel of 62 countries over 34 years, we provide
evidence in favor of EKC hypothesis for carbon dioxide emission from liquid fuel
consumption. This relationship is robust to inclusion of additional covariates used
in the literature. We test pollution haven hypothesis for liquid fuel emission using
trade to GDP ratio in an extended EKC framework. Our regression results based
on panel pooled mean group estimator, fixed effect conditional quantile regression,
fixed effect panel regression, and fixed effect panel threshold regression suggest
that the impact of trade on liquid fuel emission depends upon the level of income.
At higher level of income, increase in trade leads to lower liquid fuel emission.
Results also suggest that at high level of per capita income the elasticity of liquid
fuel emission with respect to energy consumption is lower, but the elasticity of liquid
fuel emission with respect to financial development is higher.
Keywords Carbon emission · Haven hypothesis · GDP · Global climate
change · Circular economy
9.1 Introduction
Relation between carbon dioxide emission and economic activity is usually formulated in terms of the environmental (carbon) Kuznets curve (EKC). EKC is a reduced
form relationship between per capita emission and per capita income. The EKC
hypothesis suggests that per capita carbon dioxide emission initially increases with
rising per capita income and declines after a threshold level of per capita income
B. N. Gopalakrishnan
Fellow and Former Head, Trade, Commerce and Strategic Economic Dialogue, NITI Ayog,
Government of India
e-mail: badrig@uw.edu
A. Sinha ()
Department of Finance and Business Economics, South Campus, University of Delhi, India
e-mail: aprasinha@south.du.ac.in
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_9
167
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B. N. Gopalakrishnan and A. Sinha
Fig. 9.1 Liquid fuel consumption (source: https://ourworldindata.org/fossil-fuels)
known as turning point. Grossman and Krueger (1995) argue that with change in
income, environmental regulations, technology and industrial composition changes,
and therefore income should be able to capture these changes which are driving the
environmental pollution.
EKC hypothesis for the total carbon dioxide emission has been studied extensively for individual and panel of countries. Kaika and Zervas (2013a,b) provide
excellent survey on EKC hypothesis. There has been mixed evidence for EKC from
both individual and panel of countries. Farhani et al. (2014) and Omri et al. (2015)
provide evidence in favor of EKC hypothesis using data from MENA countries. On
the other hand, Ozcan (2013) suggests that there is no evidence of EKC hypothesis
for a group of Middle East countries. A similar conclusion is arrived in Chow and
Li (2014) using a panel of 132 developed and developing countries over the period
from 1992 to 2004.
While the total .CO2 emission has been studied extensively, there has been
very limited studies using sub element of carbon dioxide emission such as from
liquid, gaseous and solid fuel. Alper and Onur (2016) provide evidence that
EKC hypothesis holds for liquid fuel emission (.CO 2 emission from liquid fuel
consumption) in China. But there are no panel data-based studies for liquid fuel
emission. This is surprising given the fact the liquid fuel consumption has been
increasing at a rapid rate (see Fig. 9.1). Also, liquid fuel consumption is a significant
portion of the total energy consumption. For example, in the United States, liquid
fuel is 37% of the total energy consumption.1 Therefore, in this chapter, we study
1 https://www.eia.gov/energyexplained/us-energy-facts/.
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
169
pollution haven hypothesis for .CO2 emission from liquid fuel using a panel of 62
countries. Since the EKC hypothesis for carbon dioxide emission has been extended
to include other relevant variables, we also use a set of control variables as discussed
below.
9.1.1 Financial Development, Energy Consumption, and
Carbon Emission
Several variables have been found in the literature that influence carbon emission
such as financial development, energy use, foreign direct investment, and trade.
Financial development can have both negative and positive effects on emission.
Financial development affects saving and growth and hence increases energy
consumption and carbon emission (Sadorsky 2010, 2011 and Zhang 2011). Frankel
and David (1999) and Tamazian et al. (2009) argue that financial development brings
more foreign direct investment and thus better technology leading to lesser emission.
Shahbaz et al. (2013a) suggest that financial development decreases emission in
both long and short run in South Africa, whereas Shahbaz et al. (2013b) in context of
Indonesia found only long-run effect of financial development on emission. Shahbaz
et al. (2013c) suggest that financial development reduces emission in Malaysia.
Jalil and Feridun (2011b) find that financial development leads to lower emission
in China. As we can see from the above individual country-specific studies, there is
mixed evidence that financial development reduces emission.
9.1.2 FDI, Trade, Carbon Emission, and Pollution Haven
Hypothesis
Foreign direct investment does not affect emission through only technology as
discussed in the previous section. Copeland and Taylor (1994) suggest that in
a world with free trade where both high income and low income countries use
pollution tax for environmental regulation, it is optimal for rich countries to have
higher tax. This higher pollution tax can lead to relocation of polluting industries
from high-income countries to low-income countries. Therefore, increase in FDI
in low-income countries should be associated with higher emission as these FDIs
would be coming in polluting industries, Mani and Wheeler (1998) and Cole and
Elliott (2005). Thus, one can test the pollution haven hypothesis using FDI and
emission at aggregate level. On the other hand, Talukdar and Meisner (2001) suggest
that increase in FDI brings technological improvement that leads to lower emissions.
Grimes and Kentor (2003) using FDI suggest that there is evidence in favor of
pollution haven hypothesis. Javorcik and Wei (2003) argue that there are issues
with testing pollution haven hypothesis using aggregate FDI data. Their argument
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B. N. Gopalakrishnan and A. Sinha
is based on omitted variable bias. For example, a country with high corruption will
have lax environmental standard and low FDI. This country will have high emission
but not due to FDI but because of corruption. So, if there are issues with measuring
corruption, then our estimates of increase in emission due to FDI would be biased.
Pollution haven hypothesis suggests that polluting industries are relocating to
low-income countries because they have lax environmental standard. But most
of the output of these industries would be consumed by high income countries,
and therefore there should be positive relationship between trade and emission in
poor countries. Pollution haven hypothesis has also been tested using international
trade, Agras and Chapman (1999), Cole (2004) and Copeland and Taylor (1995).
Halicioglu (2009) finds evidence in favor of trade increasing emission in Turkey.
Le et al. (2016) using a panel of countries suggest that trade openness leads to
higher emission and the impact of openness on emission depends upon the income
of countries.
Hoffmann et al. (2005) tested the causality between FDI and environmental
pollution. They group countries in low-, middle-, and high-income countries. They
found bidirectional causality in low-income countries, unidirectional causality in
middle-income countries from FDI to emission, and no causality in the case of highincome countries. Sun et al. (2017), Zheng and Shi (2017), Yang et al. (2018), Lopez
et al. (2018), Solarin et al. (2017) are few recent work on pollution haven hypothesis.
9.1.3 Conceptual Framework
In this chapter, we add to the literature on pollution haven hypothesis for liquid fuel
emission using trade to GDP ratio. Our main hypothesis is that increase in trade to
GDP ratio should increase emission at low level of per capita income, and as income
increases this effect gets weaker. In other words, the marginal effect of trade on
emission depends upon per capita income. We use an extended EKC model in which
we use per capita GDP, square of per capita GDP, per capita energy consumption,
domestic credit to GDP (a measure of financial development), and FDI (foreign
direct investment) to GDP as control variables. Our main variable of interest is trade
to GDP.
We use several relevant empirical frameworks to test pollution haven hypothesis
for liquid fuel emission using trade to GDP ratio. We use world bank classification to
divide the countries into high-income and low-income countries. Out of 62 countries
in our sample, 15 countries are high-income countries. The Appendix section at
the end gives the name of these countries. We estimate panel ARDL (pooled mean
group estimator) for country groups separately. This allows us to test whether the
coefficient of trade varies between high- and low-income countries.
As discussed in the next section, liquid fuel emission is not normally distributed.
Therefore, the usual regression estimated using OLS is not giving us all the
information. We estimate conditional quantile regression for panel data with fixed
effects using the methodology in Machado and Silva (2019). We estimate this for
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
171
10, 25, 50, 75, and 90 percentile. These are quantiles of emission conditioned on
covariates. One can argue that since emission and income are positively related,
higher quantiles of emission conditioned on income should be at higher quantiles of
income too. Therefore, these estimates at different quantiles can be used to infer the
relationship between emission and trade at a different level of income.
Fixed effect panel regression is also estimated to infer the dependence of
emission trade relationship on income. We include an interaction of per capita
income and trade to GDP ratio apart from other controls as explained above.
Inclusion of this interaction term makes the marginal effect of trade on emission
dependent on income. If the coefficient of this interaction term is negative, that
would imply that the marginal effect is lower at high level of income.
Our main hypothesis that the effect of trade on emission depends upon income
also implies that there are likely threshold level of income at which the effect of
trade and emission changes in sign, magnitude, or statistical significance. This is
tested using a fixed effect panel threshold model to estimate the threshold level of
per capita income and the coefficient associated with trade below the threshold and
above the threshold income.
For creating country grouping, we use current world bank classification, and our
pooled mean group estimator is based on this classification. We want to rule out that
the differential effect of trade on emission is driven by current country classification.
It is possible that some common factor in high-income country in world bank
classification makes them less polluting, and therefore they have different impact of
trade on emission. This would imply that the differential impact of trade on emission
is not driven by income but the country grouping. Since, at some point, high-income
country in the classification had low enough income comparable to low-income
countries in the classification, we create a subsample of these country–year pairs
and implement a fixed effect panel regression on this subsample to estimate the
impact of trade to GDP on emission.
9.1.4 Result Summary
Our panel ARDL suggests that high-income countries have negative elasticity of
liquid fuel emission with respect to trade to GDP in long run. In the short run,
the relationship between emission and trade is positive in case of poor countries.
The short run coefficient of trade to GDP is although positive but is not significant
for rich countries. Our quantile regression suggests that at higher quantiles the
coefficient of trade to GDP ratio gets lower. At 75th and 90th percentile, the
coefficient remains positive but is no longer significant. Since higher conditional
quantiles of emission are likely to be higher quantiles of per capita income, this
suggests that the effect of trade to GDP ratio on emission decreases as income rises.
The interaction term in fixed effect panel regression discussed above is found to
be negative. The coefficient associated with trade remains positive. This suggests
that as income increases the elasticity of liquid fuel emission with trade t decreases.
This gives further evidence in support of our hypothesis. As argued before, the
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B. N. Gopalakrishnan and A. Sinha
dependence of elasticity of liquid fuel emission with trade on per capita implies
that there should be threshold levels of per capita income. Our panel threshold
regression indeed finds a threshold level of income which is around 90th percentile
of per capita income in our sample. These results give favorable evidence in favor
of our hypothesis that marginal effect of trade to GDP ratio on liquid fuel emission
depends upon the level of per capita income.
There is also evidence that the effect of financial development on emission varies
with the level of income and at higher income financial development leads to more
liquid fuel emission as argued by Sadorsky (2010, 2011). In case of pooled mean
group estimator, this coefficient is negative for both low- and high-income countries
but higher for rich income countries. The elasticity of emission with energy use
decreases with the level of income, suggesting that at higher income, fewer polluting
sources of income are used. We do not find a significant impact of FDI to GDP ratio
on per capita emission.
In Sect. 9.2, we provide a brief description of the data and is followed by the
unit root test. Section 9.4 gives empirical models being estimated in the chapter.
Section 9.5 presents results and is followed by concluding remarks.
9.2 Data
9.2.1 Summary Statistics and Distribution
Correct Fig. 9.2 and 9.3.
We use the following data from world bank: per capita .CO2 emissions from
liquid fuel consumption (in kg), domestic credit to private sector (% of GDP), per
capita GDP (current price, in 1000 US $), trade (% of GDP), and foreign direct
investment and net inflows (% of GDP). We have taken energy consumption (in
kg) from international energy statistics (EIA).2 We have data for 62 countries from
1980 to 2013. The list of countries in high- and low-income group is given in the
Appendix (Table 9.1).
We use world bank classification to group countries in high- and low-income
countries. There are 15 high-income countries in our sample (out of 62). Figure
9.2 gives the kernel density for per capita liquid fuel emission. Emission in poor
countries is lower and the distribution is flatter.
Figure 9.3 gives the kernel density for per capita GDP, and the pattern is similar to
the total emission as explained above. High-emission countries are mostly in the top
quantile of income distribution. There is a common region between rich and poor
countries. This represents country– year pair of rich countries when their income
was low enough to be classified as a poor country based on the benchmark used in
current classification. Table 9.2 gives the number of countries across quantiles and as
expected high-income countries are mostly in top quantiles of income distribution.
2 https://www.eia.gov/beta/international/data/browser/.
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
173
Fig. 9.2 Log of per capita .CO2 emission from liquid fuel consumption: the Shapiro–Wilk test
rejects normality for three groups
Fig. 9.3 Log of per capita GDP: the Shapiro–Wilk test rejects normality for three groups
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B. N. Gopalakrishnan and A. Sinha
Table 9.1 Summary statistics of variables
Variable
Per capita GDP
Per capita GDP.×Per Capita GDP
Domestic credit to GDP
Energy consumption
Foreign direct investment to GDP
Trade to GDP ratio
Liquid fuel emission
Observations
2,108
2,108
2,108
2,108
2,084
2,108
2,108
Mean
0.74
3.22
3.30
1.42
2.72
4.10
6.60
Standard
deviation
1.64
4.30
0.94
2.53
4.29
0.56
1.61
Min
−2.18
0.00
0.47
−4.42
−28.62
2.21
2.37
Max
4.64
21.49
5.73
7.84
57.84
6.08
9.72
Notes: All variables are in log except Foreign Direct Investment to GDP ratio as this can
be negative also and we have many negative values in our sample. Small values of energy
consumption can give negative minimum as the above values are in log. Per Capita GDP in 1000
USD at current prices. The log of this is negative when per capita income is less than 1000 USD.
Liquid fuel emission in kilograms
Table 9.2 Distribution of country: per capita .CO2 emission from liquid fuel consumption
Country
Low income
High income
All
Quantile 1
527
0
527
Quantile 2
527
0
527
Quantile 3
469
58
527
Quantile 4
41
486
527
Total
1564
544
2108
9.2.2 Bivariate Relationship Between Variables of Interest
In this chapter, our focus is on testing pollution haven hypothesis for liquid fuel
emission, and therefore the relationship between trade and emission is our main
concern. Figures 9.4, 9.5, and 9.6 give bivariate relationship between log of per
capita liquid fuel emission and log of trade to GDP Ratio. The correlation between
liquid fuel emission and trade to GDP Ratio for all countries is 0.3843 and is
statistically significant at 5% level of significance. The correlation for poor countries
is 0.4483* and is statistically significant at 5% level of significance. The correlation
for rich countries is 0.0956 and is statistically significant at 5% level of significance.
The bivariate relationship suggests that among poor and rich countries the liquid fuel
emission increases with increase in trade to GDP ratio (although the correlation is
very weak in case of rich countries). This also suggests that correlation depends
upon the level of per capita income.
As we saw in Fig. 9.2 that at some point of time the rich countries’ income was
less than the maximum income of poor countries in our sample. We create a group
called rich when poor. These are rich countries based on current classification but
at some time in past their income was comparable to poor countries in current
classification. We use these country–year pairs of high-income country to create
a subsample. This subsample allows us to get rid of country-specific effect and
helps us in making more robust inference about liquid fuel emission and trade
relationship. There is a possibility that some current unobserved common factory in
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
175
Fig. 9.4 Log of per capita .CO2 emission from liquid fuel consumption versus log of trade to GDP
ratio: all countries
Fig. 9.5 Log of per capita .CO2 emission from liquid fuel consumption versus log of trade to GDP
ratio: rich countries
current classification is leading to negative/low elasticity of liquid fuel emission with
trade for high-income countries. If that is the case, then the differential elasticity
between rich and poor countries is not being driven by the level of income but this
unobserved factor. We want to rule out this possibility, and if we can show that the
expected positive relationship exists between emission and trade in this subsample,
then we can claim that the different relationship between high- and low-income
countries is driven by the level of income.
Figure 9.7 gives the bivariate relationship between log of liquid fuel emission and
log of trade to GDP ratio for this subsample. The coefficient of correlation is 0.2998
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B. N. Gopalakrishnan and A. Sinha
Fig. 9.6 Log of per capita .CO2 emission from liquid fuel consumption versus log of trade to GDP
ratio: poor countries
and is statistically significant at 5% level of significance. This correlation is higher
than the correlation found for high-income countries for full sample. This makes it
clear that the relationship between log of emission and log of trade to GDP ratio is
driven by income rather than present day country classification. This also suggests
that there is a likely threshold level of income at which the relationship between log
of emission and log of trade to GDP ratio changes. We attempt to find the threshold
income using panel threshold regression with fixed effects.
From the above discussion, it is clear that the relation between .CO2 emission and
trade to GDP ratio depends upon the level of income and there is a likely income
threshold at which the relationship changes.
9.2.3 Relationship Between Emission and Income Across
Distribution
Our dependent variable is liquid fuel emission. Ordinary least square (OLS)
regressions (regression that minimizes residual sum of squares) are fully informative
if the dependent variable is normally distributed. But if the dependent variable is
not normally distributed, then one should use quantile regression to make correct
inference at different points of distribution. As we can see from Fig. 9.1, liquid
fuel emission is not normally distributed. We estimate the basic EKC regression
in quantile framework at first, second, and third quartiles using per capita liquid fuel
emission and GDP. Table 9.5 in the Appendix gives estimates at these three quantiles
as well as estimate at mean that is OLS estimates.
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
177
Fig. 9.7 Log of per capita .CO2 emission from liquid fuel consumption versus log of trade to GDP
ratio: rich countries when their income was less than the maximum income of poor countries in
sample
Figure 9.8 gives the predicted value of emission at a different level of income
using these estimates. As we can see, the OLS estimate and median estimate
(quartile 2) also predict significantly a different value away from the mean. The
other two estimates, quartile 1 and quartile 2, predict significantly a different value
than mean and median estimator. These EKC regressions at different quantile allow
us to conclude that there is distributional heterogeneity in relationship between
liquid fuel emission and per capita income, and therefore we estimate the extended
EKC regression in quantile framework to draw inference about elasticity of liquid
fuel emission and trade at different points of distribution which is crucial for our
main hypothesis in this chapter.
9.3 Unit Root Test
Since we are estimating a long-run relationship, first we look for the integration
properties of data. Results from panel Im–Pesaran–Shin unit root test are given in
Table 9.3. All variables except trade to GDP ratio, foreign direct investment to GDP,
and liquid fuel emission have unit root at conventional 5% level of significance and
are .I (1). All .I (1) variables are stationary in first difference.
Since trade to GDP ratio, foreign direct investment to GDP, and liquid fuel
emission are stationary, conventional cointegration tests are not applicable in cases
involving these variables. Conventional cointegration tests require all variables to
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B. N. Gopalakrishnan and A. Sinha
Fig. 9.8 Predicted value of log of per capita CO2 emission from liquid fuel consumption at mean
and different quantiles from simple EKC regression
Table 9.3 Im–Pesaran–Shin unit root test
Variable
Per capita GDP
Per capita GDP.×Per Capita GDP
Domestic credit to GDP
Energy consumption
Foreign direct investment to GDP
Trade to GDP ratio
Liquid fuel emission
No of
countries
62
62
62
62
62
62
62
No of
years
34
34
34
34
34
34
34
p value
level
1.000
1.000
0.8683
0.3165
0.0000
0.0080
0.0025
p value
first difference
0.0000
0.0000
0.0000
0.0000
Notes: Ho: All panels contain unit roots; Ha: Some panels are stationary. All variables are in
log except Foreign Direct Investment to GDP ratio as this can be negative also, and we have
many negative values in our sample. Liquid Fuel Emission is .CO2 emission from liquid fuel
consumption
be .I (1). There is another reason that conventional panel cointegration test would be
inefficient in our case. Conventional panel cointegration test such as Kao tests, the
Pedroni tests, and the Westerlund tests is based on a simple panel regression of the
form given below.
yit = xit βi + zit γi + eit ,
.
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
179
where .xit contains the covariates of interest and .zit contains deterministic terms
such as fixed effects and time trend. The abovementioned method of cointegration
requires that covariates are not cointegrated between them for testing cointegration.3
In our case, covariates include per gross domestic product, energy consumption,
and financial development. It would be very difficult to argue that there is no
cointegration between these three variables, especially between gross domestic
product and energy use. Al-Mulali et al. (2013) using a panel of countries suggest
that 79% of countries in the sample have long-run relationship between renewable
energy consumption and GDP growth. Moreover, Tamazian et al. (2009), Jalil and
Feridun (2011b), Sadorsky (2010, 2011) provide evidence of relationship between
financial development and energy use. Therefore, we cannot use conventional
methods of cointegration and adopt ARDL method of cointegration.
9.4 Methodology
9.4.1 Panel ARDL (Pooled Mean Group Estimator)
We use the panel ARDL method of estimating cointegration. This has several
benefits. First, in case of both .I (0) and .I (0) variables, traditional methods of
cointegration are not applicable. They require all variables to be .I (1). Moreover,
traditional methods of panel cointegration are not suited in our case because
of control variables being used in the model as argued above. Second, ARDL
specification estimates both long- and short-run equations and therefore also allows
us to infer both long- and short-run causalities. Third, ARDL method allows us to
estimate short- and long-run dynamics separately. This is important because EKC
hypothesis is expected to hold in the long run as it is a long-run phenomenon.
Fourth, the panel ARDL approach used in this chapter allows us to statistically test
whether the long-run relationship between carbon emission and per capita income
across countries is same or not. The panel ARDL method had been used by Binder
and Offermanns (2007), Bildirici and Kayıkcı (2012a,b) and Bildirici and Kayıkçı
(2013). Our baseline model is a panel ARDL .(p, q) given by
yit =
j
=p
.
j =1
λij yi,t−j +
j
=q
δij Xi,t−j + ui + it
(9.1)
j =0
where .i = 1, 2, . . . , N is the number of groups, and .t = 1, 2, . . . , T is the time
period. .ui are country fixed effects, .Xit is .k × 1 vector of explanatory variables, .δij
is .k × 1 vector of coefficients, .yit is log of per capita liquid fuel emission and .Xi,t
consists of log of per capita GDP (.P CY ), square of log of per capita GDP .(P CY )2 ,
3 See Stata manual on xtcointtest.
180
B. N. Gopalakrishnan and A. Sinha
log of domestic credit to GDP .(DCGDP ), per capita energy consumption .(P CE),
log of trade to GDP .(T GDP ), and foreign direct investment to GDP .(F DI GDP ).
We do not take log of foreign direct investment to GDP as it contains negative values
too (when the outflow exceeds inflow of foreign direct investment). We can write the
above equation as
∗
Δyit = φi yi,t−1 − θ Xit +
λij Δyi,t−j +
δij∗ ΔXi,t−j + ui + it
p−1
q−1
.
j =1
⎛
p
.φi = − ⎝1 −
⎞
λij ⎠
j =1
⎛
j =0
j =p
j =0 δij
θ=
1 − λi1 − λi2 − λi3 − · · · − λip
p
λ∗ij = − ⎝
(9.2)
.
⎞
λim ⎠
j = 1, . . . . . . , p − 1
m=j +1
⎛
p
δij∗ = − ⎝
.
⎞
⎠
δim
j = 0, . . . . . . , q − 1
m=j +1
The model for .p = 1 and .q = 1 is given by
Δyit = φi yi,t−1 − θ Xit + δi∗ ΔXi,t + ui + it
.
Stacking the terms for a given i across time, we can write the above equation as
Δyit = φi ξi (θ ) + δi∗ ΔXi,t + ui + it
.
where
ξi (θ ) = yi,t−1 − θ Xit
.
φi = − (1 − λi1 )
.
∗
= −δi1
δi0
θ=
+ δ
δi0
i1
(1 − λi1 )
φi is the error correction term, and for long-run relationship this must be negative.
The above model is estimated with maximizing the log likelihood.
.
N
1 1
T ln 2π σi2 −
L θ , σ = −
(Δyi − φi ξi (θ )) Hi (Δyit − φi ξi (θ ))
2
2
σi2
.
i=1
where
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
181
Hi = IT − ΔXi ΔXi ΔXi ΔXi
.
We use (Pesaran et al. 1997, 1999) PMG (pooled mean group) estimator that
combines both pooling and averaging. This intermediate estimator allows the
intercept, short-run coefficients, and error variances to differ across the groups (as
would the MG (mean group) estimator) but constrains the long-run coefficients to be
equal across groups (as would the FE estimator). Starting with an initial estimate of
the long-run coefficient vector, .θ , the short-run coefficients and the group-specific
speed of adjustment terms can be estimated by regressions of .Δyi on (.ξi , .ΔXi ).
These conditional estimates are in turn used to update the estimate of .θ . The process
is iterated until convergence is achieved. We estimate all models with .p = 1 and
.q = 1. Our data is annual and one lag should be sufficient to capture the dynamics
of the model.4
9.4.2 Panel Quantile Regression with Fixed Effects
Our dependent variable is liquid fuel emission, and as discussed above, this is not
normally distributed. Also, evidence produced in Table 9.5 (appendix) based on
simple quantile regression (Koenker and Bassett 1978) suggests a significant difference across different quantiles. Therefore, we estimate panel quantile regression
with fixed effects. We use the methodology of Machado and Silva (2019) to estimate
the panel quantile regression with fixed effects. They use a location scale model for
panel data
yit = αi + Xi,t
β + δi + Xi,t
γ uit
.
(9.3)
where .uit is the error term with property .E (Xit uit ) = 0. We can write this as
Qyit (τ |xit ) = η(τ )i + Xi,t
β(τ )
.
(9.4)
where
η(τ )i = αi + δi Qu (τ )
.
β(τ ) = β + γ Qu (τ )
Machado and Silva (2019) show that the bias is negligible if .n/T < 10 where n is
the number of groups in panel and T is the time period. .α, β, γ , and .δ are unknown
parameters, and we estimate .β(τ ) using the Stata package XTQREG, where .yit
is log of per capita liquid fuel emission. .Xi,t consists of log of per capita GDP
(.P CY ), square of log of per capita GDP .(P CY )2 , log of domestic credit to GDP
4 To the best of our knowledge, there is no test available to determine the optimal number of lag in
PMG estimator.
182
B. N. Gopalakrishnan and A. Sinha
(DCGDP ), per capita energy consumption .(P CE), log of trade to GDP .(T GDP ),
and foreign direct investment to GDP .(F DI GDP ). We do not take log of foreign
direct investment to GDP as it contains negative values too (when the outflow
exceeds inflow of foreign direct investment). In case of regression with trend, .Xi,t
also includes time trend.
.
9.4.3 Fixed Effect and Threshold Fixed Effect Regression
Evidence produced in Sect. 9.2 suggests that the relationship between emission
and trade to GDP ratio depends upon the level of income. To formally test this
proposition, we also estimate a fixed effect panel model to test the dependence of
emission due to trade to GDP ratio.
log (yit ) = θi + θ1 log (P CYit ) + θ2 (log (P CYit ))2 + θ3 log (DCGDPit )
.
+ θ4 log (P CEit )
+ θ5 log (T GDPit ) + θ6 F DI GDPit + θ7 log (T GDPit )
× log (Y P Cit ) + it
(9.5)
where .yit is per capita liquid fuel emission, P CY is per capita GDP in 1000 of
USD at current price, DCGDP is domestic credit to GDP, and P CE is per capita
energy consumption in kilograms of oil equivalents, T GDP is trade GDP ratio, and
F DI GDP is foreign direct investment to GDP ratio. From the above equation, we
dlog(yit )
can see that . dlog(T
GDPit ) = θ5 + θ7 log (P CYit ). Rich countries do not experience
increase in emission due to increase in trade, whereas poor countries face this that
would imply .θ5 > 0 and .θ7 < 0. The differential impact of trade on emission in case
of poor and rich countries implies that there exists some threshold level of income at
which the magnitude ( and/or sign) of the coefficient associated with trade to GDP
changes. We can write the above regression specification as
log (yit ) = θi + θ1 log (P CYit ) + θ2 (log (P CYit ))2
.
+ θ3 log (DCGDPit ) + θ4 log (P CEit )
+ θ6 F DI GDPit + (θ5 + θ7 × log (P CYit )) log (T GDPit ) + it
(9.6)
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
183
which can be written as
log (yit ) = θi + θ1 log (P CYit ) + θ2 (log (P CYit ))2
.
+ θ3 log (DCGDPit ) + θ4 log (P CEit )
+ θ6 F DI GDPit + (θ (log (P CYit ))) log (T GDPit ) + it
(9.7)
where we have assumed that the coefficient associated with .T GDPit is a function
of .P CYit or depends upon .P CYit . The above model can be estimated using the
threshold regression framework.
log (yit ) = θi + θ1 log (P CYit ) + θ2 (log (P CYit ))2
.
+ θ3 log (DCGDPit ) + θ4 log (P CEit )
+ θ6 F DI GDPit + θ5,1 log (T GDPit ) (log (P CYit ) < ω)
+ θ5,2 log (T GDPit ) (log (P CYit ) > ω) + it
(9.8)
where .θ5,1 and .θ5,2 are coefficients associated with .T GDPit in two regimes based
on .P CYit . .ω is the threshold level of income at which the magnitude ( and/or sign)
of the coefficient associated with trade to GDP changes. We estimate the panel
threshold model with fixed effect using Stata package xthreg. In case of regression
with trend, we also include time trend.
9.5 Results and Analysis
9.5.1 Pooled Mean Group Estimator (Panel ARDL)
As explained before, we bifurcate countries in high- and low-income countries using
world bank classification.5 The pollution haven hypothesis suggests that increase in
trade should increase pollution in low-income countries and not in high-income
countries.
Results from pooled mean group estimation of Eq. 9.2 are given in Table 9.6 in
the Appendix. Error correction terms are negative and significant in all cases, thus
giving us a long-run relationship. Figure 9.9 gives the long-run coefficient from
these estimations. These are long-run elasticity of emission with respect to particular
variable except in case of FDI to GDP ratio. As we can see, EKC hypothesis does not
hold for rich countries but holds for poor countries. For rich countries, the per capita
GDP term does not come significant because of the large standard error associated
with the estimate. But the sign of coefficient is as expected by EKC hypothesis.
5 https://datahelpdesk.worldbank.org/knowledgebase/articles/906519.
184
B. N. Gopalakrishnan and A. Sinha
Fig. 9.9 Long-run coefficient from pooled mean group estimation: .CO2 emission from liquid fuel
consumption
FDI to GDP ratio is not significant for any country grouping. Long-run elasticity of
liquid fuel emission with per capita energy consumption is significantly lower in rich
countries than poor countries. This suggests that in rich countries fewer polluting
sources of liquid energy are likely to be used.
Domestic credit decreases emission in both poor and rich countries in the long
run, but the coefficient is higher for rich countries. Short-run effect of domestic
credit is opposite and is significant for rich countries (Table 9.6 in the Appendix).
Long-run elasticity of .CO2 emission with trade to GDP is negative and significant
for rich countries. In case of poor countries, long-run elasticity of .CO2 emission with
trade to GDP is not significant. Short-run coefficient of trade to GDP ratio is positive
and significant for poor countries as shown in Table 9.6 in the Appendix. The shortrun coefficients are not significant for rich countries. This allows us to conclude
that the effect of trade on emission depends upon the income, and at higher level of
income the relationship is either not significant or reversed in sign. This result thus
provides evidence for pollution haven hypothesis. We conduct several robustness
exercises to substantiate this result.
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
185
9.5.2 Quantile Regression
Liquid fuel emission is not normally distributed and EKC regression at mean and
other quantiles of distribution give significantly different coefficients (Table 9.5).
Using the methodology of Machado and Silva (2019), we estimate equation 9.5 by
panel quantile regression with fixed effects. Tables 9.7 and 9.8 in the Appendix give
the estimates without and with time trend, respectively. Figures 9.10 and 9.11 give
the estimates without and with time trend, respectively.
Without time trend, there is not much difference in per capita GDP (it slightly
increases at higher quantiles) and per capita GDP square coefficient across various
quantiles. This implies that turning point is the same across different quantiles.
Turning point depends upon the coefficient of per capita GDP and per capita GDP
square. As we can see, EKC hypothesis continues to hold at all quantiles.
Elasticity of per capita emission with per capita energy consumption (credit to
GDP) decreases (increases) at higher quantiles. This implies that at higher quantiles
fewer polluting sources of energy are being used. Elasticity of per capita emission
with trade to GDP ratio decreases at higher quantiles. This substantiates our
evidence of pollution haven hypothesis from the previous section. As argued before,
higher conditional quantiles of emission are expected to be at higher per capita
Fig. 9.10 Panel quantile fixed effect estimator for .CO2 emission from liquid fuel consumption
without time trend. These are not unconditional quantiles of emission. But since there is a strong
positive correlation between per capita emission and per capita income, higher conditional quantile
of emission conditioned on per capita income should be at the higher unconditional quantile of per
capita income, and therefore the coefficients at higher quantile should be at higher income quantile
too
186
B. N. Gopalakrishnan and A. Sinha
Fig. 9.11 Panel quantile fixed effect estimator for .CO2 emission from liquid fuel consumption
with time trend. These are not unconditional quantiles of emission. But since there is a strong
positive correlation between per capita emission and per capita income, higher conditional quantile
of emission conditioned on per capita income should be at the higher unconditional quantile of per
capita income, and therefore the coefficients at higher quantile should be at higher income quantile
too
income quantile, and therefore the coefficient from quantile regression suggests
that as income increases the impact of trade on liquid fuel emission decreases.
Foreign direct investment to GDP does not turn out to be significant at any quantile.
Elasticity of fuel emission with domestic credit to GDP increases at higher quantiles,
and this is in line with our results from pooled mean group estimator. With time
trend, all variables show a similar pattern as explained above except per capita GDP
and per capita GDP square. Now, per capita GDP coefficients increase at higher
quantiles in case of both total emission and emission form liquid fuel consumption.
9.5.3 Panel Fixed Effect Regression
Results obtained so far in this chapter suggest that the marginal effect of trade
on emission depends upon the level of per capita income. We provide additional
evidence on this using a panel fixed effect regression with interaction of trade to
GDP and per capita GDP given by Eq. 9.5.
Table 9.9 in the Appendix gives the estimates without and with time trend.
Figure 9.12 plots these coefficients. As we can see, EKC hypothesis continues
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
187
Fig. 9.12 Fixed effect panel regression with and without time trend
to hold for. Domestic credit to GDP, per capita energy consumption, and trade
to GDP ratio have positive elasticity with liquid fuel emission. Foreign direct
investment does not turn out to be significant as in The previous results. We are
interested in interaction of per capita GDP and trade to GDP ratio. In both cases
without and with trend, this coefficient is negative. This implies that the marginal
effect of trade on liquid fuel emission depends upon per capita income, and as
per capita income increases the marginal effect decreases. Thus, our panel fixed
effect regression corroborates our findings about the relationship between per capita
emission and trade to GDP ratio obtained from pooled mean group estimator and
quantile regression of the previous section.
9.5.4 Threshold Panel Regression with Fixed Effects
Since the marginal effect of trade on liquid fuel emission depends upon per capita
income, it is likely that there exists threshold (one or more) level of per capita
income at which the marginal effect of trade on emission changes (either in sign,
magnitude, or significance). We estimate the model given by Eq. 9.8 to estimate the
threshold using fixed effect panel threshold regression. Since this requires strongly
balanced sample and we have 24 observations on FDI missing in our sample (see
Table 9.1). Therefore, we lose few countries to obtain a strongly balanced sample
for the time period 1980–2013, and therefore threshold regression is done with a
slightly smaller sample in comparison to previous regressions. Table 9.10 in the
Appendix gives the estimates with and without time trend. The threshold per capita
GDP estimated is 3.2825 with and without time trend. This is close to 90th percentile
188
B. N. Gopalakrishnan and A. Sinha
Fig. 9.13 Parameters of emission from liquid fuel consumption with and without time trend:
._cat = 0 is per capita GDP below threshold and ._cat = 1 per capita GDP above threshold
Table 9.4 Distribution of country: per capita .CO2 emission from liquid fuel consumption
Country
Low income
High income
All
Below income threshold 3.2825
1326
334
1660
Above income threshold
0
176
176
Total
1326
510
1836
of per capita income in our sample. This threshold is significant (we test for more
than one threshold, but that does not turn out to be significant).
Figure 9.13 gives estimates with and without time trend. As we can See, EKC
hypothesis continues to hold for both total emission and emission from liquid fuel
consumption. Domestic credit to GDP and per capita energy consumption have
positive elasticity. Without trend, regression suggests that elasticity of liquid fuel
emission with trade above threshold turns negative but is not significant. With trend,
elasticity of liquid fuel emission with trend above threshold remains positive but is
significantly lower than the elasticity below threshold. This gives evidence that there
exists a threshold level of income at which the elasticity of liquid fuel emission with
trade changes. Foreign direct investment does not turn out to be significant. These
are in line with the previous results, table 9.4 shows country year observation based
on income threshold. As expected, Table 9.4 shows that above threshold countries
are high-income countries.
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
189
Fig. 9.14 Fixed effects panel regression with time trend for high-income countries during the time
when their income was comparable to low-income countries
9.5.5 High-Income Countries When They Had Low Income
Results obtained from pooled mean group estimator using world bank current
classification of countries suggest high-income countries have negative elasticity of
liquid fuel emission with trade. Other regressions done in the chapter also suggest
that this elasticity is lower at a high level of income. Although, we have controlled
for country fixed effects, but we want to rule out the possibility that our results are
driven by classification of countries in high and low income as explained before. We
estimate a subsample fixed effect panel regression (Eq. 9.5) with and without time
trend.
Table 9.11 in the Appendix gives these estimates. Figure 9.14 plots these
estimates. As we can see, when today rich countries were poor, they satisfied EKC
predictions of inverted U-shaped relationship between liquid fuel emission and per
capita income. But this subsample has significantly higher coefficient of per capita
income, suggesting that elasticity of liquid fuel emission with per capita income has
fallen over time for high-income countries. Domestic credit to GDP and per capita
energy consumption have positive elasticity although the coefficient of domestic
credit to GDP is not significant without time trend. Foreign direct investment does
not turn out to be significant. These are in line with the previous results. The
coefficient of interest is the coefficient associated with trade to GDP ratio. This
turns out to be positive and significant. Also, this coefficient is significantly higher
than the estimates given by threshold regression (above threshold coefficient) and
quantile regression at the highest quantile. This substantiates our result that at lower
and higher levels of income the elasticity of liquid fuel emission with trade to GDP
190
B. N. Gopalakrishnan and A. Sinha
ratio changes and this result is not driven by some unobserved factor in countries
classification as high- and low-income countries. It is more like income effect than
industry shifting because at that time also these countries were rich in comparison to
other countries and could have shifted polluting industry. But we observe a very high
positive coefficient of trade to GDP ratio. Therefore, we conclude that as income
increases the elasticity of liquid fuel emission with respect to trade to GDP ratio
decreases, and this is mostly due to the effect brought in by higher income.
9.6 Concluding Remarks
Our regression results suggest that EKC hypothesis holds for liquid fuel emission for
a panel of 62 countries for the time period of 1980–2013. This relationship is robust
to the inclusion of additional covariates. For high-income countries, using pooled
mean group estimator, we get a positive coefficient of per capita income but with
large standard errors and thus not satisfying EKC predictions. The main focus of
this chapter is to test pollution haven hypothesis using trade to GDP ratio. Pollution
haven hypothesis predicts that polluting industries would relocate from high-income
to low-income countries, and thus higher FDI in low-income countries should be
associated with higher emission. But, if polluting industries shift to low-income
countries, then that should be reflected in their trade as most of these products
of newly shifted polluting industries would be exported to high-income countries.
Therefore, we argue that increase in trade to GDP ratio should have different impact
on liquid emission based on per capita income (the marginal effect of trade on
emission should decrease with increase in per capita income). We use an extended
EKC model in which we use per capita GDP, square of per capita GDP, per capita
energy consumption, domestic credit to GDP (a measure of financial development),
and FDI (foreign direct investment) to GDP as control. Our main variable of interest
is trade to GDP.
Panel ARDL (pooled mean group estimator) suggests that high-income countries
have negative long-run elasticity of liquid fuel emission with respect to trade.
The short-run relationship between emission and trade is found to be positive and
significant for poor countries. It suggests that the marginal effect of trade on liquid
fuel emission changes with income. We use quantile regression to estimate the
coefficient of trade to GDP at higher conditional quantiles of liquid fuel emission.
These estimates suggest that at higher quantiles the elasticity of liquid fuel emission
with respect to trade decreases. There is a strong positive correlation between liquid
fuel emission and per capita income, and therefore, higher conditional quantiles of
liquid fuel emission are expected to be coinciding with higher income quantiles.
Thus, our quantile regression substantiates the results that marginal effect of trade
on liquid fuel emission decreases with income. The interaction of trade to GDP
and per capita income in fixed effect panel regression turns out to be negative and
significant and that gives clear evidence that marginal effect of trade on liquid
fuel emission depends upon per capita income as suggested by panel ARDL and
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
191
quantile estimations. Using a threshold panel regression with fixed effects, we find
a threshold level of income at which the effect of trade to GDP ratio on liquid fuel
emission declines significantly.
Since we are using current classification to group countries in high and low
income, we want to rule out that some unobserved factor in high-income countries
is giving a low elasticity of liquid fuel emission with trade to GDP. We estimate a
subsume regression using country– year pairs from high-income countries when
their per capita income was comparable (less than the maximum value of per
capita income in poor countries in our sample). This subsample regression gives
a significantly higher elasticity of liquid fuel emission with trade (higher than the
elasticity found for below threshold per capita income). Therefore, we conclude
that the differential impact of trade to GDP on emission is not driven by country
grouping but the level of income. These results give favorable evidence in favor of
our hypothesis that marginal effect of trade to GDP ratio depends upon the level of
per capita income.
The elasticity of liquid fuel emission with per capita energy consumption
decreases with higher level of per capita income, suggesting that at higher income
fewer polluting sources of income are used. We do not find a significant impact of
FDI to GDP ratio on per liquid fuel emission in any of the regression. There is also
evidence that the marginal effect of financial development on liquid fuel emission
depends upon per capita income, and at higher income financial development leads
to more emission as argued by Sadorsky (2010) and Sadorsky (2011).
Appendix
List of Countries
(1) Antigua and Barbuda, (2) Australia, (3) Burundi, (4) Benin, (5) Bangladesh,
(6) Bahrain, (7) Belize, (8) Bolivia, (9) Central African Republic, (10) Switzerland,
(11) Chile, (12) Cameroon, (13) Costa Rica, (14) Dominica, (15) Denmark, (16)
Dominican Republic, (17) Algeria, (18) Ecuador, (19) Gabon, (20) Gambia, (21)
Guatemala, (22) Honduras, (23) Indonesia, (24) India, (25) Iceland, (26) Israel, (27)
Jamaica, (28) Jordan, (29) Japan, (30) Kenya, (31) Sri Lanka, (32) Madagascar,
(33) Mexico, (34) Mali, (35) Malawi, (36) Malaysia, (37) Niger, (38) Nigeria, (39)
Nicaragua, (40) Norway, (41) Nepal, (42) Pakistan, (43) Peru, (44) Paraguay, (45)
Rwanda, (46) Saudi Arabia, (47) Sudan, (48) Senegal, (49) Singapore, (50) Sierra
Leone, (51) El Salvador, (52) Sweden, (53) Seychelles, (54) Chad, (55) Togo, (56)
Thailand, (57) Tunisia, (58) Turkey, (59) Uruguay, (60) United Kingdom, (61) the
United States, and (62) Vanuatu.
192
B. N. Gopalakrishnan and A. Sinha
High-Income Countries Based on World Bank Classification
Country Names: (1) Antigua and Barbuda, (2) Australia, (3) Bahrain, (4) Switzerland, (5) Chile, (6) Denmark, (7) United Kingdom, (8) Iceland, (9) Israel, (10) Japan,
(11) Norway, (12) Saudi Arabia, (13) Singapore, (14) Sweden, (15) Seychelles, and
(16) the United States
Results
Table 9.5 Regression at mean and three quartiles for CO2 emission from liquid fuel consumption
Per capita GDP
Per capita GDP sqaure
Constant
R2
N
Linear
CO2 emission
1.163∗∗∗
(89.58)
−0.137∗∗∗
(−27.71)
6.187∗∗∗
(369.85)
0.858
2108
Quartile 1
CO2 emission
1.176∗∗∗
(67.84)
−0.132∗∗∗
(−20.04)
5.799∗∗∗
(259.67)
Quartile 2
CO2 emission
1.138∗∗∗
(69.05)
−0.138∗∗∗
(−22.02)
6.237∗∗∗
(293.81)
Quartile 3
CO2 emission
1.162∗∗∗
(83.70)
−0.155∗∗∗
(−29.30)
6.638∗∗∗
(371.14)
2108
2108
2108
Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All
variables in log
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
193
Table 9.6 Pooled mean group estimator: emission from liquid fuel
Per capita GDP square
Domestic credit to GDP
Per capita energy consumption
Trade to GDP
FDI to GDP
Short run
Error correction
D. Per capita GDP
D. Per capita GDP square
D. Domestic credit to GDP
D. Per capita energy consumption
D. Trade to GDP
D. FDI to GDP
Constant
Observations
(1)
All countries
−0.0648∗∗∗
(−13.35)
−0.0400∗∗∗
(−3.24)
0.249∗∗∗
(7.85)
0.0278
(0.75)
−0.00748∗∗∗
(−2.73)
(2)
Poor countries
−0.0959∗∗∗
(−8.84)
−0.0664∗∗∗
(−3.18)
0.797∗∗∗
(18.02)
−0.0281
(−0.89)
−0.000801
(−0.24)
(3)
Rich countries
−0.0388
(−1.53)
−0.0577∗∗
(−2.05)
0.129∗∗∗
(3.09)
−0.465∗∗∗
(−7.39)
−0.00169
(−0.63)
−0.269∗∗∗
(−9.56)
0.00883
(0.07)
−0.0911∗∗
(−2.12)
0.0348
(1.03)
0.276∗∗∗
(4.02)
0.0690∗∗
(2.13)
0.00202
(0.79)
1.373∗∗∗
(9.20)
2017
−0.281∗∗∗
(−10.36)
0.00746
(0.08)
−0.0827
(−1.55)
0.0310
(0.83)
0.137∗
(1.92)
0.0760∗∗∗
(2.61)
−0.000358
(−0.10)
0.601∗∗∗
(8.93)
1492
−0.297∗∗∗
(−5.87)
0.324
(0.74)
−0.0317
(−0.38)
0.105∗
(1.69)
0.496∗∗∗
(2.87)
0.127
(1.47)
0.00198
(0.48)
2.787∗∗∗
(5.85)
525
Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All
variables except FDI to GDP in natural logarithm
(2)
25 percentile
0.140∗∗∗
(6.00)
−0.0548∗∗∗
(−9.45)
0.0189
(0.87)
0.478∗∗∗
(13.18)
0.0883∗∗
(2.42)
−0.00331
(−1.18)
2084
(3)
50 percentile
0.146∗∗∗
(8.34)
−0.0533∗∗∗
(−12.28)
0.0554∗∗∗
(3.38)
0.447∗∗∗
(16.46)
0.0642∗∗
(2.34)
−0.00378∗
(−1.79)
2084
(4)
75 percentile
0.152∗∗∗
(6.55)
−0.0517∗∗∗
(−8.98)
0.0943∗∗∗
(4.37)
0.415∗∗∗
(11.53)
0.0386
(1.06)
−0.00428
(−1.53)
2084
(5)
90 percentile
0.157∗∗∗
(4.82)
−0.0505∗∗∗
(−6.26)
0.124∗∗∗
(4.11)
0.391∗∗∗
(7.75)
0.0190
(0.37)
−0.00466
(−1.19)
2084
Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All variables except FDI to GDP in natural logarithm. These
quantiles are conditional on covariates. These are not unconditional quantiles of emission. But since there is a strong positive correlation between per capita
emission and per capita income, higher conditional quantile of emission conditioned on per capita income should be at the higher unconditional quantile of
per capita income, and therefore the coefficients at higher quantile should be at higher income quantile too
Observations
FDI to GDP
Trade to GDP
Per capita energy consumption
Domestic credit to GDP
Per capita GDP square
Per capita GDP
(1)
10 percentile
0.136∗∗∗
(4.29)
−0.0558∗∗∗
(−7.11)
−0.00784
(−0.27)
0.499∗∗∗
(10.17)
0.106∗∗
(2.14)
−0.00296
(−0.78)
2084
Table 9.7 Fixed effect quantile regression: emission from liquid fuel consumption
194
B. N. Gopalakrishnan and A. Sinha
(2)
25 percentile
0.228∗∗∗
(6.00)
−0.0537∗∗∗
(−6.92)
0.0114
(0.39)
0.483∗∗∗
(9.92)
0.133∗∗∗
(2.63)
−0.00129
(−0.33)
−0.00622∗∗∗
(−3.10)
2084
(3)
50 percentile
0.266∗∗∗
(10.63)
−0.0495∗∗∗
(−9.72)
0.0372∗
(1.94)
0.475∗∗∗
(14.92)
0.125∗∗∗
(3.75)
−0.00109
(−0.43)
−0.00915∗∗∗
(−6.92)
2084
(4)
75 percentile
0.305∗∗∗
(11.02)
−0.0449∗∗∗
(−7.95)
0.0645∗∗∗
(3.03)
0.467∗∗∗
(13.17)
0.115∗∗∗
(3.12)
−0.000886
(−0.32)
−0.0123∗∗∗
(−8.38)
2084
(5)
90 percentile
0.334∗∗∗
(8.53)
−0.0417∗∗∗
(−5.20)
0.0844∗∗∗
(2.80)
0.460∗∗∗
(9.18)
0.108∗∗
(2.07)
−0.000735
(−0.18)
−0.0145∗∗∗
(−7.02)
2084
Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All variables except FDI to GDP in natural logarithm. These
quantiles are conditional on covariates. These are not unconditional quantiles of emission. But since there is strong positive correlation between per capita
emission and per capita income, higher conditional quantile of emission conditioned on per capita income should be at the higher unconditional quantile of
per capita income, and therefore the coefficients at higher quantile should be at higher income quantile too
Observations
Trend
FDI to GDP
Trade to GDP
Per capita energy consumption
Domestic credit to GDP
Per capita GDP square
Per capita GDP
(1)
10 percentile
0.199∗∗∗
(3.80)
−0.0570∗∗∗
(−5.34)
−0.00861
(−0.21)
0.489∗∗∗
(7.30)
0.140∗∗
(2.01)
−0.00144
(−0.27)
−0.00394
(−1.43)
2084
Table 9.8 Fixed effect quantile regression with time trend: emission from liquid fuel consumption
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
195
196
B. N. Gopalakrishnan and A. Sinha
Table 9.9 Fixed effects panel regression with time trend
Per capita GDP
Per capita GDP square
Domestic credit to GDP
Per capita energy consumption
Trade to GDP
Per capita GDP × Trade to GDP
FDI to GDP
(1)
Per capita emission
0.313∗∗∗
(5.76)
−0.0476∗∗∗
(−11.63)
0.0517∗∗∗
(3.59)
0.456∗∗∗
(20.99)
0.0670∗∗∗
(2.80)
−0.0424∗∗∗
(−3.20)
−0.00353∗∗∗
(−2.26)
Trend
Constant
Observations
3.398∗∗∗
(24.29)
2084
(2)
Per capita emission
0.416∗∗∗
(7.67)
−0.0443∗∗∗
(−11.03)
0.0339∗∗∗
(2.39)
0.483∗∗∗
(22.52)
0.127∗∗∗
(5.23)
−0.0385∗∗∗
(−2.97)
−0.000900
(−0.58)
−0.00906∗∗∗
(−9.64)
3.100∗∗∗
(22.10)
2084
Notes: *, **, and *** gives significance at 1, 5, and 10% significance level, respectively. All
variables except FDI to GDP in natural logarithm
9 Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis
197
Table 9.10 Panel threshold regression with fixed effects and time trend
Per capita GDP
Per capita GDP square
Domestic credit to GDP
Per capita energy consumption
FDI to GDP
_cat=0 × Trade to GDP
_cat=1 × Trade to GDP
(1)
Per capita emission
0.136∗∗∗
(8.36)
−0.0272∗∗∗
(−5.67)
0.0684∗∗∗
(4.17)
0.404∗∗∗
(17.04)
−0.00263
(−1.61)
0.0741∗∗∗
(2.88)
−0.00907
(−0.34)
Trend
Constant
Observations
3.622∗∗∗
(24.03)
1836
(2)
Per capita emission
0.263∗∗∗
(12.64)
−0.0245∗∗∗
(−5.23)
0.0463∗∗∗
(2.87)
0.427∗∗∗
(18.36)
−0.000145
(−0.09)
0.141∗∗∗
(5.42)
0.0632∗∗
(2.30)
−0.00958∗∗∗
(−9.45)
3.325∗∗∗
(22.10)
1836
Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All
variables except FDI to GDP in natural logarithm. Cat=0 is per capita GDP below threshold and
Cat=1 is GDP per capita above threshold
198
B. N. Gopalakrishnan and A. Sinha
Table 9.11 Fixed effects panel regression with time trend for high-income countries during the
time when their income was comparable to low-income countries
Per capita GDP
Per capita GDP square
Domestic credit to GDP
Per capita energy consumption
Trade to GDP
FDI to GDP
(1)
Per capita emission
0.599∗∗∗
(3.62)
−0.0748∗
(−1.74)
0.0497
(0.85)
0.235∗∗
(2.18)
0.434∗∗∗
(6.36)
−0.00731∗∗∗
(−2.83)
Trend
Constant
Observations
3.498∗∗∗
(4.94)
238
(2)
Per capita emission
0.654∗∗∗
(4.01)
−0.0616
(−1.45)
0.174∗∗
(2.48)
0.415∗∗∗
(3.42)
0.341∗∗∗
(4.64)
−0.00600∗∗
(−2.34)
−0.0141∗∗∗
(−3.05)
1.973∗∗
(2.30)
238
Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All
variables except FDI to GDP in natural logarithm. These are rich countries in our sample during
the time period when their income was less than the maximum income of poor countries in our
sample. This regression allows us to conclude the coefficient of trade to GDP in EKC regression
is not country specific, but it depends upon the per capita income
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Chapter 10
The Development Practice and Reform
Optimization Path of Green Circular
Economy in Erhai Lake of China
Tang Xuebing, Cai Jun, and Zhang Shoulei
Abstract Erhai Lake, as a cross-regional ecological wetland in China, needs to
coordinate the upstream and downstream to establish an innovative development
mechanism for the development of green circular economy. At present, there are
many defects existing in the development of green circular economy in Erhai
Lake, such as large gap of governance funds, lack of governance efficiency, and
insufficient governance linkage, which must be optimized by means of innovation
linkage mechanism, selection of market-oriented tools, adjustment and optimization
of industrial structure and upgrading.
Keywords Erhai Lake · Cross-regional · Green circular economy
10.1 Introduction
Cross-regional ecological goods have significant externalities. First of all, the
definition of property rights is vague. For example, the Erhai Lake basin spans two
administrative regions, Dali and Eryuan County. The upstream is Eryuan County
and the downstream is Dali. Erhai Lake is a complete river basin that is not divided
into two due to administrative division. Second, ecological governance and ecological pollution are fluid and transferable. The pollution discharge from Eryuan County
in the upstream can be diffused to Dali in the downstream through the fluid, resulting
in substandard domestic and production water. Finally, ecological pollution has
negative externalities, while ecological governance has positive externalities. The
treatment of sewage discharge in the upstream Eryuan County produces negative
externalities, while it produces external economy for the downstream Dali, so it is
difficult for green circular economy to achieve the optimization of Pareto effect.
T. Xuebing · C. Jun · Z. Shoulei ()
School of Economics and Business Administration, Nanhu Campus of Central China Normal
University, Wuhan, Hubei Province, China
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_10
201
202
T. Xuebing et al.
The transaction costs of cross-regional ecological protection and environmental
governance mainly include coordination costs, information costs, monitoring costs,
and so on. And cross-regional green circular economy can help reduce these
transaction costs.
1. Coordination costs. Cross-regional upstream and downstream local governments
coordinate on issues such as governance planning and ecological compensation,
as well as governance conflicts and coordination among various departments
within the government. Different regions have different governance demands,
which inevitably leads to coordination costs. However, the cross-regional green
circular economy has broken through administrative barriers, built a crossregional cooperation platform, strengthened inter-governmental linkage, alleviated governance conflicts, and greatly reduced coordination costs.
2. Information costs. The upstream and downstream governments across regions
lead to information asymmetry due to different locations. Information costs will
be incurred in acquiring, processing, and processing information. Information
barriers among regions increase information costs. However, the cross-regional
green circular economy strengthens the exchange and sharing of information
between regions, eliminates information barriers, and reduces transaction costs.
3. Monitoring costs. Local governments pursue economic development, and in
cross-regional governance, the self-interested behavior of local governments is
likely to lead to “moral hazard” undermining cooperation, so it is necessary
to add monitoring and restraint mechanisms to cross-regional governance. The
establishment of the regional governance linkage mechanism and the design of
the ecological compensation mechanism provide incentives for the upstream and
downstream green circulation linkages. It is conducive to promote self-discipline
cooperation and reducing monitoring costs.
The essence of cross-regional green circular economy is a transaction activity
characterized by ecological products. From the perspective of transaction cost
theory, cross-regional green circular economy is essentially the establishment of
governance linkage relationship among government, enterprises, people and other
subjects. The application of market tools, technology upgrading and informatization
can reduce negative externalities and information asymmetry, and ultimately reduce
the transaction costs of cross-regional green cycle economy.
In cross-regional green circular economy, alliances are formed for governance
linkage. However, due to the different interests of different regions, ecological
governance has externalities. Local governments pursue the maximization of their
own interests, resulting in the redistribution of interests among local governments
within the alliance, which is non-economic and even falls into the situation of
prisoner’s dilemma. At the same time, in the cross-regional green cycle interconnected marketization, the government is concerned about the source of funds and
project security, capital is concerned about risk control and investment returns,
environmental protection enterprises are concerned about obtaining orders and
winning market competition, and residents are concerned about their family income
and the living environment. These subjects are involved in both interests and risks,
10 The Development Practice and Reform Optimization Path of Green. . .
203
so it is necessary for all parties to reach cooperation on a cross-regional community
first, and then play games in the cooperative alliance.
10.2 Introduction to Erhai Lake Basin
10.2.1 General Situation of Natural Environment in Erhai
Lake Basin
Erhai Lake basin is the “mother lake” of Dali Bai nationality, located in Dali
Bai Autonomous Prefecture. It is a national nature reserve and the core area of
Cangshan Erhai Lake scenic spot. The upstream of Erhai Lake is Pyrene Lake in
Eryuan County, and the downstream is Dali Ancient City, which provides water for
production and living for Dali Ancient City and surrounding towns.
Figure 10.1 shows the vertical governance of Erhai Lake basin.
In Eryuan County, there are mainly three river sources, the Miju River, the Luoshi
River, and the Yong’an River, which enter the Erhai Lake, and the water volume
accounts for about 70% of the total runoff. There are also 117 large rivers, such as
Cangshan Eighteen Streams, in Dali. The total runoff area of Erhai Lake is 2565
square kilometers, the lake area is about 251 square kilometers, and the average
water depth is about 11.5 meters. The only natural water course of Erhai Lake is the
Xi’er River, 22 kilometers long, which flows into the Yangbi River and finally drains
Erhai Lake
basin
Eryuan
County
Dali
In the upper reaches of Erhai Lake,
agricultural counties are mainly
based on planting and aquaculture,
and the economy is backward,
which is the source of agricultural
pollution.
In the lower reaches of Erhai Lake,
tourism cities and cultural tourism
industries are the main industries,
which have high requirements on
the environment. At the same time,
the excessive growth of the tourist
population has brought about
domestic pollution.
Fig. 10.1 Vertical governance of Erhai Lake basin
204
T. Xuebing et al.
into the Lancang River.1 Erhai Lake is a typical inland faulted lake with certain
characteristics of sealing and semi-sealing. The ecological environment has become
a bottleneck restricting the sustainable development of local economy and society.
The cross-regional green cycle linkage between Eryuan County in the upstream
and Dali prefecture in the downstream is of great importance to the ecological
environmental protection and governance of Erhai Lake.
10.2.2 General Situation of Social and Economic in Erhai
Lake Basin
The Erhai Lake basin spans 16 townships, as well as 1 industrial park and 170
administrative villages in Dali and Eryuan County. “Eryuan County is clean, Erhai
is clear, and Dali is prosperous”, which expresses the linkage between the upstream
and downstream of Eryuan County, Erhai Lake, and Dali succinctly. Erhai Lake has
the main functions of water supply for domestic production, agricultural irrigation,
power generation, and tourism. According to statistics, in 2015, the total population
of Erhai Lake basin was 914,000, and the agricultural population accounted for
about 65%. Nearly 20 million tourists visit Erhai Lake every year. The regional GDP
is 448.38 billion yuan, of which the output value of the primary industry is 46.36
billion yuan, the output value of the secondary industry is 208.57 billion yuan, the
output value of the tertiary industry is 193.45 billion yuan, and the tourism income is
139.36 billion yuan, accounting for 81.5% of the tertiary industry and 31.1% of the
regional GDP.2 The output value of the secondary industry in the Erhai Lake basin
is the highest, and its economic development is still in the stage of industrialization.
The Erhai Lake basin has rich tourism resources, but the tertiary industry accounts
for a relatively low proportion, which indicates that the development of tourism
products is still in the low-end primary stage and needs further industrial upgrading.
In the aspect of developing green and circular economy, Erhai Lake basin
has made phased achievements, and some measures are worthy of reference and
promotion, but there are still some problems that need to be improved. Through
the analysis and comparison of foreign cases, the current situation and problems of
Erhai Lake basin are sorted out, from the perspective of cross-regional governance
mechanism, market-oriented tools, and industrial structure, this paper puts forward
countermeasures and suggestions such as the design of cross-regional green circulation linkage mechanism, the selection of market-oriented tools, and the optimization
of industrial structure.
1 Interactive encyclopedia, http://www.baike.com/wiki/erhai lake, 2016.
2 Dali State Bureau of Statistics, Dali Bai Autonomous Prefecture Statistical Yearbook (2005–
2016). China Statistics Press, 2006–2016.
10 The Development Practice and Reform Optimization Path of Green. . .
205
10.2.3 The General Situation of Green Circulation
Development in Erhai Lake Basin
With the support of the national government, since the 1970s, after nearly half a century of treatment, the water quality of Erhai Lake has been significantly improved
through the process of water quality deterioration to gradual improvement. The
specific implementation of a series of treatment projects is shown in Table 10.1.
10.3 The Main Problems Existing in the Development
of Green Circular Economy
The implementation of the above-mentioned five-year planning treatment projects
has improved the water quality of Erhai Lake basin to a certain extent, and the water
quality is in the development process from protection III to II. However, with the
passage of time, the population gathering, the whole area development, in the new
governance stage, Erhai Lake basin governance is faced with new conditions and
problems.
10.3.1 Large Gap in Local Governance Funding
During the “Twelfth Five-Year Plan” period, the construction of green circular
economy and environmental protection in the Erhai Lake basin involves 20 projects
with a total of 49 sub-projects. The total planned investment is 39.21 billion yuan,
and the completed investment is 28.24 billion yuan, with an investment completion
rate of 72.03%. Among them, 660 million yuan will be invested by the state,
250 million yuan from provincial government funds, 210 million yuan from state
matching funds, and 128 million yuan from self-raised funds by counties and cities.
The local fiscal revenue is limited. In 2016, the general public budget revenue of
Dali was only 30.07 billion yuan, which is a drop in the ocean for the huge amount
of funds required for the long-term and complex governance project of Erhai Lake
basin.
As can be seen from Fig. 10.2, with the economic development, the economy
of Dali Bai Autonomous Prefecture in the Erhai Lake basin has increased every
year, but its per capita GDP is lower than that of Yunnan Province and even lower
than that of the national per capita GDP, which is close to half of the national per
capita GDP, and its economic growth rate is also the lowest. It shows that the Dali
Bai Autonomous Prefecture in the Erhai Lake basin is quite backward in economy,
which is in the stage of pursuing economic development as the core, and needs the
adjustment of industrial structure. The capital input of green circular economy is
Direction
Water quality
assessment and
monitoring
Pollution source
investigation and
treatment
Urban sewage and
fishery
Priority
1. Set up the “three wastes” leading group.
2. Establish an environmental monitoring station in Dali Prefecture to carry out routine
water quality monitoring and evaluation.
1. Charge key polluters for discharge of pollution.
2. Urban life pollution system treatment, the construction of Xiaguan sewage pipe, Dali
Dayutian sewage treatment plant.
The ninth 5-year
1. Construction of sewage pipe from Dali Ancient City to Xiaguan.
plan period
2. Cancel cage farming and motor fishing boats.
3. Carry out the pollutant discharge permit system.
Stage of comprehensive The tenth 5-year
Town
1. Carry out the trial excavation project of polluted bottom mud.
watershed management plan period
2. Return pond to lake, return farmland to forest, return house to wetland.
3. Ban phosphorus, ban white, ban grazing.
The eleventh
Six major projects of
1. Urban environment improvement and infrastructure construction project: regional
5-year plan period Erhai Lake protection
pollution interception in towns around the lake, 3 garbage treatment plants in Dali and
and management
Eryuan County, and 13 sewage treatment plants in total.
2. Water environment control project of lake and river.
3. Rural non-point source pollution control project: “soil testing formula, balanced
fertilization”, “one pool and three reforms”, promotion of village sewage treatment system,
sewage treatment facilities in farmers’ yards, and rural garbage treatment in the whole basin.
4. Lake ecological restoration and construction project: 7 wetland parks will be built.
5. River basin soil and water conservation project.
6. Environmental management and capacity-building projects.
The twelfth
Basin ecological
With 2 years, 3 billion investment, the implementation of three major projects, to achieve
5-year plan period civilization construction the water quality of class II Erhai Lake
The thirteenth
Protection and
1. The watershed “two violations” remediation action.
5-year plan period management of Erhai
2. Villages and towns “two pollution” remediation action.
Lake seven actions
3. Non-point source pollution reduction action.
4. Water-saving and water-controlling ecological restoration actions.
5. Speed up the action of pollution interception and control project.
6. Watershed law enforcement and supervision actions.
7. Comprehensive protection of Erhai Lake.
Governance phases
Period
Initial preparation stage 1970s and 1980s
Table 10.1 Summary of Erhai Lake basin governance process
10 The Development Practice and Reform Optimization Path of Green. . .
207
60000
50000
40000
30000
20000
10000
0
China
Yunnan
Dali Bai Autonomous Prefecture
Fig. 10.2 Per capita GDP of China, Yunnan Province, and Dali Bai Autonomous Prefecture
insufficient, which needs the participation of market subjects and the helping hand
of social capital.
The government financial input in the green circular economy of Erhai Lake
basin is limited, and most of the input is related to project construction, and few
of the input is project operation. Erhai Lake basin lacks environmental protection
capital operation platform, environmental protection financing ability is weak and
financing means are relatively single. Although the PPP mode is introduced in the
pollution interception and anti-pollution project to use market power to finance, it is
estimated that Erhai Lake needs about 30 billion yuan of ecological compensation
funds every year. As the Ministry of Finance issued a notice to standardize the PPP
project pool in 2017, more than 2000 projects were cleared out of the project pool,
making it more difficult for PPP projects to obtain loan financing. Moreover, most
projects of green and circular economy have little profit, so it is difficult to attract
market funds, which leads to insufficient funds and affects the progress of some
green and circular economy projects in Erhai Lake. In order to solve the problem
of lack of funds, it is necessary to further reduce the market threshold, establish
a certain incentive mechanism, guide more social capital to join, give full play to
the participation function of enterprises in the allocation of green circular economy
resources, and improve the investment and financing efficiency of green circular
economy.
10.3.2 Local Government Governance Is Inefficient
At present, most cross-regional green circular economy are short-sighted and emergency. Under the influence of the political achievement concept of “GDP as a hero”
in the past, in order to develop the local economy, local officials often ignored the
208
T. Xuebing et al.
objective laws of ecological nature and blindly carried out large-scale development
projects, causing irreversible damage to the ecology. Even in some areas, in order
to complete the task of energy saving and emission reduction, there have been
forced production restrictions, power outages, and other mandatory control of
pollutant emissions, sprinting the goal of green circular economy with short-term
behaviors. With the departure of local officials, the green circular economy plan
launched during their tenure may also face the situation of “Power gone, adulation
done”, lack of follow-up supervision and promotion, policy continuity, and even
ecological damage. These activities and emergency pursuit of short-term results
and the difficulty of continuing the “half-pull” project have led to the difficulty and
repetition of the cross-regional green circular economy among local governments in
China. Therefore, it is necessary to promote the marketization of the green circular
economy, make the green circular economy sustainable and long-term, and form a
complete and stable industrial chain, rather than a short-lived policy product.
Lack of government governance efficiency, departmental functions overlap.
Governance departments have traditional means of building and operating a green
circular economy without providing an incentive mechanism for operation, resulting
in a lack of awareness of competition, blind investment, and repeated construction.
Pollution control departments pay attention to form, do not pay attention to
technological development and innovation, treatment technology level is low. For
the same administrative matter, the problem of overlapping management functions
is prominent. Taking the protection and governance of Erhai Lake as an example,
from the horizontal perspective, local law enforcement agencies include multiple
functional departments such as environmental protection, urban management,
land, planning, public security, and industry and commerce. From the vertically
perspective, the law enforcement agencies of Dali City and Eryuan County coexist.
Due to the large number of law enforcement subjects, the functions of each subject
overlap, and the phenomenon of multiple law enforcement or prevarication in law
enforcement are prominent.
10.3.3 Green and Circular Economic Linkage Is Insufficient
Due to the differences in political economy, social development, and location, the
local governments in neighboring regions have different environmental governance
objectives and form cooperative game relations. Cross-regional water pollution
has the ability of transregional flow and transfer of pollutants. Green circular
economy requires governance linkages between upstream and downstream adjacent
regional governments to form a complete closed-loop green circular economy
system for the entire basin to avoid repeated construction and governance conflicts.
However, the administrative division has torn the integrity of the whole watershed.
Different administrative sections have equal status, and there is no subordination
and dispatching relationship between superiors and subordinates in the traditional
bureaucratic system, which makes it difficult to interact with cross-regional envi-
10 The Development Practice and Reform Optimization Path of Green. . .
209
ronmental governance. Economic benefit is the key to the performance evaluation
of the government, which makes the local government over-exploit and utilize
the ecological resources in its area. There is no communication platform among
local governments in China, and there is information asymmetry, coordination cost,
and information cost. In the cross-regional green circular economy, there are even
cross-regional pollution and pollution transfer events, which have a serious impact
on the cross-regional green circular economy. Eryuan County and Dali belong to
the upstream and downstream of Erhai Lake, belong to the county and city of
Dali Prefecture, and belong to the level government. Dali has a high degree of
social development, rich tourism resources, and a high demand for environment.
The ecological and environmentally friendly Erhai Lake is more in line with the
goal of Dali. The urbanization rate of Eryuan County is low, and the regional
economic and fiscal income is much lower than that of Dali. Starting from the
interests of the region, Eryuan County gives priority to economic development,
and makes use of the advantages of the geographical location of the upstream to
maximize the development of water resources, which causes ecological damage
to the basin, and then transfers to the downstream to form cross-regional water
pollution. This kind of behavior will affect the domestic and production water of
Dali in the lower reaches of Erhai Lake basin, and will cause a great negative impact
on Dali’s tourism industry. To make Eryuan County government carry out ecological
governance and environmental protection, it needs to pay a cost far higher than the
fiscal revenue, and the Eryuan County government lacks this motivation. Moreover,
Eryuan County and Dali belong to the same level government, which does not have
the administrative power to make Eryuan County clean up pollution. The difference
of environmental governance objectives will inevitably affect the enthusiasm of
local governments to participate in cross-regional green circular economy, so there
is a problem that the upstream and downstream linkages of green circular economy
in Eryuan County and Dali are not enough.
10.3.4 Low Degree of Marketization
Ecological protection and environmental governance belong to the field of public
goods, so the construction, governance, and operation are mainly led by the
government. Marketization can activate the vitality of social capital, technology, and
talents in governance linkage. The marketization of Erhai Lake basin governance is
in its infancy and has not yet formed scale and driving effects. At present, the Erhai
Lake basin is mainly invested by the government, and also participates in pollution
interception and pollution prevention projects in the PPP model, and a quasi-market
model in which a small number of market players such as ecological agriculture
companies participate. In addition, the threshold for participation in the PPP model
is relatively high, and many small and medium-sized enterprises cannot participate.
The government has not innovated the governance system to guide the participation
of market subjects in governance, and governance is still traditionally biased towards
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industrialized operations. The market model is too simplistic, the market stock is not
activated, and there is no participation of diversified market players. Market-oriented
mechanisms such as water rights trading, emission trading systems, and river
basin ecological compensation mechanisms that effectively supplement government
governance have not yet been effectively established and operated.
Only by establishing a cross-regional green circular economy linkage mechanism
with the goal of market-oriented profit and breaking the low-profit status of the green
circular economy can we attract more market players to participate, solve the lack of
local government funds, and form a long-term green circular economy mechanism.
At the same time, marketization can eliminate externalities, form certain constraints
to upstream and downstream, and strengthen the linkage of upstream and downstream. The government’s excessive dominance in the green circular economy has
inhibited the establishment and growth of the market mechanism, resulting in the
dilemma of marketization. A reasonable linkage mechanism should be designed to
realize the effective interaction between the government and the market, so that the
administrative mechanism and the market mechanism can be organically combined
to contribute to the green circular economy in the Erhai Lake basin.
10.3.5 The Tourist Market Is in Chaos
With the vigorous development of tourism in the Erhai Lake basin, hotels and
restaurants in the Erhai Lake basin have grown explosively and savagely. There
are more than 2500 inns in total, most of which are based on farmer residences,
providing nearly 90% of the beds. Due to the confusion of early management
and lack of scientific planning, hotels and hotels in the Erhai Lake basin lack
corresponding sewage treatment facilities, which is an important source of pollution
in Erhai Lake. However, the current management method for market entities in
the basin is biased towards “No overall plan for a fundamental transformation”,
a crude one-size-fits-all short-term mechanism, and there is a lack of clear business
management system standards. In April 2017, more than 2000 inns around Erhai
Lake basin were closed for a long time, without clear rules and regulations to guide
market subjects to participate in the rectification and management of Erhai Lake,
but a rough one-size-fits-all approach, which damaged local economic interests
and frustrated the enthusiasm of market subjects in the Erhai Lake basin. The
government should plan scientifically, create a good investment atmosphere, guide
social capital to participate in the green circular economy in the Erhai Lake basin,
make the Erhai Lake tourism market bigger, and play a positive role in the joint
governance of the government, market entities and the public.
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10.3.6 Agricultural Non-point Sources and Domestic Pollution
Are Serious
Although Erhai Lake basin has done a lot of work on agricultural non-point
source pollution and achieved phased results, there is still a certain gap with
the construction of eco-friendly agriculture. Rural infrastructure is still weak,
and sewage networks in villages are lagging behind. Many villages do not have
sewerage and drainage systems, public toilets, and garbage disposal stations. They
are generally simple stinky gutters and open-air toilets, which are prone to leakage
and easily produce a large amount of domestic sewage, domestic garbage, and feces.
The farming applied a large number of fertilizers and pesticides, with the rainwater
flowing into Erhai Lake, the situation is serious. Traditional farming still accounts
for a large proportion, and the promotion of characteristic ecological agriculture
needs to be strengthened. There are more than 90,000 cows in the Erhai Lake basin,
and more than 90 percent of them are kept free range by small farmers with two or
three cows per household. Smallholder free-range farming usually does not install
fecal waste treatment facilities, resulting in aquaculture wastewater and feces will
cause non-point source pollution in Erhai Lake. Public awareness of environmental
protection is weak, and waste water is discharged into the river unconsciously in
production and life. A large amount of funds and manpower are focused on the
construction of pollution reduction and control facilities in cities and towns, while
the input of agricultural non-point source pollution and farmers’ living pollution is
not enough, resulting in prominent shortcomings. There is a lack of market-oriented
entities to participate in guiding farmers’ large-scale breeding and planting, and lack
of large-scale pollution treatment.
10.4 Innovative Ideas to Further Enhance the Green
Circular Economy in Erhai Lake Basin
10.4.1 Design of Linkage Mechanism Based on Cross-regional
Green Circular Development
Firstly, innovative basin coordination mechanism. Establish a new mechanism for
cross-regional green circular economy linkage. Set up a cross-regional green circular economy government agency to manage cross-regional green circular economy
matters, with clear functions and full responsibilities. Scientifically coordinate
global governance planning, strengthen governance linkages between governments
across regions, and reduce information costs and linkage costs. Establish a crossregional green and circular economy company to conduct market-oriented allocation
and development of resources in the whole region, clarify the property rights of
ecological resources, privatize part of public products, and reduce transaction costs.
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Establish a cross-regional investment and financing platform for green circular
economy, lower the threshold for market subjects to participate in green circular
economy, absorb more funds to participate in green circular economy, and diversify
governance subjects. Professional governance by more efficient professional firms.
With Dali University as the center, establish a cross-regional green circular economy
scientific research base based on the Erhai Lake basin, develop and upgrade
green circular economy technologies, and reserve technical strength for Erhai Lake
governance.
Secondly, scientific planning and perfecting the system. Establish a negative list
of green circular economy in the Erhai Lake basin, and define the categories that
market subjects cannot participate in. Make overall arrangements for the whole
basin, carry out scientific and reasonable planning, and formulate a clear reward
and punishment system for enterprises, people, and other subjects. Standardize the
installation of sewage equipment and sewage standards for hotels and hotels in thee
Erhai Lake basin, the fertilization and pesticide spraying and sewage standards for
ecological farms, and the manure treatment and sewage standards for livestock and
poultry farms. A large number of homestay hotels built on farmers’ land in the
Erhai Lake basin are unable to obtain legal double certificates and are free from
legal supervision. We should strengthen supervision, carry out fiscal and tax reform,
and levy environmental resource use tax. Avoid the simple and rude one-size-fitsall governance method, protect the confidence of market players, and have more
motivation to participate in the cake of the tourism market in the Erhai Lake basin,
and linkage with the green circular economy in the Erhai Lake basin.
Thirdly, merger of upstream and downstream administrative regions. The Erhai
Lake basin is 2565 square kilometers, while the downstream basin under the
jurisdiction of Dali is only 1815 square kilometers. The pollution in the basin of
Eryuan County outside the jurisdiction of Dali cannot be effectively controlled
across regions. The Erhai Lake basin is divided into two parts in terms of administrative division, but the Erhai Lake basin is an indivisible whole. The upstream
and downstream administrative regions are merged to internalize the externality of
cross-regional ecological governance so as to reduce the transaction cost. In 2004,
Shuanglang Town and Shangguan Town, formerly belonging to Eryuan County,
were assigned to Dali and entered the category of Erhai Lake basin governance of
Dali, which played a positive role in the green circular economy of Erhai Lake.
In order to achieve better cross-regional green circular economy linkage effect,
administrative barriers should be broken through, and a feasible plan to merge
Eryuan County into the administrative division of Dali can be put forward, so as
to win national policy support. It can be foreseen that one administrative division is
more in line with the interests of the green circular economy of Erhai Lake basin.
From the perspective of the whole river basin, more systematic and comprehensive
planning and governance can reduce the transaction costs of inter-regional linkage,
and achieve the goal of “Eryuan County is clean, Erhai is clear, and Dali is
prosperous” sooner.
Fourthly, scheduling mechanism to divert tourists. Through the scientific method
to calculate the human flow of each area of towns and villages in Erhai River basin,
10 The Development Practice and Reform Optimization Path of Green. . .
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the number of residents that hotels, homestays, and inns can carry is controlled
in this number range. Yunnan Provincial Tourism Development Committee and
Tencent jointly created the Yunnan global tourism intelligence platform “One
Mobile Tour Yunnan”,3 and launched the “Yunnan Tour” app. Visitors to the Erhai
Lake are encouraged to reserve accommodation and scenic spots tickets in advance
through the “Yunnan Tour” app, and form a price gradient based on big data. The
price of the earlier reservation is the normal price or slightly lower, and a red
envelope with a certain probability will be rewarded through Tencent payment or
Ali payment. When the reservation is relatively late and the number of tourists
in the Erhai Lake basin exceeds the carrying capacity, the price is higher than
the normal price, and the marginal price is greater than or equal to the marginal
ecological governance cost. Tourists who exceed the carrying capacity pay a higher
price gradient, and through peak regulation, the tourists are diverted to other places
and the environmental pressure of the local area is relieved.
10.4.2 Selection of Cross-regional Green Circular Economy
Linkage Marketization Tools
Firstly, establish a trading system for emission rights and water rights.
Give full play to the leverage of the market, establish a platform for water rights
trading and pollution discharge trading, improve the water market system, and guide
market players to participate in the paid use and trading of water rights and pollution
discharge rights in the Erhai Lake basin. By reflecting the real price of aquatic
products in the market, reducing administrative interference, and distorting the price
of aquatic products, the governance body can grow up spontaneously and participate
in the green circular economy.
The establishment of emission trading platform can encourage enterprises to
trade emission rights, promote the cost of pollution control to be reflected and
compensated through trading, and give enterprises more power to develop high-end
pollution control technology. The trading of emission rights has formed a benign
linkage between government agencies and enterprises and among enterprises, and
the emission demands of different entities have been purchased through more
channels, which promotes the optimal allocation of water resources in the basin and
realizes the benign green and circular development of the basin. Moreover, water
rights transaction is also helpful to alleviate the water resources tension in the Erhai
Lake basin, promote the sustainable development of water resources in Erhai Lake,
and then promote the comprehensive management, development, and utilization of
water resources.
Secondly, build Erhai brand and ecological label.
Combined with the image of the “Mother Lake” in the hearts of the Bai people,
build the Erhai Festival, strengthen the belief in the holy lake of Erhai Lake, and
3 Source: xinhua, http://www.xinhuanet.com/tech/2018-03/03/c_1122480364.htm
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enhance the awareness of the residents of Erhai Lake to protect the sacredness and
purity of Erhai Lake. Relying on the huge tourism market of Erhai Lake, it will
become a well-known brand in Dali and even a well-known national brand. The
Erhai Lake brand naming rights are commercialized to promote the cooperation
between tourism enterprises and Erhai Lake specialty enterprises, and conduct brand
investment and naming to obtain commercial premiums.
Build brand ecological markers for Erhai Lake, and give ecological markers
to ecological products that meet the green circular economy standards of Erhai
Lake basin. Ecologically labeled products are green products, which should be
sold at a corresponding premium to meet Chinese people’s demand for green
products and consumption upgrading needs, so as to make up for the decline in
output caused by ecological planting and motivate people to carry out ecological
planting with low pollution. Hotels, restaurants, and other businesses conform to
ecological production and operation. Government agencies can also supervise and
judge whether they are ecological markers, so as to increase consumers’ recognition
of businesses.
Thirdly, strengthen the Internet operation in the Erhai Lake basin.
Introduce the operation mode of Internet ecological products, strengthen the
cooperation with Alipay, take Ant Forest as the model, and create a small game
to protect Erhai Lake basin. Users’ environmental behaviors, such as green travel,
water saving, and mobile payment, are converted into small water drops in the
app after calculation by big data algorithm. Users collect small water droplets
like ant forest energy, store to a certain size, which can be exchanged for a
virtual water area of Erhai Lake basin, receive the beauty of Erhai water area,
and get a sense of accomplishment. It not only carries out advertising marketing
for Erhai Lake, improves the popularity of Erhai Lake tourism, but also enhances
the participation and awareness of individual people in Erhai Lake protection. It
also obtains the sponsorship of environmental protection funds from third-party
enterprises cooperating with small games.
Make full use of new media such as Wechat, Weibo, and Douyin, which are very
popular in China, strengthen the operation and publicity of Erhai Lake basin, so as
to make people realize the beauty of Erhai Lake basin, attract more people to come
to Erhai Lake, voluntarily protect the beauty of Erhai Lake basin, and warn people to
protect the beauty of Erhai Lake basin, because the beauty of Erhai Lake is fragile.
At the same time, the ecological behavior of Erhai Lake pollution is exposed, and
the media supervision function is played. The new media of Erhai Lake can be built
into the new media with the most spreading degree and credibility in the Erhai Lake
basin, and the advertising profit of new media can be obtained through cooperative
marketing with shops and tourism products.
Fourthly, establish a diversified investment and financing system.
Cross-regional green circular economy is a complex and long cycle project,
which needs a huge amount of capital and technical support. At present, the financial
input of Chinese green circulation economy is limited, but the social capital is not
fully applied. The spillover of public goods in ecological governance leads to insufficient incentive mechanism and high financing threshold in environmental protection
10 The Development Practice and Reform Optimization Path of Green. . .
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industry, which excludes a large amount of active social capital. Diversification
of investment entities should be pursued. Firstly, apply for government financial
subsidies as much as possible, including the special governance funds of various
ministries and commissions and the transfer payments from the central finance.
Local financial input should also be stable for a long time, and cross-regional
ecological compensation should be continuously promoted. With the help of the
investment and financing platform of Erhai Valley Investment Company, it obtains
preferential loans from policy banks, commercial banks, and financial institutions.
Set up green circular economy fund, green development fund, environmental
protection fund, and water fund in the Erhai Lake basin; Develop green credit
tailored to local conditions, simplify approval procedures, and speed up the issuance
of green bonds; Erhai Lake basin tourism company and environmental protection
company package listing, absorb capital market funds.
Build a multi-level environmental protection investment and financing system to
attract social funds to participate in the green circular economy. Adopt BT, BOT,
PPP, TOT, TBT, and other methods to raise funds for the construction and operation
of cross-regional ecological projects, and absorb state-owned funds, private funds,
and foreign funds. Learn from the existing lottery issuance system, issue the Erhai
Lake basin water resource environmental protection lottery with the approval of the
civil affairs department of the state, establish a drainage system and a sales system,
and raise funds for the development of a green and circular economy in the valley.
10.4.3 Optimize the Industrial Structure of the Basin
Firstly, vigorously develop tourism.
At present, the proportion of heavily polluted primary industry and secondary
industry in the Erhai Lake basin is high. The industrial structure of Erhai Lake basin
should be upgraded to enhance the market value of cultural and tourism industry and
service industry in the Erhai Lake basin. Cannot be satisfied with the current status
of class II, III water quality, Erhai Lake basin as a pearl on the plateau, positioning
should be lofty, against the plateau “Bali”, vigorously develop the whole region
tourism. Erhai Lake is not only a natural lake for sightseeing, but also integrates a
large number of high-quality scenic spots in Yunnan with the location advantages
of the surrounding Cangshan “Scenery, flowers, Snow and Moon” to develop allround tourism such as wedding, adventure tourism, ecological education, hot spring
health and sports, high-end pension, and so on. The tourism market stock of Erhai
Lake basin should be activated and new market increment should be introduced, so
that all the main bodies of the river basin can share the benefits brought by protecting
the ecology of Erhai Lake basin, so as to be motivated to actively participate in the
protection and governance of Erhai Lake basin. It expands the industrial chain and
market of Erhai Lake basin, and also increases the tertiary industry of Erhai Lake
basin.
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Taking Dali Movie City as a fulcrum, expand and strengthen the film and
television performance industry in the ancient city of Erhai Lake. The mature highend cultural and tourism industry model of “Impression of Sanjie Liu” is introduced
to create “Impression of Erhai Lake”. Through a real landscape program, the natural
landscape of Erhai Lake basin is added with cultural connotation. Combined with
local characteristics, cultural and tourism performance projects have promoted the
employment of local people, transferred the liberated primary industry population
to a greener tertiary industry, reduced the pollution from non-point agricultural
sources, and solved the paradox between ecological environmental protection and
economic development. To further expand and strengthen the cultural and tourism
industry in the Erhai Lake basin, let more residents and enterprises participate in the
cultural and tourism industry, bind the water ecological environment health of Erhai
Lake basin with individual economic interests, form a governance linkage, and have
more motivation to participate in the construction and development of green circular
economy in the Erhai Lake basin.
Secondly, Upgrading ecological agriculture.
Further promote ecological farming, upgrade and adjust the agricultural industrial structure, and optimize the industrial structure of river basins. Reduce the
cultivation of agricultural products with high pollution and high pesticide, and
promote the commercial crops suitable for the water and soil environment of Erhai
Lake basin. Promote land transfer, introduce new farmers or market entities, reform
traditional planting patterns, and develop large-scale scientific planting. Further
promote blueberry, lavender, tobacco ecological planting estates, these crops belong
to the production process without the application of a large number of fertilizers,
pesticides, etc. Environment friendly, high economic benefits, with ornamental
value to expand the Erhai Lake tourism, improve the proportion of characteristic
ecological agriculture. Develop the agricultural fine processing industry and extend
the chain of the agricultural industry. Examples include lavender essential oil,
dried blueberries, blueberry sauce, and blueberry wine. The introduction of market
entities, rational distribution of livestock farms, improves the construction and
management of waste water discharge facilities. Take the road of green ecological
livestock and poultry breeding, develop the advantages of large-scale breeding, and
enhance the economic benefits of livestock and poultry industry. Build ecological
homes, strengthen the reconstruction and construction of rural garbage recycling
stations, sewage collection facilities, biogas digesters and ecological public toilets,
carry out interesting ecological protection teaching, and cultivate residents’ good
awareness of ecological protection.
Take the form of “company + base + farmer” or other main market linkage, give
full play to the leading role of the company, expand organic fruits and vegetables,
ecological poultry and livestock, ecological fishery, and make a comprehensive
development project integrating characteristic agricultural production, processing
and sales, leisure and tourism. Encourage industrial transformation and upgrading
and the Internet revolution, cultivate new entities, and expand rural e-commerce
platforms. Promote the characteristic agricultural products of Erhai Lake basin to
10 The Development Practice and Reform Optimization Path of Green. . .
217
force the transformation and upgrading of agricultural industry in the Erhai Lake
basin.
Thirdly, Build new countryside.
According to the location, economy, culture, and characteristic industry of the
village provide the guidance of the appropriate local development route. Some
rural areas will be transformed into beautiful villages, while others will follow the
path of rural urbanization. The countryside close to the edge of the expanding city
will be gradually merged into the town by taking advantage of its location. Carry
out urbanization and upgrading of our infrastructure, integrate it into the sewage
disposal system, strengthen waste and sewage discharge management, upgrade
corresponding industries, and promote integrated urban and rural development.
The countryside with characteristic historical culture and scenic spots is suitable
for the development of beautiful countryside. Under the guidance of government
departments, the protection of historical buildings and the protection, upgrading and
transformation of characteristic scenic spots should be carried out. The planning
should be scientific and systematic, the construction of infrastructure should be
strengthened, the facilities of sewage discharge and pollution interception should
be improved, and a beautiful countryside with beautiful environment should be
created. Give full play to our advantages in tourism resources, strengthen operations
to attract tourists for pleasure and consumption, develop the rural service industry,
and increase the endogenous driving force for rural development. Upgrade the mode
of production in rural areas, reduce pollution from non-point agricultural sources,
and change our lifestyle of indiscriminate sewage discharge. Explore local rural
characteristics, develop rural service industries, make scientific planning and orderly
operation and treatment, build new rural areas, and reduce rural non-point source
pollution and domestic pollution.
10.5 Conclusion
Establishing and improving a green, low-carbon, and circular development economic system is an inevitable choice for building a modern and powerful country.
The development of green circular economy is an important direction for future
economic development, and Erhai has unique advantages in developing green
circular economy. Combined with the current economic development status and
existing problems of Erhai Lake, we put forward innovative ideas for further
promoting the development of green circular economy in the Erhai Lake basin. First
of all, it is necessary to strengthen the top-level design, enhance the linkage between
the upstream and downstream of Erhai Lake basin, and coordinate the interests of
governments in different jurisdictions. Then it is necessary to use market-oriented
tools to promote the development of cross-regional green circular economy and
improve development efficiency. Finally, it is necessary to optimize the industrial
structure of the Erhai Lake basin, increase the proportion of the tertiary industry,
reduce the proportion of the secondary industry, and promote the development of
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a green circular economy by developing ecological agriculture and building a new
socialist countryside. With a multi-pronged approach, the establishment of a sound
and efficient green circular economy in the Erhai Lake basin is just around the
corner.
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Chapter 11
Recent Trends in Biohydrogen Economy:
Challenges and Future Perspectives
Ekta Mishra, Shruti Kapse, and Shilpi Jain
Abstract Global urbanization and population increase are major factors driving
up energy usage. Conventional fossil fuels are unable to supply this demand
because of the unrestrained production of greenhouse gases, which causes price
inflation and significant environmental harm. The emphasis has shifted to more
cost-effective, sustainable, renewable energy sources like hydrogen in order to
relieve this bottleneck. Interest in the development of biohydrogen has always been
sustained by its immense promise as a clean energy source. Instead, the “grey
hydrogen” produced by the current method of creating hydrogen has been the
main contributor to carbon emissions. Therefore, developments in green hydrogen
(biohydrogen) production technology in the transition to a decarbonized energy
sector have the potential to significantly contribute to the need for future renewable
energy. As the flexible fuel of the future that can replace fossil fuels, biohydrogen
is currently seen as an essential part of a sustainable global power supply. This
chapter attempted to describe the key challenges faced when using biohydrogen
on a commercial scale and also evaluate its future commercialization prospects by
evaluating its economics while taking into consideration the numerous processes
including production, storage, transportation, and delivery to the customer.
Keywords Biohydrogen · Green circular economy · clean energy · Biowaste ·
Sustainable development
11.1 Introduction
Energy is one of the substantial factors of a country’s economy. It is a key derivative
of human living standards of any country. Since industrial revolution, there has
been a major focus on fossil fuels as a source of energy to the world. They are
E. Mishra · S. Kapse · S. Jain ()
Department of Environmental Studies, The Maharaja Sayajirao University of Baroda, Vadodara,
Gujarat, India
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_11
219
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E. Mishra et al.
non-renewable resources and take millions of years to be produced again and
are not environment friendly. The utilization of fossil fuels is associated with
Greenhouse Gas (GHG) emission, mainly consisting of CO2 , the production of
which has increased more than 40% since the industrial revolution (Moreira and
Pires 2016). The increase in CO2 emissions is affecting the natural climatic patterns
of the earth such as changes in temperature and patterns of precipitation, which
are imposing negative impacts on human lives (Costello et al. 2009). For resolving
these increasing problems of climatic changes, the use of carbon dioxide neutral fuel
systems must be encouraged as suggested in the Copenhagen Climate Conference,
2009 (Christiansen et al. 2018). The increasing population along with pollution and
the fast depletion of non-renewable fossil fuels have forced the world to shift to
renewable energy sources (Mona et al. 2020).
Renewable energy production and utilization is one of the most attentive topics
and currently seems to be potential alternative to replace fossil fuels (Rosen and
Koohi-Fayegh 2016). In this context, biofuels are suggested to be highly potential
and green alternative as the renewable energy sources, and may be capable to
compete with the global energy crises, originated due to the various limitations
of fossil fuels (Majid 2020). Moreover, biofuels production using biomass is
considered as a potential solution to overcome these challenges (Ahorsu et al.
2018; Ben-Iwo et al. 2016). Biomasses are one of the most versatile carbon-rich,
renewable, and low-cost resources, being employed to produce various kinds of
biofuels like biodiesel, bioethanol, biobutanol, biogas, and biohydrogen (Beschkov
2017). Among these, biohydrogen is known to be an excellent renewable energy
source and has received enormous attention because of its unique properties like
being inexhaustible, renewable, pollution-free, and low cost (Hroncová et al. 2016).
Additionally, it also acknowledges to carry the highest energy density and no carbon
dioxide is generated since the combustion of H2 produces only water vapor as the
by-product (Cannone et al. 2021; Billaud et al. 2016).
The consumption and need for hydrogen as an alternative energy source is
continuously increasing and expected to contribute 8–10% in the energy market
by year 2025 (Kumar Gupta et al. 2013). Hydrogen can be produced using different
techniques such as physical, chemical, and biological processes (Raghulchandrana
et al. 2020). Among these, biological process of hydrogen production presents
significant advantages over the other processes due to the various advantages, e.g.,
can work at ambient temperature and pressure which makes it viable option for
large-scale production, less energy-intensive, less cost-intensive, use of diverse
organic substrates and microorganisms, meanwhile being the renewable in nature
and eco-friendly (Singh et al. 2021). Hydrogen production through photosynthetic
and fermentative processes by green algae, cyanobacteria, and anaerobic bacteria
is popularly known as biohydrogen and has gained momentum during the last few
decades (Mathews and Wang 2009).
The global research for biohydrogen is still in its infancy, and only laboratoryscale experiments have been reported till date (Kumar Gupta et al. 2013). Optimization strategies are in progress to overcome the challenges and to obtain the
desired biohydrogen levels, find new and alternate resources, design hydrogen
11 Recent Trends in Biohydrogen Economy: Challenges and Future Perspectives
221
storage vessels, and finally to improve its contribution to the present energy demand
(Bockris 2002). Biological hydrogen production presents a possible avenue for the
large-scale sustainable generation of hydrogen needed to fuel a future hydrogen
economy (Lamb and Lien 2020).
In this chapter, efforts have been made to outline the main difficulties encountered when using biohydrogen on a commercial scale and to assess the likelihood
of its commercialization in the future by analyzing its economics while taking into
account the various processes involved, such as production, storage, transportation,
and customer delivery.
11.2 Sources for Biohydrogen Production
The rate of production of biohydrogen depends upon the kind of substrates and
conversion technologies utilized (Singh et al. 2022). For cost-effective biohydrogen
production, the substrate should be cheap and renewable. Substrates including
algal biomass, agriculture residue, and wastewaters are readily available. Moreover,
substrates rich in starch and cellulose such as plant stalks or agricultural waste, or
food industry waste such as cheese whey are reported to support dark- and photofermentation. However, their direct utilization as a substrate is not recommended
due to their complex nature. Therefore, they must be pretreated before use to
release fermentable sugars (Singh et al. 2022). Substrate pretreatment is one of the
significant steps in the successful utilization of biomass for biohydrogen production.
Sometimes, the pretreatment of the inoculum also enhances the rate and yield
of the biohydrogen. Biomass from industries and algae could be a viable source
for biohydrogen production, especially in cases where waste treatment and energy
production are combined.
Carbohydrate-rich, nitrogen-deficient solid waste such as starch residues may be
used for hydrogen production using suitable bioprocess technologies. Sugarcane
bagasse contains high cellulose, hemicellulose, and lignin, making it a suitable
substrate for producing value-added chemicals and fuels via a biorefinery approach.
Because of the complicated structure of cellulose present in bagasse, pretreatment
is carried out to improve enzymatic hydrolysis. Thus, substrate pretreatment is
essential before it is subjected to hydrolysis or fermentation (Rai et al. 2014).
Algal biomass can be used as a substrate for biohydrogen production. The utilization of algal biomass has dual benefits as algae sequestered carbon dioxide, which
contributes toward the global reduction of harmful greenhouse gases concerning
climatic changes, and secondly, it releases oxygen (Rai et al. 2014).
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E. Mishra et al.
11.3 Key Technologies for Biohydrogen Production
Numerous studies have investigated H2 production via (direct and indirect) biophotolysis, (dark and photo-) fermentation, and microbial electrolysis cells (MECs). An
overview of various available technologies is shown in Fig. 11.1.
11.3.1 Fermentation
Fermentation is a biochemical process where microorganisms produce alcohols,
acetone, H2 , and CO2 from organic substrates (starch, lignin, cellulose, etc.) either
in the presence or in the absence of O2 (anaerobic).
11.3.1.1
Photofermentation (PF)
In photofermentation, purple nonsulfur photosynthetic bacteria (Rhodobacter,
Rhodobium, Rhodopseudomonas, and Rhodospirillum strains) capture light energy
and convert organic acids generated during anaerobic fermentation to H2 and CO2
in a nitrogen-deficient environment (Ferraren-De Cagalitan and Abundo 2021).
These photosynthetic microorganisms exist in the natural environment and are
able to process a wide range of substrates over a broad spectrum of light (Das et al.
2014). Purple non-sulfur bacteria are very efficient for hydrogen production because
of the following reasons (i) having a good efficiency of substrate conversion, (ii)
Fig. 11.1 An overview of various biohydrogen production technologies
11 Recent Trends in Biohydrogen Economy: Challenges and Future Perspectives
223
being anaerobic, they can manage the issue of oxygen sensitivity, which affects
the [Fe-Fe] hydrogenase, the hox EFUYH [NiFe] -hydrogenase, and nitrogenase
enzymes (iii) the ability to utilize both visible and near-infrared regions of the
spectrum, (iv) the potential to use a variety of substrates (Das and Veziroǧlu 2001).
But unlike biophotolysis, this photofermentation does not produce O2 that inhibits
H2 production.
Photofermenters either capture light energy from the sun or use artificial light.
Although the sun is a cheap source of energy, it limits the biohydrogen production
to daytime only. On the other hand, the use of artificial light, such as tungsten
lamps, to provide the light energy allows the production to proceed through
the night. However, this will require additional investment (photofermenter), and
operating costs (energy requirement) as well (Weber and Lipman 2019), similar
to biophotolysis. H2 yield for this light-driven process depends on several factors
including light intensity, design of the photofermenter, type of microorganism and
medium, and organic substrate, among others (Sağır and Hallenbeck 2019). Its yield
is comparable to that of biophotolysis (Łukajtis et al. 2018).
11.3.1.2
Dark Fermentation (DF)
Biological fermentation mode of H2 production in the absence of light is regarded
as dark fermentation which is known to be the simplest H2 production methods at
ambient condition while using organic substrates (Singh et al. 2021). This is the
very commonly used biological method of H2 production using versatile range of
organic and cellulosic wastes (Rosa and Silva 2017; Hajizadeh et al. 2021). Apart
from the substrate versatility and simple operation mode, H2 production rate is much
higher in this mode when compared to other known fermentative methods along
with the feasibility to utilize various fermentative microorganisms (Usman et al.
2019; Sivagurunathan et al. 2017). This process is carried out by either obligate
or facultative anaerobic fermentative bacteria such as Clostridia, Escherichia coli,
Enterobacter, Citrobacter, Alcaligenes, and Bacillus strains (Ghimire et al. 2015).
11.3.1.3
Integrated Dark and Photo Fermentation
In spite of being the most advantageous and sustainable method, both the fermentative biohydrogen production methods (DF and PF) suffer from certain drawbacks
which create main hurdles in the way of sustainable and economic biohydrogen
production technology (Singh et al. 2021). Low yield, unavailability of the potential
substrates, and the high production cost are the main drawbacks of DF process
whereas poor H2 production rate is the main constrain of PF process. In this
reference, integration of both the processes while using lignocellulosic biomass
(LCB) as the substrate may help to overcome these challenges (Cheng et al. 2011).
The maximum conversion of substrate into H2 can be achieved directly by combined
DF and PF process at minimum physicochemical changes. Moreover, the highest
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E. Mishra et al.
theoretical hydrogen yield up to 12 mol H2 /mol glucose can be achieved via this
integrated approach (Patel et al. 2018). The integrated biohydrogen production can
be operated in a single batch system or in a sequential two-step batch system.
11.3.2 Biophotolysis
Selected microorganisms have the ability to use light energy to split water molecules
and produce H2 . This light-driven process is called biophotolysis and can be further
classified as either direct biophotolysis or indirect biophotolysis. Both green algae
and cyanobacteria play important roles in biophotolysis (Ferraren-De Cagalitan and
Abundo 2021).
11.3.2.1
Direct Biophotolysis
In this process, solar energy is transformed into chemical energy. Microorganisms
performing this activity are species of different green algae (photoautotrophic
organism) and cyanobacteria. Chlamydomonas reinharditi is the most commonly
used microalga, besides Scenedesmus obliquus and Chlorella fusca for hydrogen
production. It is an attractive way to produce hydrogen as it uses water and sunlight
as an energy source (Sen et al. 2008). Microalgae such as green algae (Chlamydomonas reinhardtii) or cyanobacteria (Synechocystis) convert water (substrate)
into H2 and oxygen (O2 ) in the presence of light and carbon dioxide (CO2 ) during
photosynthesis.
11.3.2.2
Indirect Biophotolysis
Indirect biophotolysis differs from direct photolysis in that O2 evolution occurs in a
separate stage from H2 production (Kossalbayev et al. 2020). The first stage involves
photosynthesis of cyanobacteria, where CO2 and H2 O are converted to organic
substances and O2 . This is followed by a light-independent reaction where the
organic materials from the first stage are further broken down by the cyanobacteria
into H2 , CO2 , and other soluble metabolites (Weber and Lipman 2019). The
separation of the O2 -evolution phase from the H2 -production phase eliminates two
of the challenges associated with direct photolysis, which are O2 inhibition and
the formation of the H2 –O2 mixture (Huesemann et al. 2010). Despite this, H2
production by indirect biophotolysis is still quite low. This may be attributed to
the consumption of H2 by the hydrogenase enzyme (Sinha and Pandey 2011).
11 Recent Trends in Biohydrogen Economy: Challenges and Future Perspectives
225
11.3.3 Microbial Electrolysis Cell
Microbial electrolysis cell (MEC) technology is a promising bioelectrochemical
hydrogen production technology that utilizes anodic bio-catalytic oxidation and
cathodic reduction processes. MECs require a lower external energy input than
water electrolysis; however, as they also require the application of external power
sources, this inevitably renders MEC systems a less sustainable option. This issue
is the main obstacle hindering the practical application of MECs (Yang et al. 2021).
Another challenge that must be overcome by the MEC technology is the high
capital cost of the cathode material and its catalyst, which contributes about 47–85%
of the total costs (Rozendal et al. 2008). Conventionally, platinum (Pt), the preferred
catalyst for hydrogen production, is applied at the MEC cathode. Pt is a precious
metal and is quite expensive; ergo, the search for a cheaper and more environmentfriendly cathode has gained much attention (Chandrasekhar et al. 2015; Jafary et al.
2017; Kundu et al. 2013). An MEC design that can integrate both high H2 yields
and low costs is very much desirable for upscale purposes (Ferraren-De Cagalitan
and Abundo 2021).
A comparative study on the above available technologies for biohydrogen
production is discussed in Table 11.1.
11.4 Techno-economic Analysis of Various Biohydrogen
Production Methods
11.4.1 Dark Fermentation
The total cost of the dark fermentation comprises capital costs (equipment and
maintenance costs), depreciation expense costs, and operating costs (along with
administrative expenses) (Chang et al. 2011). According to Chang et al. (2011),
the cost of the equipment comprises the price needed for the H2 processing unit,
storage facility, purifying, and compression unit to be mounted. If the electricity
is produced specifically from the obtained H2 , the cost of the fuel cell is added to
the price of the machinery. In relation to the above, to assure the 99.99% of clean
H2 , a dedicated H2 purifying unit is compulsory. In their study, the authors have
estimated the revenue attained by H2 (63,000 m3 /year) produced while treating
organic wastewater (food/beverage). The revenue generated by selling the H2 is
estimated as 12,094 USD. The annual revenue and annual profit of H2 plant are
calculated as 82,550 USD and 7609 USD. Therefore, the cost of H2 production
cost is predicted as 1 USD per m3 which includes 0.17 and 0.23 USD per m3 for
feedstock and facility investment cost respectively.
The overall asking price of the H2 production through the dark fermentation
process utilizing two separate substrates, including beverage wastewater and agricultural residues with a plant potential of 300 and 400 m3 , respectively, was
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Table 11.1 Comparison of various biohydrogen production technologies (Lamb and Lien 2020;
Ferraren-De Cagalitan and Abundo 2021)
Technology
Photofermentation
by non-sulfur
photosynthetic
bacteria
Dark fermentation
Direct photolysis
Indirect photolysis
Advantages
These organisms can
utilize a wide range
of light wavelengths,
different organic
waste effluents, and
are capable of both
hydrogenase- and
nitrogenase-based
H2 evolution.
Disadvantages
Light and dark cycle
usage is not yet
perfected, reactor design
for best light
penetration, and how to
incorporate these into a
biorefinery are all issues
that need to be
addressed. The
fermentation process is
also susceptible to
contamination by
H2 -consuming
microbes.
Can constantly
Further research and
manufacture H2 in
development are needed
the absence of light, in genetic systems and
can use a range of
reactor design, and
carbon sources as
biomass convertibility,
substrates, produces H2 extraction, and the
useful metabolites as presence of CO2 in the
byproducts (butyric, gas mixture are all
poorly understood.
lactic, and acetic
acid), and is fully
anaerobic.
Directly produces
Poor light consumption
hydrogen from water efficiency, difficult to
and sunlight, with
stimulate H2 generation,
low production rate, and
better solar
conversion and less high oxygen sensitivity.
nutrient need than
those found in
terrestrial plants. In
many situations, they
can also fix
atmospheric
nitrogen.
Has hydrogenase H2 Poor light consumption
synthesis using
efficiency, difficult to
carbohydrates
stimulate H2 generation,
low production rate, and
produced through
high oxygen sensitivity.
photosynthetic
processes, with
better solar
conversion and lower
food requirements
than those seen in
terrestrial plants.
Considerations for
commercialization
Substrates and inocula
that have been
pre-treated for improved
H2 recovery.
Poor light conversion
rates.
Hydrogenase
suppression by O2 .
Substrates and inocula
are pre-treated for
improved H2 recovery.
Low H2 purity in the
gaseous product
mixture.
Low substrate
conversion efficiency.
Relatively lower H2
yield; and low H2 yield.
High light intensity is
necessary.
A bioreactor with a big
surface area is
necessary.
Photochemical
efficiency is low.
Requires a bioreactor
with a wide surface area
and strong light
intensity.
Eliminating uptake
hydrogenase to stop H2
deterioration.
(continued)
11 Recent Trends in Biohydrogen Economy: Challenges and Future Perspectives
227
Table 11.1 (continued)
Technology
Microbial
electrolysis cell
Advantages
High H2 yield
potential, reduced
biochemical oxygen
demand due to the
use of a variety of
effluents as reaction
substrates, and
suitability for
integration with
other bioprocesses.
Disadvantages
These systems are
challenging to scale up
since microorganisms
need to work at a lower
pH and greater
temperature, there could
be losses at the cathode,
delayed proton
transport, and expensive
ion exchange
membranes.
Considerations for
commercialization
Methanogen
suppression for higher
H2 yields.
Cheap electrodes.
The pH gradient is
eliminated.
assessed by some other researcher (Li et al. 2012). By selling H2 and CO2 , the
dark fermentation of beverage wastewater produced total yearly revenue of USD
10,805,000. Similarly, through the sale of H2 and CO2 , dark fermentation of
agricultural residues produced total yearly revenue of 14,408,000 USD.
11.4.2 Photobiological Hydrogen Production
The photobiological H2 production was classified as direct and indirect biophotolysis (Touloupakis and Torzillo 2019). In direct biophotolysis, photosynthetic
micro-organism (green algae or cyanobacteria) produce H2 from water molecules
by utilizing solar irradiation under anaerobic condition. In indirect biophotolysis,
the produced H2 was separated from O2 and CO2 act as an electron carrier between
generated and inhibiting O2 . The photosynthetic microorganisms consumes CO2
and increase their biomass productivity. Amos (2004) has estimated the H2 selling
price as 13.53 USD per kg based on three conditions (i) continuous H2 production
with a reactor cost of 10 USD per m2 (ii) with a compression pressure of 20 MPa
and (iii) 300 kg/d of algae. Some modifications such as H2 pipelines are connected
and the production is not restricted by storage capacity were suggested in the system
to drop down the H2 selling price to 5.52 USD per kg. The authors reported that by
performing the process at ambient pressures and by reducing the production cost to
2.60 USD per kg, the H2 selling price can be dropped to 3.68 USD per kg. Nikolaidis
and Poullikkas (2017) have reported about the economics of H2 production using
water and algae by direct biophotolysis. The authors calculated the production cost
and capital cost to be 2.13 USD per kg and 50 USD per m2 . Similarly in indirect
biophotolysis, 1.42 USD per kg will be the H2 production cost and it demands 135
USD per m2 as capital cost. Sathyaprakasan and Kannan (2015) have documented
the cost of H2 production by direct and indirect biophotolysis as 1.33 and 1.96 USD
per kg respectively.
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11.5 Challenges in Commercialization of Biohydrogen
Production
There are a number of obstacles in the way of the H2 economy’s development
and its commercialization. The H2 produced in large quantities using various
processes has some technological and financial obstacles. The commercialization
of H2 production is facing some obstacles such as lower production efficiency as
compared to other methods and higher production costs (Ren et al. 2016).
11.5.1 Economical Barriers
In biological H2 production, the DF process is very expensive and most of the
research is undergone only in laboratory scale (Kannah et al. 2021). Therefore,
the DF still needs large-scale studies to overcome the techno-economic barriers
in order to become more competitive and feasible technology (Soares et al.
2020). The development of photo-bioreactors of low cost and the optimization of
photosynthesis reactions in the biophotolysis process are the major economical
challenges (Show et al. 2019). Aslam et al. (2018) investigated the bio H2 production
using anaerobic membrane bioreactor and reported that the major economical
barriers are the higher operating and installation cost and thus it leads to lower
yield of hydrogen. The economic analysis of photobiological H2 production is
highly assumptive since the biological H2 production is a cost-intensive process
(Show et al. 2012). The H2 production rate is low in photobiological process
and thus it cannot be recommended for large-scale process. The integration of
various secondary processes to the primary process enhances the H2 production. The
secondary processes such as methanogenesis, photobiological processes, microbial
electrochemical cells (MECs), and microbial fuel cells (MFCs) are integrated with
the DF to produce efficient hydrogen. The additional energy production in secondary
process increases the economic value of the entire process (Chandrasekhar et
al. 2015). The integrated dark and photo fermentative H2 production cost were
estimated to be 2.5–2.8 USD per kg (Nikolaidis and Poullikkas 2017). As reported
by Sharma and Kaushik (2017) about 3.70 and 18.70 USD of cost were incurred
for the production of H2 in DF and PF. Compared to the natural gas reforming, the
commercialization of dark fermentative H2 production is finite due to its higher cost
(Hsu and Lin 2016a, b).
11.5.2 Technical Barriers
The production method is a well-known obstacle to biological H2 generation, but
researchers can overcome it by developing competitive H2 production (Argun et al.
11 Recent Trends in Biohydrogen Economy: Challenges and Future Perspectives
229
2017). Optimization of the entire process is necessary in order to commercialize any
H2 method (Kannah et al. 2021). With the gradual advancement of technology, the
primary stage of fermentative H2 production is still expanding (Hsu and Lin 2016a,
b). To boost the yield and H2 generation rate, several genetic and fermentative
adjustments must be applied. The development of strains for the generation of
H2 is aided by genetic engineering. The economics of the process is improved by
integrating the H2 producing operations. In the DF process, higher pretreatment
costs for inoculums and increased energy use have an impact on commercialization.
Before DF is commercialized, it is essential to look into the technical and economic
viability of preventing large-scale processes (Bundhoo and Mohee 2016; Kumar et
al. 2017). The H2 yield is restricted to 4 mol H2 /mol glucose in DF, which is again
a major technical obstacle (Ghimire et al. 2015).
A comparative study on various techno-economic barriers of various biohydrogen production technologies is discussed in Table 11.2.
11.6 Future Perspectives
The aforementioned biohydrogen technologies are currently in the early stages of
development. Finding more affordable substrates and economically sound materials
for reactor design requires more study. Costs can be reduced by combining the
production of biohydrogen with the treatment of wastewater. It may be possible
to genetically alter the hydrogen-producing microbes and the processes that drive
H2 generation in order to boost H2 yield. As of now, the H2 output and production
costs of these technologies still fall short of those of the methods utilized to create
H2 from crude oil, coal, and natural gas (Ferraren-De Cagalitan and Abundo 2021).
Systems for producing hydrogen that combine two or more methods may
increase H2 yield while also lowering production costs. One hybrid hydrogen
generation method creates H2 by combining photofermentation and biophotolysis.
Both methods make use of organisms that react to light to create H2 . To increase H2
yield, Melis and Melnicki devised a technique including the co-culture of green
algae and photosynthetic strains that utilize various light spectral areas. In their
system, the green algae, such as Chlamydomonas reinhardtii, in their system use the
visible portion of the light spectrum to create H2 , whereas photosynthetic bacteria,
like Rhodospirillum rubrum, use the near-infrared portion of the spectrum (Melis
and Melnicki 2006). Another intriguing hybrid option is a system that combines DF
with the MEC. By combining the process with MEC technology, low H2 yield from
DF procedures can be increased.
Japan has long advocated for a civilization that is entirely powered by hydrogen,
or a “hydrogen society.” The following are only a few of Japan’s numerous attempts
to promote a hydrogen society: A village entirely powered by hydrogen is depicted
on the recently finished Harumi Flag. HFCs are used in the Toyota Mirai and Honda
Clarity Fuel Cell electric automobiles (Hassanein et al. 2017). The Energy Saving
and New Energy Vehicle Technology Roadmap that China just unveiled emphasizes
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E. Mishra et al.
Table 11.2 Techno-economic barriers in various biohydrogen production technologies
Technology
Dark
fermentation
Economic barriers
The main factor
affecting the cost of
biohydrogen is the
cost of the substrate.
Photo
fermentation
High energy expense
with higher yield.
Dark
fermentation
Costly procedure
Integrated
dark and
photo
fermentation
The toxic nature of
the wastewater
treatment effluents
drives up the
processing costs. In a
sequential reactor,
the cost of running
and maintaining the
reactors rises. The
cost of operation
rises when black
fermentation effluent
is pretreated.
Technical barriers
The design,
construction,
operation, and
control of an
appropriate
bioreactor.
–
Since
pretreatment
methods must
adapt to various
biomass,
pretreatment
before
fermentation is a
significant
problem.
A significant
barrier is created
by the inhibitory
substances used
in the
pretreatment. The
substrate inhibits
either of the
processes.
Opportunities
The amount of
feedback inhibition
can be reduced by
combining dark and
photo fermentation.
References
Ren et al.
(2011)
Metabolic
engineering can
make up for the
significant
advancement in the
biohydrogen process.
To find the
chromosomal genes
in microalgae for
increased hydrogen
production, the
effects of nutrient
limitation and
substrate utilization
were investigated. It
is necessary to
develop
photobioreactors
with the best design
possible.
Large-scale,
advanced
investigations can
overcome the
financial and
technical obstacles.
Rashid et
al. (2013)
By choosing
appropriate hydrogen
producers, genetic or
metabolic
engineering used in
integrated dark and
photo fermentation
processes can boost
the efficiency of
hydrogen production.
Rai and
Singh
(2016)
Soares et
al. (2020)
11 Recent Trends in Biohydrogen Economy: Challenges and Future Perspectives
231
the crucial role that FCEVs play in the decarbonization of their transportation sector
(Ferraren-De Cagalitan and Abundo 2021).
Electrolysis has become the most common technique for creating pure hydrogen
to date. However, this process needs a lot of energy input to split the water molecule
into H2 and O2 molecules in an electrolyzer, with electricity accounting for 75%
of the cost to produce H2 . However, if the electrolyzers are powered by sustainable
sources like solar and wind energy, H2 generation costs may decrease (Samsun et
al. 2022).
11.7 Conclusion
The use of hydrogen as a sustainable energy source is expanding globally. Despite
still being in the research and development stages, biohydrogen is a viable alternative for delivering clean H2 . The challenge is to advance the state-of-the-art
biohydrogen technology to the point where mass production of the fuel is commercially feasible. However, contemporary biohydrogen production techniques are
still inferior to those utilized for conventional H2 synthesis in terms of cost and
output. More research is required to optimize and enhance the current production
technology in order to boost H2 yield and decrease expenses concurrently. In
general, creating renewable H2 for usage in industrial and commercial settings can
be advanced through the use of dark fermentation.
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Chapter 12
Strategic Planning and Business
Sustainability in Agribusiness: Analysis
in a Model Farm in Brazil
Najara Escarião Agripino, Kettrin Farias Bem Maracajá,
and Janine Vicente Dias
Abstract Despite the great advances in recent years, which place Brazil among
the countries with the largest and most diversified agricultural production, Brazilian
agribusiness has also been associated with the negative image of the destruction of
biomes and contamination by pesticides. Studies such as those carried out by Duan
et al (Mathematics 9(884):1–16, 2021), Bartzas and Komnitsas (Inf Process Agric
7:223–232, 2019), and Yuan et al (Int J Environ Res Public Health 19(6572):1–31,
2022) point to the need to combine agribusiness economic strategies with socioenvironmental responsibility, in order to minimize the environmental impacts of
agricultural units and build a positive image of companies with their stakeholders.
This study is based on the Strategic Planning for Corporate Sustainability model
(PEPSE), developed by Brazilian researcher Elisa Coral. As an objective, the study
intends to obtain information about the strategic planning of a farm located in the
interior of Paraíba, Brazil, in view of the variables of the internal and external
environment and to identify the sustainable strategies adopted in the decisionmaking process. The study is classified as descriptive qualitative and uses the
techniques of literature review, semi-structured interviews, and in loco observation
to obtain the data. Content analysis with a closed grid category was applied as
an analysis technique. Environmental strategies were identified as results, among
others, environmental certification, dissemination of good practices, inventory of
fauna and flora, hiring of local labor, partnerships with environmental preservation
agencies and entities, and partnerships with teaching institutions, to deal with
external variables; and knowledge of local geography, adaptation of agricultural
practices to local characteristics, partnership with a selective garbage sorters
association, use of non-marketed products and use of waste for composting and
animal feeding, to deal with internal variables.
N. E. Agripino · K. F. B. Maracajá ()
Federal University of Campina Grande, Campina Grande, Brazil
e-mail: kettrin.farias@uaac.ufcg.edu.br
J. V. Dias
State University of Campina Grande, Campina Grande, Brazil
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_12
235
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Keywords Corporate sustainability · Agribusiness · Environmental strategies ·
Strategic planning
12.1 Introduction
The search for alignment between economic gains and socio-environmental responsibility has driven organizations in recent decades. Sectors considered critical for
sustainable development, such as agribusiness, civil construction, and mining, have
been the most required by society and that most demand governmental supervision.
Regarding the agricultural sector, this is one of the largest manufacturing sectors
in the world, both in terms of production value, job creation, and exports. Its main
purpose is to produce and feed the population in a healthy way, and it is increasingly
evident that its influence goes beyond the environmental, technological, and political
fields, directly impacting people’s nutrition and quality of life (Wiśniewska 2015).
For Brazil, agribusiness has been one of the main economic activities since its
discovery. In addition, its dynamism allows both domestic demand for food and
raw materials to be met, also being one of the major industries responsible for the
balance of the country’s external accounts (Amaral and Guimarães 2020).
However, the current changes in environmental legislation and the ecological
disasters of recent years related to agricultural activities – such as the record fires
that occurred between 2019 and 2020 in the Cerrado, Pantanal, and Amazon, in
addition to the damage caused by the release of more than 493 agrochemicals
proven to be associated with rural workers illnesses, have compromised the image of
Brazilian agribusiness in the world and raised internal discussions about the social
role of economic activity and its negative impacts on society and the environment.
Studies such as those carried out by Duan et al. (2021), Bartzas and Komnitsas
(2019), and Yuan et al. (2022) point to the need to combine agribusiness economic
strategies with socio-environmental responsibility, in order to minimize the environmental impacts of agricultural units and build a positive image of the companies
with their stakeholders. However, since organizational and socio-environmental
interests are in many ways conflicting, developing tools and methodologies to assess
agricultural sustainability has been a major challenge.
Based on this understanding, the Brazilian researcher Elisa Coral developed
a strategic planning tool for corporate sustainability, PEPSE, combining existing
environmental strategy models with traditional strategic planning models, with the
aim of performing an effective analysis of sustainability in businesses.
Based on the literature on environmental sustainability in agribusiness and on
Strategic Planning for Corporate Sustainability (PEPSE), the study aims to obtain
information on the strategic planning of a farm located in the hinterland of Paraíba,
Brazil, with the internal and external environmental variables, and to identify
sustainable strategies adopted in the decision-making process.
The study did not intend to apply the PEPSE model in its entirety, since the
researched agricultural unit has national and international certifications that attest
12 Strategic Planning and Business Sustainability in Agribusiness: Analysis. . .
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to its good practices, but to apply the variables and indicators of analysis of the
internal and external environment present in the PEPSE to unveil the differential that
makes Tamanduá Farm a reference in agricultural sustainability. The justification for
adopting PEPSE in the research is that the farm does not adopt any formal strategic
planning model, making it necessary to apply a specific model for the analysis of
its strategies. Based on the company’s profile, the PEPSE model is understood to be
ideal for research, since it is a tool specifically designed for the analysis of corporate
sustainability and is aimed at the industry.
As contributions, the study identified the main variables of the internal and
external environment that constitute priorities in the strategic planning of the farm
and identified the main strategies adopted to achieve corporate sustainability. In
addition, the study indicates strategies for solving the bottlenecks found on the farm
based on qualitative research.
12.2 Brief Theoretical Considerations
The growing concern of society today for the environmental and the scientific
evidence of the relationship between environmental problems and production
practices, especially in industrial practices, have pressured organizations to rethink
their production practices and socio-environmental responsibility, which in turn
have a direct impact on the image with the consumer market.
In the long term, building a positive image can represent profit maximization and
better brand positioning, in addition to increasing sales volume, more committed
employees, and access to capital markets, among others. In this way, the promotion
of sustainability in the organizational scope must start with business management,
with senior management being responsible for structuring and raising awareness
of the organization regarding its socio-environmental impacts, and analysis of the
variables of the internal and external environment associated with the achievement
of business sustainability. Based on these efforts, it is possible to improve the quality
of processes and products aligned with good environmental practices (Claro et al.
2008).
Several authors throughout the 1980s and 1990s developed models aimed at
the development of environmental strategies to complement the deficiencies of the
traditional models of Strategic Planning in terms of socio-environmental responsibility. Among the proposed models, it is possible to highlight those idealized by
Shrivastava (1995), Hart (1995, 1997), Reinhardt (1998, 1999), Sharma (2000), and
Stead and Stead (2000).
The model proposed by Shrivastava is based on the ecocentrism environmental
paradigm, which, according to the author, should follow the adoption of the
anthropocentric management theory, to recognize “risk and ecological degradation
as a central variable in organizational analysis” (Shrivastava 1995, p. 133). For
Shrivastava (1995), companies that adopt sustainable environmental management
will have the expansion of their life cycle and will contribute to a sustainable society,
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for this to happen, it is necessary to consider some essential strategic dimensions:
mission; business and competitive strategies; core competencies; structures and
systems; organizational culture and processes and performance criteria.
Hart’s model focuses on the resource and capabilities perspective, proposing
that sustainable companies should engage in proactive environmental strategies,
establishing at least internal skills and managerial support. Hart (1995) relates
environmental strategies to resource theory factors (RBV) and capabilities. In
Hart, companies can adopt different environmental strategies depending on their
stage of evolution and available resources. Thus, stage 1: pollution prevention, is
an operational strategy that aims to increase production capacity while reducing
the risks of causing environmental damage; stage 2: planned product, aims to
integrate environmental issues, stakeholders’ perception of product design and
process development; stage 3: clean technologies, aims to reduce the environmental
impact of production systems in a globalized way.
For Reinhardt (1999), the adoption of environmental strategies must be linked to
the implementation of environmental business ethics. The author understands that
corporate strategies and environmental policy must be based on business fundamentals, such as structure, position, and capabilities. Reinhardt (1999) proposed
five strategies: product and process differentiation (promoting the differentiation of
products based on their ecological characteristics or production process), managing
competitors (promoting partnerships within the industry to establish standards or
influencing governments for the creation of legislation that benefits products),
reduce costs (promote the reduction of internal costs while improving environmental
performance), manage environmental risks (avoid costs arising from occurrences
such as industrial accidents, boycott by consumers and civil actions), and redefine
markets (define new competition rules based on environmental issues).
In the proposal by Sharma et al. (1999), in the period from 1980 to 1995, seven
Canadian companies in the oil sector were studied to analyze the environmental
response strategies of these organizations. Throughout the research, the authors
attributed characteristics of strategic adaptation arranged chronologically, analyzing
each phase the sector went through to find explanations for the answers that
organizations gave in the face of the moment experienced. Thus, according to the
authors, over the years from 1980 to 1985, the sector went through a gestation phase
in relation to environmental issues; between 1986 and 1987, the sector experienced
a phase of politicization, when discussions about public policies and regulatory
revisions intensified and companies were limited only to complying with them;
between 1988 and 1992 it was the legislative phase characterized by the several
events that provoked concern with the environment; the final phase called litigation
was considered from 1993 onwards, marked by the consolidation of regulations.
From that point on, companies started to be considered part of the environmental
problems and thus, criminally responsible for the negative impacts they caused.
As for the sector’s environmental response strategies, Sharma (2000) classified
them as reactive and proactive. Reactive strategies would be those used by companies that abdicate from deciding on how the company should act on environmental
issues in favor of institutional coercive forces, that is, environmental actions would
12 Strategic Planning and Business Sustainability in Agribusiness: Analysis. . .
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only be taken if they were imposed externally; proactive strategies refer to those
used to create competitive advantages.
In the model proposed by Stead and Stead (2000), the planet is considered as the
main stakeholder and the process of elaborating business strategies must be based on
the principles of sustainability. In the model, business strategies must be the result
of the interaction of three factors: the values that support the company’s ethical
system (aiming to find a balance between economic success and environmental
protection); the social issues that the company faces (seeking to establish the
existing relationships between environmental issues and the organization’s strategic
issues, through the variables proposed by Ehrlich and Ehrlich (1991): population,
consumption and technology as key factors that affect quality of life on the
planet); and the green stakeholder map (cooperation between stakeholders and the
development and preservation of the planet).
Focus on developing sustainable strategies and restructuring organizational
management to achieve corporate sustainability is noted in the models presented.
Based on traditional strategic planning models, with a focus on economic factors and
based on the models of formulation and implementation of environmental strategies
mentioned above, Coral (2002) developed the PEPSE. The model’s differential is
the incorporation of social, economic, and environmental dimensions in the strategic
planning of the business for the elaboration of sustainable strategies and choice of
the most appropriate tools for their implementation (Coral et al., 2003).
In the PEPSE model, the stages of strategic diagnosis, elaboration of sustainable
strategies, and project development are distinguished from traditional models of
strategic planning due to their approach to sustainability. In PEPSE, the strategic
diagnosis stage is composed of two phases: data collection and data analysis,
in which the results obtained will be considered in the decision-making process;
definition of objectives and goals; and elaboration of sustainable strategies (Coral
et al. 2003). Figure 12.1 illustrates the representation of the bases that support the
PEPSE model.
As shown in Fig. 12.1, the strategic diagnosis in PEPSE begins with the
collection of information about the organization, and encompasses the steps of
characterizing the company, analysis of the internal and external environment, the
leader’s vision, environmental conjuncture, and current strategies. After which the
organizational architecture, stakeholder analysis, strategic and operational bottlenecks, and the company’s degree of sustainability are analyzed.
Characterization of the company involves the collection of information regarding
the company, such as the nature of its activities, main products, profitability, market
positioning, sales margin, sales destination, investments in R&D and workforce
training, use of productive capacity, and available technology. In this phase it is also
essential to identify the vision of the company’s leaders regarding strategic factors,
such as customers, materials, partnerships, and business (Coral, 2002).
In the external analysis, the model proposes to identify the company’s competitive forces that act on the positioning in relation to environmental variables. In
Porter (1985), the analysis of competitive forces considers the government as an
actor that can influence competitiveness. Considering Porter, Coral (2002) reflects
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Fig. 12.1 Strategic planning for corporate sustainability. (Source: Constructed by the author by
use of Coral (2002))
the government and adds society and the environment to the model as factors that
influence all other PEPSE actors (clients, suppliers, substitute products, potential
entrants, intensity of rivalry between competitors, and competitors). As an example,
the author cites the environmental impacts that directly affect society, which will
pressure the government for greater regulation of the economic market.
In the internal analysis, information about the organization’s infrastructure, the
management models adopted, and the identification of the company’s strengths and
weaknesses is collected (Coral 2002). The variables to be studied in the internal
environment are strategic management, human resources, process management
and production technology, product development, quality assurance, information
management, logistics, financial management, commercialization and marketing,
and environmental management.
The information obtained from the analysis of the internal environment will serve
as a basis for the characterization of the organizational architecture and typology.
The leader’s vision phase requires the identification of the understanding of the chief
managers and their vision of organizational aspects, such as environmental legislation, responsibility for social development, and a vision of the future regarding the
reduction of environmental impacts (Coral et al. 2003).
The characterization phase of the environmental situation consists of collecting
complementary information on the company’s environmental situation in relation
its use of natural resources: water and energy consumption, fossil fuels, percentage
of renewable and non-renewable inputs, balance of use of inputs, generation,
classification of waste disposal from activities, effluent treatment systems, use of
environmental management tools and environmental technologies for the industry
(type, origin, and costs), and compliance with environmental legislation. With such
12 Strategic Planning and Business Sustainability in Agribusiness: Analysis. . .
241
information, it will be possible to identify the existence of strategic and operational
bottlenecks, classify the degree of corporate sustainability, and the existence of new
opportunities (Coral et al. 2003).
The survey of current strategies requires the identification and classification
of the strategies currently used by a company at the business, operational, environmental, and social levels; In the organizational typology, information on the
organizational architecture (set of characteristics related to the production system,
management tools, degree of computerization, organizational structure, and human
resource training) must be carried out. This stage determines the company’s degree
of flexibility in implementing different strategies, as well as its ability to innovate
(Coral 2002).
The model also works with the analysis of stakeholders. According to Sharma
et al. (1999), more and more companies find themselves obliged to respond to a
greater number of stakeholders due to the expansion of their activities. For this
reason, identifying the most important stakeholders for the success of the business
and measuring the value being created for them should be part of the company’s
strategic action (Benn et al. 2016). Wegrzyn and Wojewnik-Filipkowska (2022)
complement by stating that the criticality of this analysis is the path to success for
any organization.
In defining strategic and operational bottlenecks, it is necessary to identify
bottlenecks that affect the production process of the industry, to assist in the
elaboration of an action plan to eliminate or reduce their negative impacts.
The degree of corporate sustainability is achieved through a quantitative analysis
of the company’s sustainable performance, this is obtained through the interrelation
of the variables identified in the strategic diagnosis phase, namely: “the ability
to implement strategies, the environmental impact of the activities performed,
resource availability, market growth, competitive position; the leader’s vision; social
responsibility”. Thus, the degree of corporate sustainability will be the sum of
the points acquired in each variable. From the identification of the degree of
sustainability it is possible to identify which areas need improvement, as well as
monitor organizational performance (Coral et al. 2003, p. 10). Table 12.1 illustrates
the organization’s situation in terms of total points:
According to the model, the degree of corporate sustainability will be analyzed
on a scale from critical sustainable potential to potentially sustainable. Based on
this analysis, the company will have a clear view of its position in terms of socioenvironmental responsibility.
Table 12.1 Degree of corporate sustainability
Degree of corporate sustainability
<50%
50% a 70%
Critical sustainable
Regular sustainable
potential
potential
Source: Author by use of Coral (2002)
70% a 90%
Good sustainable
potential
>90%
Potentially
sustainable
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The mission, vision, and policies still need to be defined. For authors such
as Megginson et al. (1991), Kotler and Keller (2012), and Yanaze (2007) they
are strategic elements of organizational management, and their formulations are
essential to better the understanding about the company and better direction for the
organizational management process for their stakeholders. The purpose of defining
objectives and goals is to guide strategic management (Odita and Bello 2015). In
the PEPSE model, this step follows the same methodology as the other traditional
strategic planning models; however, it uses the analysis carried out in the strategic
diagnosis step for corporate sustainability.
The elaboration of the sustainable strategies phase is based on all the variables
previously worked on. The strategies developed in this phase must be analyzed
according to their convergence with the organizational architecture and just as
their sustainability. The analysis of the convergence of strategies in relation to
organizational architecture and sustainability serves as a basis for defining the most
appropriate tools for the company, thus, the company must have the capacity to
implement a sustainable strategy in the long term. To analyze the sustainability
of the strategy, capacity to implement the strategy, the economic return, and the
environmental and social impact of the strategy must be considered.
Finally, the development project phase is derived from the result of the strategic
planning and must provide the proposal for the elaboration of a detailed plan
that enables the implementation of the strategies developed throughout the process
(Coral 2002).
Based on the phases of the model, it is possible to conclude that the PEPE
model is an efficient tool to support the analysis of environmental positioning and
the elaboration and implementation of environmental strategies, as well as a good
parameter to identify and correct the possible bottlenecks that may compromise its
sustainability.
Regarding corporate sustainability in agribusiness, the sector occupies a strategic
position in terms of social, environmental, and economic dimensions, being a
reference for the development of research and technologies used for the sectors
growth. In Brazil, given the complexity of the production chain and the changes that
have taken place in environmental policy in recent years, Brazilian production has
constantly been associated with negative environmental and social impacts, which
has reflected in sanctions on national products in the foreign market (Agripino et al.
2021).
Thus, even with projections of growth in the sector and expansion of production,
Brazil has gone against the popular discussions on sustainability and sustainable
development, requiring rural producers to take their own initiative to adopt and
commit to sustainable practices.
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12.3 Methodological Procedures
The qualitative research of this study is classified as descriptive, as it intended to
analyze characteristics and describe the relationship between sustainable practices
and the decision-making process in a company in the agricultural sector, aiming
to draw a faithful portrait of the reality of the studied organization. The research
is aimed at solving a complex problem that involves strategic planning and the
achievement of corporate sustainability.
As data collection techniques, a literature review was applied to better understand
the topic studied, as well as to formulate the content categories necessary for
analysis of the data obtained in the field research; the semi-structured interview,
which is indicated when it is intended to understand the information that is being
passed on at the same time makes it possible to ask momentary questions in the
interview that are relevant to the investigated phenomenon (Glesne 2015); and onsite observation to identify points not mentioned by the interviewee and that are
relevant in carrying out the research.
The interview was applied on July 21, 2021, from 8:00 am to 9:30 am with
the farm’s production manager and was recorded as it was authorized by the
interviewee. The objective of the interview was to obtain information about the
strategic planning of the agricultural unit in relation to the variables of the internal
and external environment, for this, the variables indicated in the PEPSE model were
used as a basis. The interview script followed the criteria adopted by the researcher
Coral (2002) to apply the model.
The Production Manager is an Agricultural Engineer and started his career at
the company in 2002 as an intern and was hired in December 2003. Since then, he
has been managing the Tamanduá Farm and five other farms owned by the Landolt
family. The Production Manager is responsible for managing and establishing its
direction. The information and strategic decisions of the business are centered
around him.
The process of qualitative data analysis was carried out using the content analysis
technique through the application of categorization and coding mechanisms. Following the suggestions of Gibbs (2009), the study adopted the coding mechanism
based on three steps: descriptive coding of the data to find categories related to
the sustainability variables defined in the PEPSE model and to categorize the
sustainable actions described by the interviewed manager. In the descriptive coding,
close words or original terms of the transcribed speech were used, repeating the
idea that the text conveys at first sight; analytical coding was used to apply a
representative code of the idea conveyed in the interview text, in more depth, in
order to better organize the collected data and optimize the analysis process; and
finally, the theoretical coding, in which the data obtained was confronted with
existing theories, specifically in this case with the PEPSE model adopted for the
best direction of the study.
The study adopted the variables indicated in the PEPSE model to analyze the
internal and external environments. Altogether, the model proposes nine variables
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for the analysis of the external environment and ten for the analysis of the internal
environment, as already presented. However, after an interview, the Intensity of
Rivalry between Competitors variable was removed from the analysis, since it was
declared that the company has no direct competitors. The main product of the farm
is biodynamic spirulina, and according to information, the farm is the only one in
the world to produce organic and biodynamic spirulina, for that reason, they do not
consider that they have direct competitors.
The qualitative stage was applied to identify variables and criteria adopted by the
farm and respective strategies to deal with the internal and external environment.
Thus, the study analysis categories were relevant, formulated from the proposed
objectives and closed grid, based on the internal and external analysis variables
present in the PEPSE model (Vergara 2012).
To obtain the data, primary and secondary sources were used. As a primary
source, an interview with a semi-structured script was carried out with the production manager of Tamanduá Farm, to collect information on specific aspects related
to the farm, such as customers, suppliers, etc., in addition to seeking from the
manager’s perspective, the analysis of the environment in which the farm is located.
As secondary sources, scientific studies, opinions, reports, institutional websites,
and journalistic articles were consulted to characterize the sector. During data
collection, the interviewee informed that the company does not have direct competitors, therefore, the intensity of rivalry between competitor’s variable, considered
in decision-making was not analyzed, since it does not apply to Tamanduá Farm.
However, other variables that contemplate the analysis of competition such as
competitors, potential entrants, and substitute products, are part of the data analysis.
The decision to keep competition-related variables in the analysis was to confirm
information with the manager.
12.4 Characterization of the Company
Tamanduá Farm is in the rural area of the municipality of Santa Terezinha, in
the hinterland of Espinharas, in the interior of Paraíba state. Tamanduá Farm was
acquired by the company Mocó Agropecuária Ltda. in 1977, a name inspired by
the cotton variety cultivated by its owners between 1977 and 1984 (Tamanduá Farm
2019).
For the change from monoculture to diversification to be possible, studies were
carried out in the region to adapt production practices to the characteristics of the
environment – semi-arid climate with typical caatinga vegetation of the sertão and
low rainfall records. Thus, Instituto Fazenda Tamanduá was created, also in 1977.
The studies carried out by the institute resulted in socially and environmentally
sustainable practices, such as organic and biodynamic production (Tamanduá Farm
2019).
The sustainable production of Tamanduá Farm has earned them important certifications, such as the USDA Organic and Demeter seals issued by the Biodynamic
12 Strategic Planning and Business Sustainability in Agribusiness: Analysis. . .
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Institute (IBD). Among the products sold by Tamanduá Farm, the highlights are
Brown Swiss cattle, Alpine and Boer brown goats, Brown (red) and Black Rice, Rice
Flour, Honey, Goat’s Milk, Mangos, Melons, Mini Watermelons, and Spirulina.
produced according to national and international quality standards and certifications.
Spirulina being the main product.
Like many properties in the region, Tamanduá Farm is limited by its water storage
capacity. As a strategy to overcome scarcity and to maintain annual profitability,
managers opted for short-cycle irrigated crops such as cucurbits or long-cycle crops
such as fruit trees, specifically mango trees.
12.4.1 Analysis of the External Environment
According to Vlados and Chatzinikolaou (2019), the external environment is the
set of all elements external to the organization that influence its operation. Although
these factors cannot be directly controlled by organizations, knowing, and analyzing
them is potentially beneficial, since social, political, technological, and economic
issues are crucial to the performance of companies.
In PEPSE, the government variable influences the environment and society
and acts on all the other actors in the model. Regarding the natural environment,
the variables that affect all the actors considered in the model were listed as:
customers, suppliers, substitute products, potential entrants, and intensity of rivalry
between competitors. With respect to society, it can act on competitive forces,
especially regarding the company’s image. Customers, suppliers, competitors,
potential entrants, substitute products, intensity of rivalry between competitors,
government, society, and the natural environment were indicated as variables of
society that act on all the actors.
12.4.1.1
Characterization of the Sector
Employing practically one in three workers in Brazil, the main challenges facing
Brazilian agriculture today are dealing with high production costs. The Confederation of Agriculture and Livestock of Brazil (2021) forecasts an increase of more than
100% in expenses on fertilizers and pesticides for crops such as soy and corn, as a
result of logistical bottlenecks in the production chain of input-exporting countries;
variation in the operating cost of some products such as corn, coffee, and soybeans,
which tend to rise; increase in the costs of agricultural inputs, including herbicides,
which registered an accumulated increase of 372% in 12 months, which tends to
increase production costs; energy or political crisis in the main suppliers of inputs
to Brazil (China, Russia, Belarus, and India, which together import 76% of our raw
material); the logistic issue, especially for the flow of goods and the bottlenecks
of maritime transport; the climatic phenomenon La Niña, which should cause the
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anticipation of planting; the variants of COVID-19; and the environmental agenda
(Zanatta 2021).
As for trends, Minister Tereza Cristina pointed out government investments
for innovation and sustainability, which tends to increase foreign investments;
infrastructure improvements such as the conclusion of the BR-163 to facilitate
the flow of production from the Midwest through the North Region, the socalled Arco Norte; expansion of connectivity in the countryside, with expansion of
internet coverage (currently, only 23% of agricultural space has internet coverage);
insertion of the country in the era of aggregation and capture of value, with the
production of more plant-based protein foods, laboratory meats, vertical agriculture,
and fermentation technologies (National Agency for Technical Assistance and Rural
Extension [ANATER] 2021).
Regarding the local market, agriculture plays a prominent role in the regional
economy. Sugarcane is the most important product, especially in the states of
Paraíba, Pernambuco, and Alagoas, but other products are also worth mentioning,
such as soybeans, cocoa (especially in Bahia), coffee, corn, beans, rice, bananas,
cotton, sisal, cassava, coconut, and chestnuts. In relation to livestock products,
the raising of cattle (stronger in Maranhão, Piauí, and Bahia) and goats stand out
(Dumont 2021).
According to the Northeastern agricultural census carried out in 2017 and
released in 2019, of the 10.1 million workforces employed in agricultural activities
in Brazil, 46.6% of them work in more than 2.3 million establishments in the
Northeast region, of which 79% are from family farming and occupy 20% of
the total cultivated area in the country. The diagnosis of the region pointed out
that despite the importance of agricultural activity for the economy, the sector is
still underdeveloped in terms of infrastructure and technologies, in addition, its
main difficulties are access to credit and technical assistance, and water scarcity.
Regarding the modernization of practices, it is seen that most producers are on
the sidelines, especially regarding the use of agricultural inputs. It is estimated
that 30.3% of rural properties cultivate crops with fertilization, while the country’s
total is 42.3%. The final data from the sector diagnosis showed that only 23.8% of
producers use pesticides, 2.3% have tractors, and 8.2% have access to some type of
technical assistance (Simões 2021).
In turn, the municipality of Santa Terezinha, located in the Sertão Paraibano
mesoregion and Patos microregion, has an approximate population of 4550 inhabitants [2021], GDP per capita of R$ 9825, 40 [2019] and 11.6% of the population
occupied [2019], of which 40.35% work in the agricultural sector. Based on its
data, the municipality can be considered small. Its economy is based on agricultural
production, with most properties being considered family farming. The main
agricultural products sold are maize, beans, rice, guava, palm, banana, soursop, and
mango. In livestock, the herds of goats, pigs, sheep, cattle, horses, donkeys, and
mules are highlighted. Also noteworthy is the production of honey, milk, and eggs
(Instituto Brasileiro de Geografia e Estatística [IBGE] 2021).
Located in the drought polygon, the city of Santa Teresinha is part of the Sertão
Paraibano 2 Regional Market (MRT 05), composed of 44 municipalities. The MRT
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05 land network has 26,886 rural properties registered in the National Rural Registry
System of the National Institute for Colonization and Agrarian Reform, of which
96.43% (25,925) are considered small rural properties, 3.11% (836) are mediumsized rural properties and 0.46% (125) are from large rural properties (INCRA
2021). One of the biggest obstacles to these properties and the subsistence of the
population is the cyclical occurrence of droughts. In a survey carried out in Santa
Teresinha, 147 water points were recorded, 01 natural source, 01 Amazon well, 03
excavated wells, and 142 tubular wells, located on public land (15), private land
(130), and without defined property (71). Regarding the use of water, 35% of the
registered points are intended for primary domestic use (drinking water); 30% are
used for secondary domestic use (general use); 04% for agriculture; 03% for other
uses, and 28% for animal watering (Ministry of Mines and Energy [Brazil] 2005).
In view of the diagnosis presented, it is concluded that the main opportunities
for agribusiness in the region are the export of products; business modernization,
with access to technologies and production automation; adoption of sustainable
production techniques, such as drip irrigation, given the regional characteristics;
development of vegetable meats, following trends; and diversification of production.
As for the main threats, it is possible to mention the difficulty in accessing credit;
although vegetable meat is pointed out as a future alternative for a more ethical
diet, for ranchers it can represent a difficulty, due to the need to adapt production;
the variants of COVID-19; the country’s politics and international relations; and the
little modernization of the sector.
12.4.1.2
Diagnosis of the External Environment
During data collection, the interviewee informed that the company does not have
direct competitors, therefore, the intensity of rivalry between competitor’s variable,
considered in decision-making was not analyzed, since it does not apply to the Farm.
About customers, the company’s target audience was defined in 1998, when the
farm owner observed that there was a high demand for organic and biodynamic
natural products and at the same time, there were few companies serving this market.
According to the Production Manager, the farm seeks to meet the market share
that is interested in healthy products and/or products that bring socio-environmental
responsibility as an added value, for that, according to him, for more than 20 years,
the company became certified for the sale and export of organic and biodynamic
products, following national and international protocols.
Considering the interests of customers, the Farm has been dedicated to publicizing its social, environmental, and cultural actions, as well as the production process,
with a view to strengthening its image in the market and acquiring credibility
with the consumer. The main means of internal and external dissemination of
the company’s sustainable actions is through documents, a website, and social
networks. As for the location of these customers, the manager says they are local
customers in the region, and there is a very strong clientele in the state of São Paulo –
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Brazil, and a large part of the production of mango and melon pulp is directed to
Europe.
The company serves the final consumer through e-commerce and the wholesale
customer. According to the information obtained, there are ample opportunities to
be taken advantage of by the farm in relation to the consumer market. However,
there is the challenge of overcoming the region’s climatic difficulties, especially
regarding water scarcity and the slowness of the certification process that slows
down the company’s operations.
As for the farm’s suppliers, there is a cardboard box factory for mangoes,
melons, and watermelons; melon and watermelon seed suppliers; cleaning product
factory; and graphics that make product packaging labels. Regarding how suppliers
are selected, the commitment to socio-environmental awareness was pointed out,
according to the manager, suppliers must be duly registered with their competent
bodies and demonstrate that they care about the environment, and that they provide
recyclable products. As opportunities for suppliers, the partnership with certified
suppliers was indicated for the purchase and sale of products in the region, and as
the main threat, there is the difficulty of finding local companies that are socially
and environmentally responsible.
For Coral et al. (2003), the substitute products considered in the PEPSE model
are those that have a direct or indirect impact on the development of society;
contribution to the reduction of negative social impacts; and products or services
with a positive social image. Thus, according to primary data collection, the
farm’s production does not have substitute products in the local market and direct
competitors that impact the farm’s performance. However, at the national level,
there are organic producers, such as the Landless Rural Workers Movement (MST)
and at the international level, especially in the European market, Germany is the
main organic market, followed by the European Union. Thus, as opportunities it
is possible to mention the low competition in the national market for the farm’s
products and the possibility of reinforcing competitiveness with the diversification
of new products. The main threats are potential entrants and consumer awareness of
the preference for sustainable products.
The main actions to minimize the threat of potential entrants, indicated by the
company, were certifications with reputable companies to prove that the products
are free of chemical contamination, actions aimed at increasing sales and increasing
the public served, which consists of promoting and publicizing socio-environmental
responsibility through social networks. As a threat, conventional products were
pointed out. These compete with more competitive prices, taking advantage of
consumers who do not understand the importance of certifications or are still
very price sensitive. As opportunities, the expansion of environmental awareness
activities promoted by the farm in the local market to create in the consumer an
environmental responsibility and conscious consumption was indicated.
As for the government variable, the farm complies with environmental legislation
and has a Private Natural Heritage Reserve (RPPN), with over 300 hectares
registered for the federal government, in this area several research projects are
carried out in partnership with universities. There are also Permanent Preservation
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Areas, which are the banks of rivers, and streams within the property. For example,
in 3000 hectares [total area of Tamanduá Farm], there is more than 20% of legal
reserve, in addition, fauna and flora surveys are carried out in partnership with
institutions that promote environmental safety, such as the Brazilian Institute of
Environment and Renewable Natural Resources (IBAMA) and Legal Environmental
Police. Thus, as opportunities, the partnership with government agencies for the
preservation of local biodiversity and tax incentives was indicated. As threats, the
delay in the process of issuing certifications by public bodies.
As for the society variable, it was said that the company participates in the
development of the local community by generating employment and environmental
education for residents. Due to the actions described by the manager, the company
was recently awarded the SMETA protocol, a specific certification for actions that
are socially responsible. As practices that respect consumer rights, the company
discloses its environmental inventory and releases a report with important information about its activities and production. The Farm also carries out philanthropic
actions, both in the surrounding community and in the city of Patos-PB. Thus, as an
opportunity for the company, a positive social image, communication with the local
community, development of social activities and the SMETA seal that attests to its
actions which opens opportunities for export are pointed out. The main threat is the
lack of community awareness about sustainable consumption.
For the manager interviewed, the environmental issue is a link to sustainability,
among the actions to preserve the farm area and its surroundings, the manager
claims to have partnerships with IBAMA, Environmental Police and the Veterinary
Medicine course at the University Center of Patos (UNIFIP) for the care of wild
animals. The farm today is a registered animal release unit, an important action for
long-term sustainability, without degradation or minimization of this degradation.
Regarding the energy sources used in production, it was clarified that the company
uses hydroelectric energy supplied by the company in Paraíba, but there is a project
to adopt solar energy in the coming years.
There are also ongoing environmental projects, such as the use of nutrient cycling
through composting, in which all organic material generated in the company is
subjected to a composting process in which animal manure and pruning from
the branches of the mango trees are used, transforming it into compost for the
plants after one hundred days of decay. The manager also stated that there was a
goal of reducing water use, for which drip irrigation was implemented. As for the
effluents generated, the farm adopts septic tanks and selective collection. Thus, as
opportunities, it is possible to highlight participation in environmental preservation
projects, partnerships with environmental protection agencies and entities, access
to technologies for sustainable production, awareness of society, and the growing
demand for sustainable products. As threats, the use of fossil fuels in transport and
the absence of renewable energy sources are identified, which can compromise the
company’s image in the consumer market.
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12.4.2 Analysis of the Internal Environment
The internal environment is understood as the set of factors present in the organizational environment which have a direct impact on its performance. In the study of the
internal environment, current competencies and resources are considered to identify
the most representative strengths and weaknesses of the company, compared to
others in the same sector, to understand which resources can be used better and
which should be improved upon. (Oliveira 2011).
For Shatilo (2019), analysis of the internal environment is the tool that enables
the development and operation of organizations. The study of the internal environment can be a means for business expansion or a source of problems that can
compromise its existence. Organizations must identify their current competencies
and skills, as well as their potential to better direct them toward fulfilling their
objectives, mission, and vision.
Therefore, based on the interview with the production manager, the variables
indicated in the PEPSE model for the diagnosis of the microenvironment were analyzed, namely: strategic management, human resources, management of production
processes and technologies, product development, guarantee of quality, information
management, logistics, financial management, commercialization and marketing,
and environmental management.
12.4.2.1
Diagnosis of the Internal Environment
Regarding strategic management, a lack of formal strategies was reported and the
adoption of a structured strategic planning model that would help the management
of the enterprise as well. Management practices are based on the employees’
empirical knowledge, thus making it impossible to have a clear view of the control
and effectiveness of business management. The conduction of business takes place
in a centralized way, in the figure of the production manager.
Like strategic management, information management does not have a structured
system, with a concentration of information in the figure of a single employee, which
compromises the understanding of other employees about organizational plans and
objectives. As for the strategic management of the company, according to the data
collected in the interview, the strategic positioning in the market, the prospection and
analysis of scenarios and markets are identified as strengths. As weaknesses, the lack
of implementation of strategic planning (mission, vision, and values formulation)
and the absence of a specific tool for the company’s environmental management
were identified.
About information management, weaknesses are the absence of information
sharing with other employees, which in turn can compromise their view of the
company in which they work. In addition, the absence of a structured information
system for better decision-making can be pointed out.
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Regarding the development of products, this is based on the demands and interests of the market regarding organic products and considering the characteristics
of the region and production capacity. As for the use of technologies, the farm
either acquires technologies developed by third parties, adapts some of them to
its reality, and develops its own technologies, such as the technology used in
the production of organic Spirulina. According to the Production Manager, the
technology developed on the farm not only allowed the cultivation of Spirulina in
the region, but also made it the only and truly organic Spirulina produced in the
world. Thus, as a strong point, the farm’s competitiveness in a promising market,
acquisition, adaptation, and development of technologies for sustainable production,
institutional partnerships for agriculture and the identification and evaluation of
opportunities for the commercialization of production products were pointed out.
As weaknesses, it was indicated that the farm needs to diversify its, since it remains
concentrated in few options for the market, as well as expanding the production
areas, thus ensuring improvement of the activities that are developed.
Regarding production processes and technology management, production with
forage planting was indicated as practices, to avoid laminar erosion, and machines
were developed for this purpose; adoption of a planting calendar, considering crop
rotation with local species; and farm-specific soil management. The company also
has an irrigation system with treatment by magnetization, a technology that makes
the water have a charge that does not obstruct the drips. As positive points, the
manager mentioned access to technologies and development of its own and specific
technologies for production, such as organic spirulina. As negative points, the
absence of renewable energy sources to minimize environmental impacts.
Regarding logistics, the company has a distributor supplying products in Europe,
and as for actions aimed at the internal environment, the farm uses technologies for
greater efficiency in the production and storage of goods. As positive points, there is
access and technological use and as negative points, the absence of a structured
strategic planning that allows the evaluation and control of the production and
management of the company, to make it possible to verify the efficiency.
For the commercialization of products, the company works with e-commerce,
through its own website and direct sales throughout the country, with São Paulo –
Brazil, the main state for marketing the farm’s products. There is also sale to
wholesalers. For exports, the company has a distributor in Rotterdam, Netherlands.
The company delivers mango and melon pulp as well as mangos to the Port of
Rotterdam and the distributor distributes the products throughout Europe. The
management of the company’s image is the responsibility of adapting the farm to
the methodologies and meeting the criteria for acquiring certifications and internal
marketing practiced with the awareness of employees and motivational practices.
Today, the farm is a national and international reference in organic and biodynamic agriculture in terms of its sustainable production practices. As positive points,
we have the internal marketing, the necessary certifications for the commercialization abroad and the online store to serve the national market and intermediary to
reach the international market. As a weak point, there is the difficulty of fixing the
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prices of products for resellers, who can sometimes apply an abusive rate of profit
for the resale of products.
For hiring employees, the local workforce is prioritized, first the families inside
the farm and then the families living in the surrounding areas. As for the training of
hierarchical workers, the educational level is from technical to higher education and
the qualification of employees follows the area in which they work and the level of
demand for each position. The CEO has a degree in law, the others have degrees in
economics, administration, and agronomic engineering. There are also employees
with technical training in their areas, such as food technicians. As for the turnover,
the permanent employees of the farm have been working for years, some joined as
interns and were later hired and/or promoted.
Temporary employees, as in the case of those hired by harvest, are residents from
the surrounding area and whenever there is a seasonal need for hiring, they are called
upon complying with all the requirements of labor legislation. The farm constantly
holds events and promotes environmental education and awareness among the staff.
The company follows measures to protect against accidents at work and during
the period of the COVID-19 pandemic, health standards were adopted to prevent
the spread of the virus among employees. According to the interviewee, there
were no losses of employees due to the disease. As positive points, there is the
ease of hiring qualified labor for the functions, respect for labor legislation and
professional qualification. As a weak point, a deficiency in communication between
all hierarchical levels was observed, with information centralized among managers.
Another negative point observed is the absence of qualified professionals for the
implementation of strategic planning and project management.
Regarding financial management, the difficulty of aligning sustainable production with profitability was reported, for which the company has planned other
projects to increase revenue. As positive points, there is the great economic
potential of the farm, with the possibility of exploring various businesses, such as
agrotourism, one of the idealized projects. As a negative point, the centralization
of decision-making and management is highlighted, which can compromise the
progress of the projects to be developed.
As for environmental management, the Production Manager of the farm states
that this is the focus of the company’s management and as actions for its sustainable
operation, plans are established, where all actions and resolutions are included in
the environmental management plan. Thus, each employee is trained in the area
in which they are working, and these action plans are implemented through onsite training and lectures. The interviewee also stated that several training sessions
are carried out with employees throughout the year to improve the company’s
environmental performance. Regarding the negative impacts, it was answered that
the activity that most involves human activity is mango production, but that in this
sense, it is not considered a negative impact. Even though the manager did not
recognize the negative environmental impacts in the interview, it is necessary to
remember that fossil fuels are still being used in the cars available to the farm, which
admittedly has a negative impact on the environment. Regarding consumption, it
was clarified that between 400 and 500 liters per month are used. Another point
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is the non-use of renewable energy sources. Given this fact, it is identified as a
bottleneck in the company’s environmental management.
Regarding the positive environmental impacts, there is the preservation of
biodiversity, beekeeping, “because bees not only produce honey, but they also form
a link in agriculture, pollinating melon, watermelon, mangos and still produce
honey, and favors the pollination of native species” (Production Manager 2021).
Regarding current environmental strategies, the manager indicated the Permanent
Preservation Areas (APP), with the objective of increasing partnerships with
educational institutions and increasing the number of academic research carried out
on the farm. There are also strategies adopted to reduce the impacts of activities,
such as solid waste management. It emphasizes that the farm is a school farm and
that it works with a focus on the environmental awareness of its employees and the
community.
Thus, we can indicate as weaknesses in the company’s environmental management as the use of fossil fuels and the absence of the use of renewable energy sources
and the absence of the use of specific tools for the environmental management
of the farm. As positive points, the hiring of local labor, with a positive social
impact on the community, promotion of environmental education for residents
in the surrounding area and employees, selective collection, and conservation of
biodiversity, in partnership with government agencies and educational institutions.
The farm has important certifications, which guarantee them a great competitive
advantage, they are the USDA Organic and Demeter seals issued by the Biodynamic Institute (IBD); the Organic Product Brazil, issued by a certification body
accredited by the “Ministry of Agriculture, Livestock and Supply (MAPA) and
accredited by the National Institute of Metrology, Standardization and Industrial
Quality (Inmetro), and which ensures that a certain product or service obeys the
norms and practices of organic production”; and Global G.A.P (Good Agricultural
Practices), a private organization that establishes standards and certifications of
good agricultural practices, covering food safety and sustainability requirements
(traceability, production techniques, environmental preservation, food safety, and
social aspects) (Organicsnet 2021; Sebrae 2018).
The farm is also certified with the seals: Selo BR-BIO-122 Agriculture NonEU, which is an IBD code for Brazilian producers certified according to European
Regulation (EC) 834/2007, in accordance with the requirements of the European
Regulation (EC) 834/2007 and (EC) 889/2008; and SEDEX/SMETA. SMETA
4-Pillar Certified Factory issued by SEDEX Members’ Business Ethics Audit
(SMETA), which uses SEDEX’s social audit methodology to assess locations and
suppliers to meet working conditions in the supply chain (Sedex 2021). As a
strong point of the farm, certifications, quality standards attested by national and
international quality organizations and zero waste, with the use of waste in the
production chain, stand out. As a weak point, the absence of specific tools for
environmental management and strategic planning to measure and control results
is highlighted.
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Survey of Current Strategies
The survey of the current strategies adopted by Tamanduá Farm was carried
out through the application of an interview with a semi-structured script with
the managers and on-site observation. For a better visualization of the strategies
adopted, these are organized according to the variables analyzed. Initially, market
strategies were identified according to the variables of analysis of the external
environment.
Thus, environmental certification, construction of a positive image, dissemination of good practices, inventory of fauna and flora, hiring of local labor,
cultural events, certified suppliers, exclusivity agreement with certified suppliers,
partnership with environmental preservation agencies and entities, partnership with
educational institutions, school farms, and endomarketing were identified as current
strategies.
As for the strategies of the internal environment, for better performance of business activities, knowledge of local geography, adaptation of agricultural practices
to local characteristics, partnerships with educational institutions for sustainable
agriculture, acquisition and adaptation of technologies to farm practices, development of proprietary technologies with low environmental impact, organic and
biodynamic production, development of self-production practices, irrigation with
low water consumption, internal marketing for motivation and good practices among
employees, e-commerce to serve the final customer, distributor to access international markets, environmental management plan, employee training on sustainable
practices, selective collection, partnership with a collectors association, biodynamic
beekeeping; use of non-marketed products and use of waste for composting and
animal feed.
It can be observed that some strategies are applied in more than one variable, as
is the case of certifications and environmental education, this happens because they
are key strategies for the company’s competitiveness in the segment in which it is
inserted.
According to the research data, Tamanduá Farm, despite not having a structured
Strategic Planning and specific tools for Environmental Management, has defined
good strategies to achieve its organizational objectives and, in this way, positioned
itself in the market and conquer a respectable image with the consumer market, as
a national and international reference farm in sustainable agricultural production.
12.4.3 Proposition of Strategies to Be Adopted Based
on the Analysis of the Environment
After the information provided by the production manager, insertion in the Latin
American market through commercial representatives and expansion of wholesale
customers through the hiring of a team of sales representatives; imposing a price
12 Strategic Planning and Business Sustainability in Agribusiness: Analysis. . .
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list for the sale of products by wholesalers, expanding partnerships with educational
institutions in the region for environmental education and conscious consumption,
seek partnerships with investors (China, for example, which has invested in research
in the area of sustainability in the northeast region), partnerships with university
extension projects to formulate strategies for the commercialization of goods,
expanding opportunities for technical visits to learn about sustainable agriculture,
adoption of a solar energy system to replace hydroelectric energy, and biofuels as
an alternative to fossil fuels are suggested as strategies to be adopted by the farm.
Finally, it is suggested that the organization adopt a structured model of strategic
planning aimed at analyzing environmental strategies, with a view to better the
understanding of the company’s positioning in the market and evaluating its results.
Although the PEPSE model has been used as a basis for the identification of
environmental variables and strategies, not being applied in its entirety, it was found
to be an adequate tool for the organization’s profile, since it is easy to apply, focused
on the industry and proposes variables compatible with the reality of the unit.
It is also proposed to define the hierarchical structure of the farm for better
division and organization of work, since decisions are centralized in a single person;
planning meetings with the team to align understanding on decision priorities and
business vision; and finally, promote training with the team involved in strategic
planning and the importance of periodically carrying out a strategic business
diagnosis to analyze the company’s relations with its stakeholders.
12.5 Conclusion
Based on the research, it was found that the variables of analysis of the external
environment adopted on the farm from the PEPSE model are customers, suppliers,
potential entrants, government, society, and the environment. It was identified that
in the decision-making process and in the elaboration of strategies, the competing
variables, substitute products, and intensity of rivalry between competitors are not
considered, since the farm considers itself having to deal with direct competitors for
its products.
However, given the increasingly fierce competitiveness in a global market, it is
suggested that in future planning, substitute products should be considered in the
elaboration of environmental strategies.
As for the internal environment variables, all the variables proposed in the
PEPSE model are considered in the formulation of farm strategies, with the product
development, environmental management, and quality assurance variables being the
ones that have received the most attention in farm planning. As a suggestion, it is
indicated once again the adoption of structured environmental tools to better verify
the sustainable potential of the company. The PEPSE model proved to be adequate
to the reality and organizational objectives, being a good tool to assist in the strategic
management of the business.
256
N. E. Agripino et al.
As for the strategies adopted, environmental certification, construction of a
positive image, dissemination of good practices, inventory of fauna and flora,
hiring of local labor, cultural events, certified suppliers, exclusive agreements
with certified suppliers, partnerships with environmental preservation agencies and
entities, partnerships with educational institutions, school farms and endomarketing,
to deal with external variables. And knowledge of local geography, adaptation of
agricultural practices to local characteristics, partnerships with educational institutions for sustainable agriculture, acquisition and adaptation of technologies for
farming practices, development of proprietary technologies with low environmental
impact, organic and biodynamic production, development self-production practices,
irrigation with low water consumption, internal marketing for motivation and good
practices among employees, e-commerce for end-customer service, distributors to
access international markets, environmental management plan, employee training
on sustainable practices, selective collection, partnership with an association of
collectors, biodynamic beekeeping; use of non-marketed products and use of waste
for composting and animal feeding, to deal with internal variables were identified.
It was observed that the farm adopts strategies compatible with its reality,
however, a greater control and structuring of its management processes is necessary.
As limitations of the research, the COVID-19 pandemic was the main obstacle,
since the adoption of sanitary measures and reduction of staff on the farm, as
well as restrictions on visitation, made contacting employees difficult and directly
compromised data collection.
As suggestions for future work, the full application of the model used is recommended, to analyze the organizational typology and the sustainability potential
of the farm more directly, although it has certifications, the use of fossil fuels and
non-renewable energy compromises its classification as a sustainable company.
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Chapter 13
Application of Industrial Ecology
Principles In and Around Cement
Industry in NCR of Delhi: Potentials,
Problems and Possibilities
Anuja Malhotra
and Nandan Nawn
Abstract Cement is among the highest pollution-generating industries in India,
both directly (particulate matter) and indirectly (use of thermal-powered electricity
as an input). With growing infrastructure requirements, the volume of cement
production—globally ranked second—can only rise. At the same time, as a ‘Scavenger Industry’, it has the potential to innovate around its input requirements, be it
‘exchange’ of by-products, and/or recycle and reuse of others’ ‘wastes’. Grounded
in the framework offered by Industrial Ecology this chapter looks at the potentials,
problems and possibilities of applying ‘circular economy’ in and around Cement
Industry in National Capital Region (NCR) of Delhi, India. Three ‘exchange’
scenarios have been constructed—use of fly-ash from power plants as an input,
waste plastic (Refuse Derived Fuel) as fuel, and crop residue (as briquettes) as fuel.
It has been argued that the social benefits of implementing these exchanges are high
and there is a case for—diverse—intervening and facilitating roles of the State.
Keywords Industrial ecology · Closing material loops · Cement industry ·
Industrial waste recycling · Pollution in Delhi
The chapter is a modified version of the Masters’ Thesis (link) submitted by the first author in
partial fulfilment of requirements of M.Sc. in Economics degree from TERI School of Advanced
Studies, New Delhi, under the supervision of the second author. Authors would like to acknowledge
contributions from Dr. Ashok K Dikshit, National Council for Cement and Building Materials,
Faridabad towards preparation of the Masters’ Thesis.
A. Malhotra ()
Center for Policy Design, Ashoka Trust for Research in Ecology and the Environment (ATREE),
Royal Enclave, Bengaluru, Karnataka, India
e-mail: anuja.malhotra@atree.org
N. Nawn
Department of Economics, Faculty of Social Sciences, Jamia Millia Islamia, New Delhi, India
e-mail: nnawn@jmi.ac.in
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_13
259
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A. Malhotra and N. Nawn
It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to
a diminished consumption. The very contrary is the truth.
(William Stanley Jevons (1866) The Coal Question: An Inquiry Concerning the Progress
of the Nation and the Probable Exhaustion of our Coal-Mines, 2nd edition. Macmillan,
London, p. 123)
The economic system is stable somewhat in the way a bicycle and its rider are stable: if
forward motion stops, the system will collapse. Forward motion in the economic system is
technological progress.
(Robert U Ayres (1989) Industrial Metabolism. In: Ausukl JH, Sladovich, HE (eds)
Technology and Environment. National Academy Press, Washington, DC, p. 32)
13.1 Introduction
Interdependence between economic systems and ecosystems was recognised even in
the era of classical political economy. The use of “original and indestructible powers
of the soil” to explain the rent paid to the landowner in On The Principles of Political
Economy and Taxation (1817) by David Ricardo is just one of many examples.
This attribute could explain ‘differential rent’ across parcels of land with varying
degrees of ‘productive power’. It was a rate question, and so was the ‘paradox’ in
The Coal Question (1866) by William Stanley Jevons.1 However, the latter is also
a scale question. Nevertheless, neither is known to have caused much flutter within
the ‘policyspace’ then.
About one-and-a-half centuries later Club of Rome published Limits to Growth
(1972). This marked the entry of the scale question in the economic ‘policyspace’
(at least) albeit only in the academic domain. The ‘oil crisis’ in the subsequent
year, of course, subsumed it, though some prominent economists engaged with
it, even if just to dismiss it. In the next half a century it completed a full circle:
what is commonly regarded as ‘climate change’ today is a pure scale question.
For a while, the ‘policyspace’ has been abuzz with how not to breach the limits,
dictated by Nature. The matter in question is to regulate human activities that have
been the main driver of climate change, primarily due to the burning of fossil fuels
(like coal, oil, and gas), which produces heat-trapping gases. This is the absorption
capacity or ‘sink function’ provided by Nature in the form a ‘fund-service’ a la
Nicholas Georgescu-Roegen (1971)—a scale question. The basis of apportioning
the amount (per capita income or population, for example) is still being debated.
So is the question of who will pay for the costs of the corresponding action, i.e.,
abating release of emissions beyond the ‘quota’. In fact, recently there have been
calls for paying the damages as compensation to the nation-States who are or will
be victims due to inaction. All of these are scale matters—dictated by Nature—
and are occupying the ‘core’ of the global ‘policyspace’; it’s in the ‘political action
domain’ and beyond the academic one.
1 Later, it was termed as ‘rebound effect’.
13 Application of Industrial Ecology Principles In and Around Cement. . .
261
The common obsession shared by the political class, dominant schools of thought
in economics, business, and financial world—around economic growth—is an
indisputable fact. It follows that even if many ‘transitional’ pathways have been
located to address the scale question—by definition, involving lowering of the scale
of economic system—none have been found to be acceptable to those holding
power, be it nationally or in the global arena. They prefer playing with the rate
question—say, by improving energy and material efficiency (or, lowering energy
and material intensity). Stanley Jevons through ‘Jevons’ Paradox’ had shown the
limits of playing with the rate question to address a scale question (see, Polimeni et
al. 2008). It follows that the number of ‘transitional’ pathways that the powerful can
find acceptable are rather limited. As a corollary, pathways which minimally affect
those obsessed by the ‘growthmania’ will enjoy a positive and non-zero probability
of being accepted. Pathways based on the framework offered by Industrial Ecology
(IE) belong to this set.
The stiff resistance from the powerful to adopt any pathway that calls for
downscaling of economic systems—such as what degrowth movements ask for—
paves the way for exploring two options. First is the possibility of ‘decoupling’
main products (a ‘good’) from the by-products (a ‘bad’). Making emission norms
stronger for passenger vehicles is an example here—but, this is a rate matter.2 The
other is use of by-products of unit A (that are ‘wastes’ to producer of A), by producer
of unit B, as an input. By extension, it is possible to imagine use of by-products of
unit B (that are ‘wastes’ to producer of B), by producer of unit A. This ‘exchange’
makes it a ‘circular economy’. This process is iterative: any number of units can be
a part of this ‘circle’. Alternatively, this makes the ‘loop’ closed.
The inherent assumption here is that the ‘wastes’-turned-inputs will replace the
conventional input and will not have much consequence for either the technology-inuse or the input-output relationships. It follows that, input per unit of output, for the
economic system in question consisting of all participating units will fall. In case the
output remains unchanged (assuming constancy of demand) in physical terms, then
total quantity of inputs in physical terms will fall. This has obvious economic and
financial consequences for the participating units—but, in case those ‘wastes’ (in the
case of non-use as inputs) were otherwise being dumped on a landfill (opportunity
cost of land) or waterbody (water pollution) or being just burned (air pollution)
there are additional social benefits in finding ‘use-values’ from them. The circular
economy not only saves social but also private costs (savings on the conventional
inputs). This idea is borrowed from the functioning of ecosystems.
.
∼∼∼
2 This is measured in terms of release of various noxious gases per unit of air released, assuming a
constant relationship between the latter and distance covered.
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A. Malhotra and N. Nawn
Fischer-Kowalski (1998a)3 identified late 1960s-early 1970s to be the time when
“pioneers of ‘industrial metabolism’”4 worked across disciplines that served as
foundations to the later works in Material Flow Analysis, Circular Economy, and
Social Metabolism—all within the fold of IE. Suh (2009, p. vi) mentions “history of
industrial ecology and input-output economics, material flow analysis, LCA [Life
Cycle Analysis], sustainable consumption, policy applications, energy and climate
change, waste management, national accounts and statistics” among the ‘topics’
included in the Handbook of Input-Output Economics in Industrial Ecology—
this illustrates the breadth of the subject. Engaging with it requires inter-, if not
trans-disciplinary endeavours. But, irrespective of its ‘command’ in such forays,
Economics—as a discipline—assumes a disproportional importance in the ‘political
action domain’ within the policyspace.
Ayres (1989, p. 23) writes,
[i]t is increasingly urgent for us to learn from the biosphere and modify our industrial
metabolism, the energy- and value-yielding process essential to economic development.
Modifications are needed both to increase reliance on regenerative (or sustainable) processes and to increase efficiency both in production and in the use of by-products.
As “economic system depends on the extraction of large quantities of matter from
the environment” (Ayres 1989, p. 25), it’s useful to find the “fraction of the total
mass of processed active materials that is annually embodied in long-lived products
and capital goods (durables)” (Ayres 1989, pp. 25–6). “The annual accumulation
of active materials embodied in durables, after some allowance for discard and
demolition” was found to be “6 percent of the total” and the remaining “is converted
into waste residuals as fast as it is extracted” (Ayres 1989, p. 26).
In this ‘metabolic view’, evolution of the industrial processes is seen through
“savings in materials and energy inputs or capital requirements, if not both” (Ayres
1989, p. 32). Here, it makes economic sense to invest in development of processes
that can “saves one link in the chain between raw materials and finished materials
or final goods”. This will “improve[e] overall effectiveness in production” through
“development of new processes [that] shorten [...] process chains, bypassing as
many intermediates as possible” (Ayres 1989, p. 32). But the other possibility is
“better use of by-products and wastes” (Ayres 1989, pp. 32–3; emphasis added).
One such is finding “new uses for what were formerly waste products” (Ayres
1989, p. 24). In case disposal of wastes becomes costly, due to newer regulations, it
makes economic sense to locate an ecologically more benign option, namely, finding
buyers of by-products.
Ayres (1989, p. 33) used the metaphor of a “the myopic drunkard’s walk” to
characterise evolution: “The drunkard’s walk is not exactly random, but it tends
to follow the path of least resistance in the short run”. Ayres (1989, pp. 34–
35) “postulate[d] a long-run evolutionary imperative favouring industrial metabolic
3 Also see, Fischer-Kowalski (1998b).
4 This term was coined by Ayres (1989).
13 Application of Industrial Ecology Principles In and Around Cement. . .
263
technologies that result in reduced extraction of virgin materials, reduced loss of
waste materials, and increased recycling of useful materials” and also that “shortterm economic incentives do not necessarily point in the direction indicated” besides
the fact that they “are often inconsistent with the postulated long-term imperative”.
It follows that there must be some “counteracting incentives and mechanisms”
that “must grow out of social and even political responses to perceived environmental problems. It is political action, ultimately, that creates the incentive
structure—fiscal, monetary, and tax policy—and the regulatory environment within
which economic incentives drive entrepreneurial activity (Ayres 1989, p. 35;
emphasis added).
It is this lack of ‘political action’ that has ensured that ‘sustainable development’
remained as a mere buzzword (besides being vague and unclear). For the same
reason, variety of pathways (howsoever defined) under ‘energy transition’ or ‘low
carbon economy’ will not be acceptable to the global powers as shown by Ghosh
(2021), among others. Pathways following ‘industrial metabolism’ satisfy the
conditions mentioned in the quote at the beginning of this chapter from Ayres (1989,
p. 32). The recent presence of terms like ‘industrial economy’, ‘circular economy’,
dematerialisation and other such (outside of the academic and) in the political action
domain owes much to the ‘limits to growth’ in real terms (pun intended) across
sectors and systems.5
One of the key elements in the practice of industrial metabolism is facilitating
‘coordinated development’ of industrial units that can engage with each other
towards ‘exchange’ of by-products to satisfy the condition of “new uses for
what were formerly waste products” (Ayres 1989, p. 24). ‘Industrial ecosystem’
at Kalundborg, Denmark involving a coal-fired power plant, an oil refinery, a
pharmaceutical maker and a plasterboard manufacturer (Ehrenfeld and Gertler
1997), has been the pioneering instance of a successful ‘industrial symbiosis’.6
Closer home, Ramaswamy and Erkman (2006) is one of the earliest expositions.
It covered textile industry in Tirupur, foundries in Haora, leather industry in Tamil
Nadu (using Resource Flow Analysis as a tool) and Damodar Valley Region (using
industrial metabolism as a tool) to examine potentials for application of IE. Like
others, it emphasised on the tasks for ‘environment planners’ within industries,
companies, and public authorities to engage with multi-level planning and listed
various tools towards this end. One such tool is to construct various ‘scenarios’
keeping in mind the requirement of ‘exchanges’ among participating units. This
tool has been rather common, as can be seen in a recent study on China involving
“energy-intensive industries such as steel, cement, and power” (Zhang et al. 2022,
5 Ecological Economics and Journal of Industrial Ecology among others have been carrying
papers on these matters for a few decades. Researchers at the Universitat Autonoma de Barcelona,
Barcelona, Spain and Institute of Social Ecology, Klagenfurt University, Vienna, Austria have been
forerunners in this area.
6 Frosch and Gallopoulos (1989) popularised the idea of waste exchange between industries,
imagining the industrial system to mimic biological ecosystems that are highly effective at
recycling. See, Ayres (2004) on the limits to this idea.
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A. Malhotra and N. Nawn
p. 1).7 This paper also constructs alternative scenarios (Sect. 13.4) in and around
cement industry for National Capital Region of Delhi, India.
13.2 Contextualising the Research Problem
This section provides the rationale behind choice of industry and geographical
space.
13.2.1 Why Cement Industry?
Cement is an indispensable component in construction as such and infrastructure
in particular. With growing requirements, the production of cement in India can
only rise. Rising concerns over the environmental impacts of its production and
consumption have led to experimentations with a variety of substitutes: mud,
plastic and geo-polymers, to name a few. Yet, their disadvantages outweighed their
feasibility.8 Cement remains the most preferred binding material worldwide. At the
same time, efforts to control pollution intensity via ‘end-of-pipe’ solutions have not
been successful (Bahel and Kanchan 2017).
Numerous studies have shown that it makes sense to focus on production
activities rather than on end-of-pipe solutions. For sure, their ‘performance’ largely
depends on regulatory mechanisms, their implementation and continuous monitoring by the State but in developing countries institutions and regulatory frameworks
are rather poor (Andersen 2007; Preston 2012). As a result, end-of-pipe solutions
have seen failure in multiple places.
Consider the following example: in 2014, the Ministry of Environment, Forests,
and Climate Change (MOEFCC), Government of India directed industries to
comply by certain norms. One was for the cement industry, wherein 194 cement
plants were asked to reduce their particulate matter (PM) emissions by establishing
an ESP (Electrostatic Precipitator) unit in their factories. However, due to financial
and space constraints, less than 5% of the plants complied. In response, the
government made the norms less stringent as apparently the financial and capital
constrains were ‘genuine’. Ultimately, the cement industry is still one of the most
polluting industries of India (Bahel and Kanchan 2017).
7 This study used “business-as-usual, optimization of product structure, low-carbon technology
application, and policy advancement” (Zhang et al. 2022, p. 1).
8 Mud needs higher content of clay and is a poor insulator; plastic has environmental impacts
throughout its entire life-cycle; and geo polymers have been technically difficult to create; thus,
hindering the scalability and feasibility of usage (Civil Engineers Forum 2016).
13 Application of Industrial Ecology Principles In and Around Cement. . .
265
Potential for this ‘scavenger industry’ (Rejinders 2007) to use other industries’
‘wastes’ and reduction in the overall environmental impact in the process is well
recognised. To reiterate, in the language of IE this warrants “new uses for what were
formerly waste products” (Ayres 1989, p. 24) and can be seen as mutually beneficial
exchanges of by-products (or, simply ‘exchange’). Precisely for this capability of
using by-products of other industries,9 cement has been a common component of
‘industrial ecosystems’ as can be seen in most eco-industrial parks.10
In approaches using IE principles solutions are not sought after the damage
is done. Instead, it tries to minimise that damage in the first place by reducing
the material used or reusing waste products. Even the measurement in terms of
materials and not money. It opens up a possibility where material load is reduced,
without even considering the damage cost. For instance, a quantitative study of the
Kalundborg Industrial Park shows that more than 30 exchanges took place between
industries. It has also been shown that more than 95% of the input water required
in thermal power plants is sourced from wastewater of other industries (Jacobsen
2006). Domenech and Davies (2011) quantified CO2 emission savings to be 64,460
tonnes per year and groundwater savings to be 2.9 million-meter cubes per year.
IE warrants the design of processes such that waste is reduced, “closing loops” of
materials rather than polluting the land and water through their disposal. It warrants
the use of “appropriate technology” which means that while deciding the technology
or process, the local situation must be considered. The social, political, geographical
and cultural situation plays an important role in determining the technology (Reddy
1998). For instance, the problem of air pollution in Haora (West Bengal) could not
be solved by using natural gas as an input, which was a perfectly good solution
in the western parts of the country. Rather, the region-specific appropriate solution
was to develop a left-over gas from coke ovens (Erkman and Ramaswamy 2003).
IE endorses that solutions may be inspired by the best practices globally, but they
much be locally checked for feasibility and appropriateness.
As mentioned before, cement is the second most consumed material on earth
(after water), which is not surprising as it is indispensable in construction and even
the development of agriculture. In India, it is the second most important primary
input for the economy (after steel and iron). Cement is required by almost every
other industry, provides employment to almost 1 million people (directly as well as
indirectly), and contributes substantially in the Foreign Direct Investment inflow.
It has forward linkages to infrastructure as well as backward linkages to coal,
9 These include using foundry sand and waste paint from auto manufacturing industry, fly-ash from
electric power plants, scrap tires from tire dealers or manufacturers, paper sludge from pulp and
paper factory, kiln dust from road construction industry, gypsum and slag from non-ferrous metal
industry.
10 In eco-industrial park businesses cooperate with each other (and with the local community, at
times) in an attempt to reduce waste and pollution. This takes place through sharing of resources
(material, water, energy, and even information) among others. For instance, in the Kolkata leather
complex in India consisting of 500 tanneries a common effluent treatment plant (CETP) was set up
to reduce the environmental impact since this joint approach was economically feasible.
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A. Malhotra and N. Nawn
electricity and natural gas (Pandey 2017). Alternatives to cement do not enjoy
economic and technical viability. Materials like mud, plastic and geo-polymers have
been experimented as substitutes for cement but the scalability and feasibility are not
comparable. This makes cement largely non-substitutable (Civil Engineers Forum
2018).
Cement is also responsible for negative impacts on the environment and human
health. Following is a list (not exhaustive) of these impacts:
• Globally, almost 5–6% of carbon dioxide emissions are attributed to the cement
industry.
• Highly energy intense, fuel consumption in the clinkers is responsible for
emissions such as NOx, SOx, CO2 , and particulate matter (Mehraj and Bhat
2014).
• Cement dust contains heavy metals such as nickel, cobalt, lead and chromium.
These are hazardous for human health and vegetation (Baby et al. 2008).
• Prolonged exposure to cement dust can cause serious irrevocable damage to
humans and any soil, plants and vegetation that comes in contact (Mishra and
Siddiqui 2014).
• Linkages between cement dust exposure and respiratory symptoms in human
population are well established (Ikli et al. 2003).
Because of all these reasons, the MOEFCC has categorised the cement industry
in the ‘red’ list or most polluting category. These classifications have been done on
the basis of a pollution index, constructed as a function of emissions (air pollution),
effluents (water pollution), hazardous wastes and consumption of natural resources.
The significant negative environmental impact can offset using the principles of
IE, namely, waste exchanges. Oss and Padovani (2003) have shown that cement
industry may be one of the best drivers of practices related to IE in the manufacturing sector. To some extent, the Indian cement industry is already practising IE.
The government mandates that cement industry can use fly-ash (from thermal power
plants) to make blended cement. There has been progress such that 25% of the flyash generated is being used by cement industry (Shankar 2018).
13.2.2 Research Area
Particulate matter (PM), a pollutant emitted from cement production, is the most
prominent cause of pollution in the National Capital Region (NCR) of Delhi
(Sharma and Dikshit 2016).11 This region records poor air quality almost throughout
the year. A study by TERI and ARAI (2018) shows that unless the air quality
is improved, the health damage in the area will escalate at a steep rate. It is
11 NCR includes eight districts from Uttar Pradesh, 14 from Haryana, two from Rajasthan and the
National Capital Territory of Delhi.
13 Application of Industrial Ecology Principles In and Around Cement. . .
267
Fig. 13.1 Map of Delhi NCR
and illustration of presence of
industries in the region.
(Source: Created by authors
using data from Ministry of
Commerce and Industry)
Note: This is not an
exhaustive list; the icons are
not to scale, they are only
indicative
obvious that application of IE in the cement industry in and around this region can
contribute towards lowering of the pollution to some extent, besides a reduction in
the extraction of ‘resources’ to be used as inputs—both can be economically and
ecologically valuable. Figure 13.1 shows the location of industrial units in the study
area with a potential to exchange by-products.
In Delhi NCR, the landfills are overflowing (Nandi 2017). Delhi’s waste
management has been a systematic failure where 9500 tonnes of garbage per day is
generated only to end up in uncontrolled landfills. Overflowing landfills are causing
groundwater pollution (Mor et al. 2006) and methane emissions (Talyan et al. 2008).
Yet, 80% of the waste may not end up in those landfills if there is segregation
at source and it reaches its appropriate destination be it for recycling or reuse or
even conversion into manure. The Delhi government is spending INR 1350 crores
annually on waste management and disposal but results have been far from expected
(Singh 2014). It makes sense to locate markets for such exchanges of waste, and
reduce the need for disposal in landfills.
13.3 Some Empirical Matters
To locate possibilities of exchange of by-products between cement and other
industries the first step is to understand the flows of resources in the cement industry
itself. The methodology has been developed by pioneers like Ayres (1989). The
material and energy flows can be accounted for a substance, product, process,
company, municipality or region—the level of analysis depends on the purpose
of the study. For our purposes, we construct input-output matrix for the cement
industry.
13.3.1 Environmentally Extended Input Output Matrix
The basic input-output (I-O) model was developed by Leontief in the 1930s. It was
constructed using economic data for a specified region. As the name suggests, the
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A. Malhotra and N. Nawn
Table 13.1 EEIO matrix for cement industry (annual)
Raw material
Limestone
(22.82 million
tonnes)
Gypsum
(1.14 million
tonnes)
Grease
(167 tonnes)
Lubricating oil
(489 tonnes)
Bauxite/iron ore
(0.79 million
tonnes)
Water (14.69
million meter cube)
Energy consumption Main-product and by-products Emissions per year
Coal + pet coke
Cement (23.18 million tonnes) CO2 emissions(69,063 TJ)
15,098,332
tonnes
Diesel oil
Waste oil and Electrical
(748 TJ)
grease
cables
(83,633
litres)
Biomass fuels
Steel scrap
Plastic bags
Dust emissions(304 TJ)
(30,635
565.53 tonnes
tonnes)
Alternative fuels
Waste
Glass
NOx
(1339 TJ)
cement bags
23.883 tonnes
Electricity
Wood
Copper
SOx
(481,624 MWh)
2714 tonnes
Source: Created by authors using Annual Reports and GRI Reports of ACC Limited (ACC
Limited, 2017a, 2017b), Ambuja Cement Limited (Ambuja Cement Limited, 2017), Dalmia
Bharat Limited (Dalmia Bharat Group, 2016) and JK Cement Limited (JK Cement Limited, 2018)
analysis involves flows of products from each sector (input) as well as the flow to
each of the sectors (output).
There have been many modifications to the conventional I-O matrix to account
for social and environmental matters. For instance, ‘Economic-Ecologic models’
have been developed to include the ecosystem where flows are recorded between
ecosystem and economic systems. These are known as the environmentally extended
input-output matrix (EEIO) in general. The goal of EEIO is to incorporate the indirect or embodied environmental impacts associated with production. For instance,
an EEIO analysis can capture how much nitrogen is released into the environment
in the production of wheat (Kitzes 2013).
EEIO matrix of cement industry (Table 13.1) has been prepared using the Annual
Reports and GRI reports of some cement companies. Annual reports provided
monetary values. Material flows have been compiled using data submitted by these
companies through their sustainability reports as per Global Reporting Initiative
(GRI) standards.12
There are many notable features in the input and output of cement industry that
strengthens the case for use of IE (Table 13.2).
12 GRI is an international independent institution that disseminates globally applicable sustainabil-
ity reporting. See, https://www.globalreporting.org/standards/
13 Application of Industrial Ecology Principles In and Around Cement. . .
269
Table 13.2 Notable features of input and output of cement industry
Feature
Considerable amounts
of mineral resources
(bauxite, iron ore and
sand.)
Primary raw material is
limestone
Water is used for
cooling purposes, not
as a ‘direct input’
More than 90% of the
energy consumption is
sourced from fossil
fuels
High volume of
emissions
Details
Limestone is one of the 12 ‘most critical’ mineral resources for
which no substitutes are available and it is indispensable for cement
manufacturing.
As per Indian Bureau of Mines, the limestone reserves available in
India are expected to last only another 30 years. There too, all
available reserves cannot be exploited due to many reasons such as
deposits being in inaccessible areas, lack of infrastructure and other
restrictions.
Cement cooling is an important step in the process because it
enhances the quality of cement. However, on an average only 9% is
sourced from treated/reused water.
Problems associated with fossil fuel dependency are environmental
pollution, economic dependence on imports and contribution to
global warming. In Indian cement industry, the use of alternative
fuels (like by-products from other industries) is only 2–3% of the
total energy mix. In some European countries, these alternative
fuels account for more than 60%.
Cement industry is highly polluting. 50% of emissions is due to
chemical process of manufacturing, 40% is due to burning fuel and
remaining owes to use of electricity and during transportation.
Source: created by authors
13.3.2 Locating Exchange Possibilities
Next, we identify the possible ‘waste exchanges’ with cement industry as the
destination. There are two such: the use of alternative raw materials (as inputs),
and introduction of waste materials as alternatives to fossil fuels.
13.3.2.1
Alternative Raw Materials as Inputs
To reiterate, cement industry has the potential to use by-products of other industries.
These include but are not limited to steel slags from Iron and Steel industry, fly-ash
from power plants, aluminium slag, paper sludge from paper industry, and shredder
residue from auto scrap processing. Cement is a binder—a substance that binds
other materials such as sand or gravel. The by-products mentioned at the beginning
of this paragraph can be used as binding materials as well. For instance, fly-ash
can be mixed with cement to make a binding material known as blended cement
(Helmuth 1987). Bureau of Indian Standards allows use of fly-ash up to 35% in
such a mixture (Bobde 1998). Even though the Indian cement industry has seen an
increase in the use of fly-ash and production of blended cement, it still uses less than
30% of available fly-ash. The major reason for this is unavailability of fly-ash in the
desired quality.
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The benefits of such blended cement are several. Since lesser cement is required
as a binding material (while having at least the same level of strength), lesser
pollution is emitted in the production of cement. Moreover, lesser raw material is
mined including scarce and ‘critical’ ones like limestone.
There have been successful attempts worldwide with exchanges in these lines.
For instance, in the Cajati Industrial Park, Brazil, a cement plant was built only
to make use of by-products of other industries. Millions of tonnes of wastes have
been avoided in the process. In Japan, the Taiheiyo Cement used sewage sludge
and incineration ash as raw materials. In Hannibal, Missouri, waste materials
contaminated with heavy metals (their toxicity polluted land and water severely)
were used in cement industry (Hanehara and Ichikawa 2001).
13.3.2.2
Alternative Fuel Source
The cement industry in India relies majorly on the consumption of fossil fuels for the
burner. More than 90% of the energy is sourced from Coal and Pet Coke. However,
global (and local) experiences have demonstrated that there are many alternatives
to such fossil fuels that can be used for the burner. These include, among others,
plastic, slaughterhouse wastes (bone, fat, and meat), scrap tires, municipal solid
waste and biomass. In France, use of meat and bone solved a sizeable panic caused
by infected beef (Mehta 2002; Naryana 2009). Briquettes from agro-waste (crop
residue) can be used as fuel in the cement kiln. In NCR, where the burning of crop
residue is considered to be a major contributor of air pollution, this might address
a much bigger problem than just reducing use of fossil fuels in cement production
(Bikkina et al. 2019).
13.4 Three Scenarios of Waste Exchange
We elaborate on the possibilities mentioned in 13.3.2 above in this section.
13.4.1 Using Rejected Plastic as Fuel for the Burner (Scenario
1)
According to the Central Pollution Control Board, Delhi is the highest contributor to
plastic waste, nationally, with more than 700 tonnes per day. This has made the water
in adjacent Yamuna river unfit for domestic and commercial use. Alternatively, the
plastic has ended up in landfills or was simply burnt. Delhi government banned
plastic use completely in 2009. However, there has been an implementation failure.
13 Application of Industrial Ecology Principles In and Around Cement. . .
271
Since 2018, NASA satellites have been identifying ‘red dots’ in the NCR region.
They indicate burning of plastic and municipal solid waste in the open areas.13
Alarmed, the Environment Pollution (Prevention and Control) Authority (EPCA)
directed the Delhi Pollution Control Committee (DPCC) to act. However, even
after posting nearly 100 environment marshals and flagging more than 10,000
violations, the ‘red dots’ did not decrease substantially. The laws prohibit such
burning but implementation and follow-up is a challenge—for every such non-point
source emissions like this—simply because it’s nearly impossible to monitor due to
prohibitive costs.
Using plastic waste as fuel for the burner in the cement plant is placed under
the category of Alternative Fuels and Raw Material (AFRM). In India, AFRM
makes up for less than 4% of the fuel needs in the cement industry, as the
energy dependence is still majorly on fossil fuels. In many countries—such as
Switzerland, Germany, Austria, Denmark and the Netherlands—cement industry
has been sourcing majority of their fuel needs from AFRM. In fact, the use of
AFRM may help India meet its climate change goals (Shankar 2018). Next, we
explore stages to realise this possibility.
In the first stage, namely, collection of plastic, labour for recovery of ‘resource’
is the most important input. The second one is to process and convert the ‘resource’
into Refused Derived Fuel (RDF). And the final stage is to provide this RDF to
cement plants.
The labour is available in the region. A conservative estimate is that there are
about one to 2 lakh waste-pickers collecting almost 2 kg of plastic per day, per
person. These are conservative estimates and it is said that the actual number may
be close to 8 kg per day per person. Even the conservative estimate makes it almost
6000 tonnes of plastic per month. Due to lack of official means of processing plastic,
less than 10% of collected plastic is recycled and the rest ends up in either landfills,
the Yamuna or is burnt. This calls for placing the entire collection process within a
‘formal network’. Of course, this will make the working and living conditions for
the waste-pickers better, who are still majorly working outside of ‘formal network’.
In contrast to the labour-intensive nature of collection and segregation stage, preprocessing one is capital-intensive. In it, calorific value of waste is calculated to
explore viability, followed by treatment with chemicals & microbes to eliminate
moisture, before shredding the waste into small particles and converting into fuel.
The requirement of physical machinery and land is estimated to be as follows: (a)
a minimum 25 acres land required for the pre-processing of waste, (b) machinery
(costing INR 20–100 crore depending on size of unit) and additional machinery of
about INR 5 lakhs to dehydrate the non-recyclable plastic. A back-of-the-envelope
estimate shows conversion of 500 tonnes of waste to 150 tonnes of refuse-derived
fuels (RDF).14
13 These satellites would not be able to detect minor fires such as a “chulla” (oven) or matchstick,
these have to be big fires that generate heat for over 4–5 h (Thakur 2018).
14 Data taken from Tamil Nadu Pollution Control Board (2017), Central Pollution Control Board
(2017), Gautham (2018).
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Use of RDF as fuel does not warrant any change in the existing technology or
machinery at the cement plants (Modi and Rajasekar 2012). Clearly, supply of RDF
takes place only if sum of expenditure of labour and machinery in the first two stages
are less than the price of RDF. However, the opportunity cost of RDF as a fuel is
the price of its substitute, namely, coal and pet coke. In short, economic viability of
scenario 1 depends on fulfilment of two necessary conditions:
(a) A non-zero supply of RDF, if and only if, total cost (labour time + machinery) ≤ total revenue (price of RDF x quantity of RDF sold).
(b) A non-zero demand of RDF, if and only if, unit price of RDF ≤ unit price of
coal/pet coke.
If (b) does not hold per se, there can be a case for government intervention in
the form of subsidy. Next, we look at the expected societal benefits, and social costs
borne currently. Former includes the following:
(i) Saving landfill space: None of three landfill sites—Bhalswa, Ghazipur and
Okhla—comply with the schedule 3 of the Municipal Solid Waste (MSW)
Rules, 2000. Accordingly, the DPCC does not grant new authorisations but
still they are used for disposal because of lack of alternative. According to
DPCC reports, more than 8000 tonnes of MSW reach these landfills every day,
even if they are not even allowed to be operational. Conversion of plastic into
RDF will help addressing this problem.
(ii) Decline in use of Pet Coke: The major part of energy requirements in cement
industry is sourced from pet coke; for some, it is 100%. Most is imported
from the USA. Tests by EPCA on imported pet coke revealed that they contain
17 times more sulphur than coal. Some finds it akin to export of pollution to
India from the USA. Its low cost owes to discontinuation of its use by USA
refineries. In fact, even the Government of India banned use of pet coke as a
fuel. However, the ban was not implemented on cement industry still. As and
when it does, cement industry will have search for economical alternatives:
RDF can be one such. The cess makes coal an unfavourable option (Jethmalani
2017).
(iii) Technical advantages of using RDF: Two facts—namely, lesser emissions
compared to coal and higher yields of chlorinated organic—make RDF an
important component in meeting the global climate change commitments. In
fact, co-firing (combining) RDF with coal can make it a more efficient fuel
with higher yields, as well as a cleaner fuel with lower emission (Raghunathan
and Bruce 1997). Some studies suggest that if RDF is used as fuel, emissions
are definitely lower for up to 30% use of RDF, and above that it is ambiguous
(Asamany et al. 2017). But, in Delhi NCR, the use of RDF is less than 2%.
The current societal costs are as follows:
(i.) It is estimated that the health cost of Delhi is close to 3% of the GDP (World
Bank 2016). A significant part of emissions is due to burning of plastic.
13 Application of Industrial Ecology Principles In and Around Cement. . .
273
(ii.) Daily cost of waste disposal is more than INR 100 lakh, even if conservative
estimates are taken. INR 40 lakh is spent per day on the transportation of waste
in Delhi alone and INR 1800 per tonne is paid to contractors for disposal in
the landfill.
(iii.) INR 1514 crore has been spent by the Delhi government in 18 years to clean
the Yamuna as reported by Mahapatra (2012).
13.4.2 Fly-Ash Used in Manufacturing Cement (Scenario 2)
Fly-ash is a by-product from burning coal in thermal power plants. Its disposal on
land and water has serious environmental consequences in terms of PM. Recognising its reutilisation potential, the Fly Ash Mission was started in 1994, jointly
by Ministries of Power and Environment & Forests. Its use has been promoted for
the manufacturing of ash bricks, building material, pavement construction, and road
embankments, among others. Acceptability has been one challenge: it was reported
that contractors find raakh (fly-ash) not good enough for road construction. Even
the presence of NTPC professionals at the construction sites was of limited help.
This problem of acceptability does not exist at the cement industry since the
Bureau of Indian Standards (BIS) certifying that use of fly-ash up to 35% is
desirable. In fact it provides the cement improved resistance from sea water and
sulphate soil. There are a variety of uses in the cement industry (NTPC 2007):
1. Fly-ash can be mixed with cement clinker to improve the performance of
Ordinary Portland Cement and manufacturing Portland Pozzolana Cement.
2. Fly-ash can be used instead of cement up to 35% in concrete. However, the
replacement percentage can be as “high” as up to 60% in high-volume fly
ash concrete. The percentage is dependent on expected compressive strength,
modulus of elasticity and tensile strength.
Fly-ash was available free of cost till 2004 and only transportation was to be paid
for by the cement industry. However, later coal-fired power plants started charging
INR 500–700 per metric tonne (MT). Alongwith transportation, the cost becomes
INR 1000–1500 per MT, depending on the location of the grinding unit. Yet, all flyash cannot be re-used as it is. Coal-fired power plants usually has a variety of ash
(NTPC 2007): (a) Fly-ash, a fine material possessing desirable pozzolanic (cement
grade) properties; and (b) Bottom ash—collected at the bottom of the furnace—is
relatively coarser and possesses little reactive ability.
To make it ‘fit for use’ in cement production, fly-ash has to be treated chemically,
thermally or mechanically to enhance its reactivity. This involves extra costs. Yet,
even thousands of tonnes of fly-ash remain unused in the country (Table 13.3). Even
this non-use has social costs, in terms of augmenting PM, and costs of storing—
as pond ash or mound ash—including but not limited to occupying space (NTPC
2019).
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Table 13.3 Fly-ash availability in India
Region
Delhi and NCR
Other
Total in India
Stock of bottom ash (metric tonne)
–
9,38,328
9,38,328
Fly-ash available (metric tonne)
18,500
42,014
60,514
Source: Created by authors using Data from NTPC (2019)
It appears that cost of pre-processing and transportation is perceived to be high by
the cement industry—notwithstanding the technical feasibility—and is considered
to be economically unviable. In short, this is a classic case of market failure.
Ordinarily, the market should have discovered a price where fly-ash could be sold.
Next, we will explore the nature of State intervention to ‘correct’ this failure. To
answer this question, the opportunity cost of business as usual (unutilised fly-ash)
has been listed below:
1. Fly-ash ponds/mounds occupy large agricultural land. In the Badarpur power
plant, it is about 2200 acres, which is more than 70% of the total power plant area
(Verma 2018). Opportunity cost in terms of agriculture use has been estimated
to be an income of INR 10,000 to 40,000 per acre of land (per cropping cycle),
depending on the type of cultivation, soil and other such factors. Back-of-theenvelope estimate reports an income of INR 20–60 crore per year in total. In
fact, this is an underestimation because the Haryana government has set a target
of income at INR 1 lakh per acre of land, which is more than twice of this estimate
(Jayan 2018).
2. Coal fly-ash is a known source of anthropogenic PM globally. It has been
established that sustained exposure to ambient PM is a cause of mortality. A
study by IIT Kanpur has revealed that fly-ash is one of the major contributors
to PM pollution in Delhi: it contributes to almost 40% of PM2.5 and more than
25% of PM10. This has also been reiterated by others (Singh 2011; Sharma and
Dikshit 2016). The health cost of this PM is high (particularly PM2.5). It has been
estimated that residents of Delhi lose 10 years of their lives due to air pollution
(Greenstone and Fan 2018; Ghazali and Kaushal 2015). The economic cost of
air pollution—and not PM per se—in Delhi has been assessed at about 3% of its
GDP (about INR 2 lakh crore) in 2018 by World Bank.
3. More than 80% of the raw materials in cement comprises of ‘scarce’ limestone.
Though it is a ‘critical’ raw material, reserves are expected to last only 25–
30 years more. Moreover, only ‘cement grade’ limestone can be used. Even
all such available limestone cannot be used due to infrastructural barriers,
restrictions due to law, and higher costs (Bapat 2018). Clearly, use of fly-ash
can help conserving this resource. In fact, this can reduce pollution as well: life
cycle analysis of limestone shows that 1 tonne of crushed limestone results in
emission of 3.13 kg of CO2 per tonne. Limestone quarrying has been identified
as “contributors to climate change” (Kittipongvises 2017).
13 Application of Industrial Ecology Principles In and Around Cement. . .
275
4. The Badarpur power plant was shut down in 2018 because it contributed to 11%
of Delhi’s PM2.5. Re-use of fly-ash in cement production and consequently,
the landscaping of 2000 acres of fly-ash pond may enable this plant to function
(Verma 2018)—this shows the importance of ‘circular economy’.
Clearly, there are many market failures, warranting intervene by the State, say,
by providing subsidy towards purchase of fly-ash. Alternatively, if cement plants
find it economically viable to use fly-ash, then State may ensure ‘matchmaking’,
facilitating the ‘waste exchange’, even by providing a nominal discount to some
taxes.
13.4.3 Using Briquettes Made by Crop Residue as Fuel for
the Burner (Scenario 3)
Emissions from crop residue burning in the states of Punjab, Haryana and western
Uttar Pradesh contribute to regional pollution. This even affects parts of Bihar and
West Bengal depending on wind patterns (Sharma 2018). An annual economic loss
of USD 30 billion from stubble burning caused air pollution in India was estimated
(Jitendra 2019).
Many schemes including subsidised machinery to encourage in-situ management
of crop residue have been announced by both state governments and Government of
India (Ministry of Agriculture & Farmers Welfare 2019; Mohan 2018). However, the
implementation is still a challenge, notwithstanding grounds-up interventions like
involving panchayats to encourage farmers and even announcement of ‘rewards’
(Hindustan Times 2022). Certainly, behavioural changes are rather hard to achieve,
especially those involving additional costs—either as rent or purchase price for the
machinery besides the fuel costs.
An alternative is conversion of crop residue into briquettes—known as
briquetting—which may be used in the cement industry as fuel. Briquetting can
yield a cheaper and cleaner fuel, in addition to solving the menace of residue
disposal (Quartey 2011; Bilgin et al. 2015). Crop residue briquettes have also been
called the new source of renewable energy which can displace the use of coal in the
energy mix (Gondwe et al. 2017).
There is indeed a business case for briquetting as estimates from Jain and
Yadav (2019) and Datta (2019) show. A briquetting company in Kampala, Uganda
recorded a rate of return of 7%. 100 full-time workers (70% were women) and
400 labourers produced 1680 tonnes of briquettes per year with an initial capital
investment of 698,964 USD (equivalent to about INR 4 crore). In addition to return
to the company, savings of 6.1 tonnes of CO2 per tonne of briquettes as well as
additional income to farmers of about 15 USD (INR 900) per tonne (received on
selling the crop residue) was recorded by IWMI (2012).
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Clearly, this ‘model’ requires focussing on regions with surplus crop residue.
An investment of INR 1–3 crore can yield 1000–2000 tonnes of briquettes, per
year, per plant. With two plausible revenue streams—sell of briquettes and carbon
credits (Anand 2018)—and low gestation period it can be a profitable opportunity
for private players. Hypothetical studies in India show a clear possibility, but
commercial applications are rare. In fact, societal benefits are significant, which
we list next.
1. Jayan (2019) cited a study published in the International Journal of Epidemiology that estimated costs from respiratory diseases caused due to exposure to
stubble burning as INR 2 lakh crore every year for Punjab, Delhi and Haryana.
Another study in Nature was quoted as well which argued that about 60% of
Delhi’s air pollution in winter is due to stubble burning in the neighbouring states.
This cost is saved in case crop residue burning can be controlled—briquetting
model provides an economically viable opportunity.
2. In this model, farmers receive twofold benefits—from saving the costs of
disposing residues and selling them. To be owners of briquetting plants, this is a
profitable opportunity, as the calculations show. In fact, studies have estimated
that the price of briquettes as fuel is comparable to the price of pet coke—
indicating that cement players will not be disincentivised to buy briquettes. In
case the use of pet coke is banned, like RDF, briquettes can be an option to ensure
continuous supply of fuel to the cement plant. Of course, it is also a cleaner
fuel with emissions lesser than fossil fuels. All these will lead to additional
employment opportunities.
Again, realising the potential of scenario 3 requires interventions by the State, in
the form of ‘matchmaking’.
13.5 Summary and Conclusions
The three exchanges illustrated in 13.4 have been proved to be technically feasible,
backed by research and established by example. To summarise: plastic as RDF
contributes to less than 2% of energy needs for cement plants which can be
increased; fly-ash from thermal power plants is already in use but there is potential
to aim at increasing it; briquettes from crop residue are a promising fuel source. In
each, there are significant social benefits.
The problem per se is unavailability of an ecologically benign input—preprocessed plastic for use as RDF/fly-ash in desired form/briquettes—at the required
scale. At times it could be due to price differences quoted by buyers and sellers
and at others it is simply lack of coordination. It follows that the nature and type
of intervention by the State will vary: it will be match-making between potential
participating units at times and at another it will be subsidisation or lower tax rates.
State intervention towards application of IE principles is not a new concept
(Costa et al. 2010). It is expected to address technical, behavioural, economic
13 Application of Industrial Ecology Principles In and Around Cement. . .
277
and even informational barriers that thwart implementation of these principles. In
fact, these roles of the State have been recognised in the evolution of industrial
ecology (Zheng et al. 2013). In particular, its role towards intra- and inter-industry
coordination has been the key. Collaborations can be encouraged either directly by
regulation (such as mandating the use of fly-ash in cement industries), or indirectly
through economic incentives (such as subsidised buying of fly-ash by cement
industries).
There are ample examples in this regard. The German government mandated
automakers to take back and recycle the automobiles they produce. Following
this, the automakers encouraged material suppliers to accept recovered metal from
dismantled cars and used those recovered materials in new car parts and ‘closed the
loop’ in the process. In another instance, a substantial carbon tax on fuel was shown
to dramatically impact the product cycle of such fuels. Regulatory frameworks
played a key role in the USA in promoting energy-efficient equipment instead of
constructing new plants to generate energy.
Even the Kalundborg Eco-Industrial Park—the most quoted example in discussions on IE—has its roots in government intervention. Symbiosis Centre in
Kalundborg (2013) in a publication marking 40th anniversary of ‘The Kalundborg
Symbiosis’ (Ditlevsen 2014) listed many roles that the State had played through its
various arms. For example, municipality of Kalundborg helped participating units to
engage in dialogues, acted as a matchmaker forming collaborations and facilitating
trust building between (private) participating units, securing knowledge sharing by
adding credibility besides extending loans to build infrastructure such as pipelines
for exchange of by-products.
All these points to roles that high or low transaction costs can play in markets to
achieve socially efficient outcomes, as pointed out by Ronald Coase. Interventions
by the State are necessary to minimise them.
.
∼∼∼
This chapter focussed on the cement industries, and included only three possibilities. Clearly, more such technically viable exchanges within the cement industry
can be explored, such as use of paper sludge, slag, scrap tires, biomass as fuel and
even animal and bone waste products. Scope can be further increased to include
other industries such as oil refineries.
Being in this anthropocentric era, a paradigm shift is required such that the
industry and the environment can move towards a ‘balance’. This shift requires
re-thinking systems, change in values and the functioning of the economy. If
sustainable development is to be achieved, then a systems approach is necessary,
which will remain elusive unless concrete steps are taken. Some steps mentioned in
this chapter may provide grounds for implementation of IE at higher levels. These
steps, once implemented, will gradually evolve IE toward solutions to industryenvironment ‘frictions’. In fact, IE principles can be useful towards construction
of the frameworks where industry can serve as a catalyst towards achieving ecolog-
278
A. Malhotra and N. Nawn
ically sustainable, socially just and economically viable development processes and
outcomes.
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Chapter 14
Challenges and Recommendations
for a Green Circular Economy
Lledó Castellet-Viciano, Águeda Bellver-Domingo, Vicent Hernández-Chover,
and Francesc Hernández-Sancho
Abstract The economic model that governs our society is linear and unidirectional,
in which natural resources are extracted from the environment, to later be used as
raw material for various products that will be consumed and finally discarded. The
premise of this model based on “extract-produce-use-dispose” was that resources
are abundant, easily accessible, and their management as waste is very economical.
However, it has been observed that the dynamics of this system is unsustainable or
unfeasible in the distant term both due to the limited lifetime of the goods, and due
to the great demand for resources that in many cases are scarce and the pollution
generated by the immense amount of waste generated. However, the shift from the
conventional model to a new circular economy model requires to overcome different
obstacles at social, political, economic, and legislative levels, among others. To
this end, we need to define the main challenges that will let us to achieve a more
sustainable model.
Keywords Sustainability · Circular economy · Transformation · Strategies ·
Innovation · Digitalisation
14.1 Introduction
14.1.1 The Current Situation of Natural Resources
and the Environment
The current world is managed by a linear take-make-use-dispose economy model
that is collapsing the environment. The origins of this economic system date back
L. Castellet-Viciano () · Á. Bellver-Domingo · V. Hernández-Chover · F. Hernández-Sancho
Inter-University Institute for Local Development (IILD-WATER), Water Economics Group,
University of Valencia, Valencia, Spain
e-mail: lledo.castellet@uv.es; Agueda.Bellver@uv.es; Vicent.hernandez@uv.es;
Francesc.hernandez@uv.es
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023
P. Singh et al. (eds.), Green Circular Economy, Circular Economy
and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_14
283
284
L. Castellet-Viciano et al.
to the mid-eighteenth and early nineteenth centuries in Great Britain with the
industrialisation of production processes that mechanised lots of manufacturing
processes giving rise to serial and mass production of products. This phenomenon,
accompanied by the Industrial Revolution and capitalism, gives as a result an
economic model based on industrial activity and the current consumer society.
The development of this economic model, which brought considerable welfare to
our society, has paradoxically, caused an irreversible environmental impact. The
industrialisation not only accelerated the production of products but also eased the
access to natural resources, which linked to the population growth, and led to an
exploitation rate of natural resources that exceeds their replenishment or recovery
capacity.
Currently, the production and consumption model is linear and unidirectional.
This model puts the emphasis on the provision of the society commodities without
paying attention to the quantity of hazardous materials generated throughout the
life cycle of the goods and services (manufacture, use and disposal). Moreover,
this linear model has a direct impact on the long-term availability of resources,
the efficiency of production systems and economic growth. Recently, it has been
observed how resource scarcity affects economic and social development. Many
companies have now begun to notice that this linear economic system jeopardises
the supply of raw materials and increases resource prices. With the expected
population growth and the current pattern of production and consumption, it is likely
that prices and volatility will remain high, that resource extraction will move to
places more difficult to access, and that the environmental damages caused by the
exhaustion of natural assets will increase. Considering both the situation of natural
resources and the expiry of the linear production model, Circular Economy becomes
a novel and optimal alternative for the development of the new production model.
14.1.2 The Concept of the Circular Economy
Circular Economy (CE) has gained momentum in the last years in view of the high
demand for natural resources in the current linear economic model. Although the
popularity of the concept, there is no accepted uniform description for it (Kirchherr
et al. 2017a).
The origin of this concept is rooted in the movement that emerged in the 1960s on
the biophysical limits of the economic system that was threatening the environment
as a consequence of the indiscriminate use of raw materials by the industrial sector.
Boulding (1966) suggested that the only way to ensure that natural resources were
not exhausted was by creating a closed economic cycle in which the waste generated
was recycled and reintroduced back into the system, thus maintaining the stock of
limited resources. However, the first time the term circular economy was formally
used was in 1990 by the economist Pearce and Turner (1990), who introduced a
new economic model based on the principle of “everything is an input to everything
else”.
14 Challenges and Recommendations for a Green Circular Economy
285
In parallel, as it gradually became clear that industries were having a negative
impact in terms of both the excessive use of natural resources and the use and
generation of toxic substances, the new concept of “sustainable development”
emerged. The first time this concept appeared was in the Bruntland Report in 1987,
which aims to “meet the needs of the present generation without compromising the
chances of future generations to meet their own needs”. Similar to the concept of
Circular Economy, neither is there a concrete definition of sustainable development.
It is a concept that has often been considered ambiguous and too unspecific
to be implemented. For this reason, the definition has evolved over time (Fig.
14.1). The definition of sustainability and specifically Sustainable Development
refers to economic, social and environmental sustainability, and the relationship
between the three spheres. How the relationship between the three basic pillars of
Sustainable Development is understood is what has evolved over time. Initially,
it was understood that the three spheres were interconnected in some way and
each of them was dependent on the other. Later, Mebratu (1998) showed that
this relationship follows an order, so that economic sustainability depends on
social sustainability, and social sustainability in turn depends on environmental
sustainability, connecting the three spheres again. But more recently, the relationship
Fig. 14.1 Evolution of the concepts “Sustainable Development” and “Circular Economy”.
(Source: adapted from Prieto-Sandoval et al. 2017)
286
L. Castellet-Viciano et al.
Mining/materials manufacturing
Farming/collection1
Biological nutrients
Biochemical
feedstock
Restoration Biosphere
Product manufacturer
Service provider
Biogas
Cascades
Anaerobic
digestion/
composting
Extraction of
biochemical
feedstock2
Technical nutrients
Parts manufactor
Recycle
Refurbish/
remanufactor
Reuse/redistribute
Maintenance
Collection
Collection
Energy recovery
Leakage tobe minimised
Landfill
Fig. 14.2 Restoration of biological and technological nutrients (circular economy model).
(Source: Ellen McArthru Foundation 2013)
between economy, society and environment has been joined by a third variable, time,
as actions taken to achieve a balance between economic, social and environmental
development can have an impact in the short, medium or long term (Prieto-Sandoval
et al. 2017; Lozano 2008).
Both the circular economy and sustainable development have gained prominence
up to the present day. And given the principles and purpose of both concepts they
are often presented together. In fact, some authors understand the circular economy
as the practical guide to achieve the principles of Sustainable Development (Murray
et al. 2017; Ghisellini et al. 2016). Among all the definitions that have been assigned
to the term Circular Economy, perhaps the most commonly used is the one drawn
up by the Ellen Mac Arthur Foundation Circular Economy Team (Kirchherr et al.
2017b), in which the circular economy is presented in a butterfly diagram reflecting
the production and consumption system in which different materials and biological
and technological products are recirculated in the economic system in order to
extend the useful life of products, reduce the amount of resources extracted from
the environment and minimise the generation of waste throughout all production
processes (Fig. 14.2).
In the 1970s the main strategies associated with the circular economy were based
on “Reduce, Reuse and Recycling” and became known as the 3R’s, a concept that
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Table 14.1 Circular economy strategies
Strategy
More efficient use and
production of goods and
services
R0 refuse
R1 rethink
R2 reduce
Prolonging the service life of the
products and their components
R3 re-use
R4 repair
R5 refurbish
R6
remanufacture
R7 repurpose
Effective use of materials
R8 recycle
R9 recover
Description
Rendering the product unnecessary,
either because it is no longer useful or by
replacing it with a different product that
does the same function.
Intensify the use of products by
cross-sharing actions or using
cross-purpose products.
More efficient fabrication and use of
products and services using fewer natural
resources and materials.
Reuse of a rejected product that can still
be used by a different user.
Restoring a product (by maintaining or
repairing) to return its functionality.
Upgrading an old product.
Build a new product, using parts of a
discarded product. The resulting product
has the same function than the one
discarded.
Build a new product, using parts of a
discarded product. The resulting product
has a different function than the one
discarded.
Processing of materials to be used again.
Energy production through incineration
of materials.
Source: Potting et al. (2017)
gained increasing importance alongside environmental movements in Europe and
the USA. In recent years, the principles and strategies being developed to implement
a circular economy have broadened to cover a wide range of possible strategies.
Firstly, as a result of the publication of the Waste EU Directive 2008/98/EC, on
waste and repealing certain Directives, the 3R’s were enlarged to 4R’s with the
introduction of the concept “Reduction”, that refers to the need of reducing the
generation of waste. Subsequently, the number of strategies was expanded to six,
giving rise to the 6R – Reuse, Recycle, Redesign, Remanufacture, Reduce and
Recover (Sihvonen and Ritola 2015). One of the most recent updates on the number
of strategies encompassed by the circular economy is the 9Rs (Potting et al. 2017;
Kirchherr et al. 2017b) (Table 14.1).
From a purely economic point of view, circular economy can be considered as
a business model which companies can use and take advantage of its opportunities.
In this context, the circular economy business model can be approached from five
different perspectives, which have their own distinct characteristics and can be used
individually or combined (Lacy et al. 2014):
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1. Circular Supplies: This approach is premised on the provision of 100% renewable, recyclable or biodegradable materials. This model replaces the linear
production model, reducing or eliminating the consumption of raw materials
that are often scarce and unlimited, minimising waste production and improving
process efficiency.
2. Resource recovery: waste recovery and processing by using up-to-date recycling
solutions to be used as raw materials in other processes promotes return chains
and recover the implicit value of the final product lifetime.
3. Product life extension: through this business model, which includes actions such
as repair, upgrade and resale of products, the service life of products can be
extended, while reducing the quantity of residues produced and the usage of
resources. By repairing or upgrading the product, the company can generate
additional revenue by incorporating new qualities to the product that can offer
new services. It can also extend the useful life of the products economically since
it delays the replacement or substitution of the product with a new one.
4. Sharing platforms: this particular approach encourages a collaborative environment between people using the product, whether they are individuals or
organisations enabling and facilitating the access to recovered products in order
to increase the utilisation rate. Besides, the maximisation of the utilisation of
products and subproducts this model increases the productivity and creates user
value.
5. Product as a service: in this business formula another option to the conventional
market structure of “buy and own” is offered. With this purpose the products are
shared by different products via a rental or pay-for-use agreement. This approach
encourages both long-lasting performance and the ability to upgrade in reverse,
moving from mass production to efficiency. This business model can be very
attractive for companies whose product is expensive due to the technology used
and the costs of operation and maintenance, but if the technology is shared by
different users, the maintenance costs can be shared and reduced, while at the
same time generating revenue from the leasing of the use of the technology.
Therefore, circular economy can be understood as an economic and industrial
system that implies a circular flow of materials and waste, seeking the reuse of
different waste streams generated throughout the entire production system. In this
circular model waste streams are used to create value ensuring the access to raw
materials while restoring the capacity of natural resources. Thanks to that, the
production processes and ultimately the economic growth do not rely on the stock
of natural resources and reduces the pressure on them. Moreover, the elimination of
the dependency between the availability of natural resources and the production
processes permits to reduce the risk of raw materials shortages, ensuring the
economic development. Nevertheless, to achieve this purpose and transform the
linear model into a circular one the best available technologies, as well as innovation
to maximise the efficiency of production processes is needed. In fact, some authors
believe that circular economy could be a solution to break the link between the
socio-economic growth and the environmental deterioration (Ghisellini et al. 2016).
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14.1.3 Guaranteeing a Sustainable Use of Resources
A more efficient and sustainable resource management requires a joint reaction from
society, from the perspective of citizens, the different economic and political sectors,
with measures at all levels: local, regional, national and even global.
In order to promote a more efficient and sustainable management of resources, it
is necessary to change the current pattern of production and consumption. Thus, a
more efficient production process implies not only reducing the volume of resources
used directly in processes, but also all raw materials involved in them. In addition to
reducing the consumption of inputs, it is necessary to minimise the waste generated
throughout the production system and to use renewable energy sources, which will
allow us to move towards a much more efficient and sustainable production system.
As far as the consumption system is concerned, it must be responsible, prioritising
those products that have a smaller water and energy footprint. However, in order to
guarantee the efficiency and sustainability of any resource, we must bear in mind
how necessary it is to preserve and conserve natural capital, which is why the
restoration of all those ecosystems and ecosystem services that have deteriorated
becomes a priority, as well as halting the loss of habitats that are in danger.
Changes in the system of production and consumption and favouring the
protection and conservation of ecosystems must be supported by a series of financial
mechanisms that include the valuation of natural resources, integrating them into
decision-making, as well as the internalisation of the “polluter pays” principle.
The polluter pays principle is one of the cross-cutting guiding principles of
environmental policies in the European Union, which aims to establish a framework
of environmental liability through which the agent causing environmental or social
damage is held responsible for it and bears all the costs associated with the measures
necessary to repair or prevent and control the mishap. But in addition to penalising
instruments such as the above, economic instruments should be used to support
and reward projects that guarantee the conservation and sustainable management
of resources. And finally, if we take into account the globalised world in which
we live, this improvement in the efficiency and sustainability of resources can
only be achieved by promoting an equitable distribution of resources, in which the
available resources must be shared and by making fair and joint decisions that take
into account not only economic aspects, but also ecological values, which implies
complementing GDP with other types of indicators to measure the level of wealth
of a country.
It should be highlighted the role that the European Union (EU) has played on
showing the need of guaranteeing a supply of resources and an efficient use of
them to ensure the prosperity of business and economies. In the last decade, the
European Union has been driving governments and businesses around the world
to implement strategies based on the circular economy model. As a result, the
European Commission has been working for several years on the development of
plans, packages and proposals aimed at transforming the current linear economic
model into a circular one. The first step of the transition towards a circular economy
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model by the European Union began in 2014 with the communication ‘Towards a
circular economy: a zero waste program for Europe’ in order to reduce the waste
generated. This publication was followed by ‘Action Plan for a circular economy
in Europe’ published in 2015 in which the European Commission proposes a
series of measures that go beyond the reduction of waste and affect all stages of
the products lifecycle. In 2018, the ‘Circular Economy Legislative Package’ was
presented, highlighting the ‘European Strategy for Plastic in a Circular Economy’
and the ‘Sustainability Strategy for Chemical Substances’. In order to generalise
the implementation of the circular economy, recently, in 2020, the ‘New Circular
Economy Action Plan for a cleaner and more competitive Europe’ was published,
which is a key element in the European Green Deal (European Green Deal),
Europe’s new program for sustainable growth.
Only in this way, we could ensure the integrity of ecosystems, the conservation
of biodiversity and guarantee food, water and energy security.
14.2 Obstacle and Enablers of Circular Economy
Currently, there is sufficient information about the condition of resources and how
they will be affected if we do not act, and there is also enough information about
what we need to do to change the situation. However, there are several barriers that
are holding back the progress towards a circular economy model that guarantees the
sustainability of the system. Some studies differentiate between barriers to circular
economy and drivers of circular economy. Nevertheless, the authors of this chapter
will introduce them together since the limitations to circular economy become the
areas with a greater potential of improvement. There is a wide range of research
that focus on the analysis of this topic and mention a wide range of barriers/drivers
to achieve a circular economy model, but ultimately, they can be grouped into the
following four areas: (i) Social/cultural; (ii) Technological; (iii) Financial, and (iv)
Political. De Jesus and Mendonça (2018), through a literature review of numerous
articles, not only analyse and define the main factors that affect the circular economy
but also rank them according to their relevance for achieving the circular economy.
For this purpose, they use a hard-soft dichotomy system. Below we present a
schematic approach of the influence of these factors and their relevance to the
circular economy (Fig. 14.3).
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Fig. 14.3 Impact of the most relevant factors to enhance circular economy. (Source: adapted from
de Jesus and Mendonça 2018)
14.2.1 Description of the Main Factors to Enhance a Circular
Economy Model
14.2.1.1
Technological
In order to make the transition to a circular economy, a number of technological
developments are required to enable the circularity of products and materials. Some
authors qualify technological development as a basic requirement for implementing
the circular economy (Shahbazi et al. 2016). Kirchherr et al. (2018) found design as
a major impediment to the circular economy transition.
In order to extend the useful life of products, it is necessary to know their
limitations and those of the materials that constitute them in order to improve their
quality and durability, whether from a design or process point of view. Furthermore,
the recovery, recycling and valorisation of materials require techniques that facilitate
and speed up the process. Today, waste separation efforts are constrained, resulting
in difficulties in ensuring high-quality of recycled products, which leads to another
problem, the unreliability of supply of recycled goods, in quantity and quality,
which causes many producers to prefer virgin material. Currently, when products
or materials are recycled, they are often of lower quality, and if they are of adequate
quality, there is a lack of information to prove it, which generates mistrust on the part
of consumers, who are not willing to buy what is recycled (Grafström and Aasma
2021).
It is necessary to have techniques capable of effectively separating the materials
and products to be recovered in order to maximise material recovery. Once materials
have been recovered, they must be reintroduced into the cycle through reuse or
recycling, which also depends on technical aspects. It is necessary to know where
or in which sectors the materials can be reused and the required quality criteria. In
this respect, information and communication technologies play a key role.
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Economic and Financial
To enhance the circular economy, it is essential to create or modify the functioning
of the current market in order to finance circular economy business models and
to amortise the high initial investment costs of the actions (Grafström and Aasma
2021).
It is necessary to create a market for reused, recycled or recovered products,
which have little or no economic value, and this is something that needs to be
changed. However, for this market to be successful and to boost the demand for
these products, the creation of the market should be accompanied by a system that
certifies the quality of the products, giving customers more confidence and security
(Mhatre et al. 2021; Ghisellini et al. 2016).
Another aspect that also needs to be addressed is the supply of products in
quantity. Currently, the quantity of a product recovered for reuse may not meet
consumer demand, and in turn, this is also a problem for companies trying to recover
a subproduct in their processes, since the implementation of a recovery process may
entail a high cost in relation to the amount of by-product obtained.
In addition to this, raw materials often have a very low price compared to reused
materials or products, which does not allow these products to be competitive (Kirchherr et al. 2018). Currently, low raw material prices are acting as a disincentive for
the consumption of recycled or reused products and impede the move towards a
circular economy model.
According to Masi et al. (2018), one of the main problems hindering the move
towards the circular economy is the lack of investment to implement the necessary
technologies to maximise material recovery and management. There is currently
a lot of uncertainty about the demand and value of recycled products, so the
willingness to invest in markets for recycled materials is very low.
It should be kept in mind that any change involving technological development
requires heavy investment that needs to be addressed together with other economic
instruments to amortise these costs (Grafström and Aasma 2021). For instance, the
incorporation of environmental externalities into products that use raw materials
from limited natural resources can increase the price of raw materials and the
products that use them. In this way, recycled or reused products could be more
competitive in the market. At the same time, the current market is marked by
relationships and contracts that are deeply rooted in the linear production system, so
it is necessary to be open to new relationships and contracts.
14.2.1.3
Regulation and Policies
The integration of world economies (globalisation) has had a major impact on
policies, instruments and investment decisions in cities, reducing the number of
actors involved in resource management, and making them increasingly dependent
on private operators. This situation sometimes limits or hinders the implementation
or market entry of new products, generally non-conventional resources such as
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reclaimed water or energy from alternative sources to traditional ones. In order to
implement more sustainable strategies such as those promoted in circular economy
models, an economic, political and technological restructuring is necessary. But this
change cannot be supported by current policy, which is highly influenced by the
market and governed by short-term profits.
It should be taken into account that policy and regulation can influence both producer and consumer behaviour by creating instruments that promote and incentivise
the repair and reuse or recycling of products or the promotion of a collaborative
economy. At the production level, certain political actions such as economic
incentives can promote the development of innovative alternatives to improve the
efficiency of processes (Ilić and Nikolić 2016), or on the contrary, inefficient
production processes can be economically penalised through charges (Zhu et al.
2015), both situations would promote efficient and clean production.
At the European Union level, work is being carried out on the development
of regulations with the aim of carrying out integrated and joint management of
resources. However, for the established guidelines to take effect, they must be
adapted to the national legislation of the different countries, which in turn must
be transferred to regional and/or local regulations, taking into account the different
administrations. In such a way that a regulation that claims to be integrative
at all levels becomes a cross-sectoral regulation that does not allow for crosssectoral management of resources. However, the integration of some regulations
is not always easy due to the fact that the management of the different resources
is usually very fragmented and divided between different administrations with
different competences over the same resource, making its management and the
implementation of reuse, recycling and waste recovery actions extremely difficult.
14.2.1.4
Social/Cultural
A large proportion of the existing research about circular economy is related to the
production chain, the sustainability of the production system, resource efficiency,
and strategies to achieve the circular economy pointing out the main barriers and
drivers of change towards a circular economy model... but there are very few studies
that focus on the impact that circular economy will have on consumers, and how they
will have to adapt to this change (Camacho-Otero et al. 2018). There are certain
cultural values, norms, and social practices deeply rooted in people’s lifestyles that
are difficult to replace or change. The throwaway culture that promotes high demand
for of resources and the accumulation of hazardous substances is widespread today.
In fact, lots of studies (Williams 2019; Kirchherr et al. 2017b) agree with social
barriers being a significant obstacle to keep the products in the economic system for
longer and closing the cycle of products and materials. To overcome this situation, it
is crucial to appeal to consumers responsibility to promote the commercialisation of
sustainable products. With this aim, more supportive measures are needed (Tan et al.
2022). For instance, the use of a labelling system that provides specific information
about the sustainability of the products could help governments to gain society
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commitment and confidence (Mhatre et al. 2021; Ghisellini et al. 2016). According
to Hobson and Lynch (2016), one of the main changes that today’s society needs
to make is to abandon the belief that the ownership and newness of products is of
greater value, and instead give priority to actions based on repair and the use of
second-hand products.
Generally, urban infrastructures and their layout are very inflexible, making
it difficult to implement urban structures that allow for the circular management
of resources. However, this inflexibility is mitigated when, unfortunately, the
environment in which cities are located presents a certain level of degradation or
environmental problems, such as poor air quality as a result of emissions, scarcity
of water resources, soil pollution... In this situation, there is a greater predisposition
of the society to implement or accept measures based on the circular economy that
guarantee the sustainability of resources.
One reason behind this social resistance to change is the little awareness of the
circular economy, its benefits, the processes involved, etc. Information is the motor
for change, so it is necessary to provide citizens with all the knowledge on the
current conditions of resources and the need for change in order to raise awareness
about a more conscious use of products and natural resources. Moreover, as a
consequence of globalisation, citizens are not aware of the great negative impact that
this consumption model generates, as these are generally produced in geographical
locations other than the place where the product is consumed.
14.2.2 Synergies Among Factors to Scale Up Circular
Economies
Unlike de Jesus and Mendoça (2018), when it comes to measuring the impact that
some factors have on circular economy, Kirchherr et al. (2017b) go a step further and
define the pressure of some initiatives within four main groups of circular economy
factors. This is because the impact of the initiatives that belong to the same group of
factors could be different. It should be noticed that Kirchherr et al. (2017b) address
the limitations of the circular model development, but this could be applied for both
barriers and drivers (Fig. 14.4).
This is a very interesting approach to initiate actions towards a circular economy
model. In order to move quickly and efficiently towards a circular economic model,
it is necessary to understand the relevance and scope of each of the proposed actions
and to act in parallel at different levels (de Jesus et al. 2018; Kirchherr et al. 2017b;
Ghisellini et al. 2016):
(i) Micro level, the implementation of the circular economy focuses on individual
actors, or companies, where the development or improvement of a product,
production process or business model is aimed at, as well as organisational
changes within the company itself in order to enhance the reuse and recycling
of waste, and the improvement of the efficiency of the process.
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Fig. 14.4 Pressure of the main barriers. (Source: Kirchherr et al. 2017b)
(ii) Meso level, the development of the circular economy takes place through
the interaction of different actors, a network of companies or industries, and
regional policies. In order to move towards a circular economy model, it is
necessary to establish new relationships that enable collaboration between
different companies and facilitate the exchange and sharing of products or
infrastructures to ease the closing of the products cycle.
(iii) Macro level, the implementation of the circular economy is carried out on a
larger scale such as national, European or global and it usually involves aspects
related to legislation.
The effect of actions implemented at the company level has a limited effect if
relationships and collaborations between different companies and sectors are not
fostered. Furthermore, all such actions need to be supported by institutions and
policymakers. For example, in order to facilitate collaborative relationships between
different companies and sectors and the flow of recovered or reused materials and
products, legislation needs to be changed, which in many cases is very rigid in this
respect and acts as a barrier to the implementation of the circular economy.
Moreover, the factors are not isolated one from the other, i.e., there are synergies,
so that a specific initiative, such as the implementation of digital technologies
to facilitate the separation and recycling of materials within the framework of
technological development, can be advantageous from a social point of view to
spread a message to society about the amount of a certain material generated, its
possibilities of use in another product and the environmental benefit it generates.
In this way, a technological implementation can be a key to the process of material
recovery and reuse and also to overcome some social obstacles. At the same time,
a change in the market, in which the price of raw materials and reused products
increases, can favour the consumption of the latter, favouring the acceptance of
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this type of products by society. Therefore, in order to make the transition to the
circular economy effective, initiatives that have a positive effect on others should
be prioritised to achieve a greater impact. Moreover, it should be taken into account
that to implement a circular model, it is not enough to take action on only one factor,
but it is necessary to work simultaneously on all of them so that the efforts have a
greater and accumulative impact.
14.3 Cutting-Edge Practices to Enhance Circular Economy
14.3.1 Innovation
Innovation is a key factor behind the emergence of novel circular businesses and
constitutes one of the basic elements to close the life cycle of materials and products,
increasing their useful life and reintroducing them into the economic system.
According to de Jesus et al. (2018) innovation is not only linked to the technical
sophistication of products or materials, but also has to do with adaptation to the
context of their use, including economic, social and/or environmental aspects. Some
authors when talking about innovation in the framework of the circular economy
refer to it as eco-innovation (Prieto-Sandoval et al. 2018; de Jesus et al. 2018).
The term eco-innovation refers to any novelty or advance in terms of production,
application or commercialisation of a commodity from which a company or user
benefits, the purpose of which is to reduce the environmental impact generated by
other alternatives, so that social and/or environmental needs become the driving
force behind such innovation (Prieto-Sandoval et al. 2018; Cohen and Muñoz 2016;
Hofstra and Huisingh 2014). Furthermore, according to the OECD, eco-innovation
is a tool that can make a product or service more competitive by reducing negative
effects on the environment or society, thus it is also an enabler of sustainable
development.
Innovation can take place at any stage of the production and consumption
system. The publications reviewed by Prieto-Sandoval et al. (2018) identify several
innovative ways to implement the circular principles:
• Business model innovations, concerning on how organisations or enterprises
build and extract added value.
• Network innovations, resulting from symbiotic collaboration among several
enterprises.
• Novelties in terms of organisational structure in which innovative organisational
and management practices are developed to back up green policies.
• Process innovations, relating to changes in how companies manufacture their
goods or offer services.
• Product innovations, that is connected to the quality and functionality of
products.
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• Service innovations that are introduced in the context of circular economy aim
to expand the lifetime of products through a decrease in their ownership; in
other words, the same product can be used by different users many times,
through renting or sharing actions. Consequently, it has an impact on the service
infrastructure.
• Market innovations, generated through the experiences shared by clients, the
values of the brand and their product positioning.
• Customer engagement innovations, focussed on addressing the satisfactionof the
clients.
One of the ways to analyse the relationship and opportunities of innovation
and the circular economy is by disaggregating the circular economy by levels.
When we talk about innovation at the micro level, it is usually linked to the
product, the process or a new business model. At the product or service level,
an improvement in design, quality and durability results in a more sustainable
product. When innovation is applied to the process, it is generally to increase the
efficiency of the process in terms of resources used and waste generated, resulting
in cleaner production. When innovation is carried out through a business model, the
aim is to improve the competitiveness of a more sustainable product or service,
which is accepted and valued by users. At the meso level, what is sought is
collective innovation, whether it is technological or not, its purpose is to promote
cooperation between multiple actors. The aim of this new form of collaboration
is for the different actors or companies to share processes, materials, products,
infrastructures or services, optimising the use of resources. Finally, innovation at the
macro level comes from the hand of national or more global entities or institutions
with the necessary mechanisms to generate a context in which to promote actions or
policies specific to the circular economy, such as waste management, scientific and
technological improvement, or public awareness, for example.
An important domain of the circular economy in which innovation plays a
relevant role is in achieving greater efficiency in the reuse and recycling of products
and materials, as the level of global consumption has increased and will continue
to do so in the coming years, both in developed and underdeveloped countries.
Therefore, in order to promote reuse and recycling, it is necessary to design an
innovative waste management system, with technologies that improve and speed up
the separation and classification of materials and products in order to recover as
much as possible. It should be borne in mind that technological innovation alone
cannot achieve this objective and requires new organisational forms that allow
for adequate waste management. Therefore, a new reorganisation of the resource
management system is needed, allowing the flow of information between producers
and consumers in order to create a market of realistic opportunities (de Jesus and
Mendonça 2018).
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14.3.2 Digitalisation
A major ally of the Circular Economy is innovation, and this has a lot to do with the
implementation of digital technology in different fields and for different purposes. In
the industrial sector, digitalisation has become the driving force behind sustainable
production, intervening in all phases of the process, from the eco-design of materials
and products, the increase in the efficiency of resource use, the implementation and
operation of the production process itself that is more respectful of the environment,
to sustainable waste management that facilitates the reuse and recycling of products
(Geissdoerfer et al. 2017). Such is the importance of digitalisation in production
processes that all companies that do not make progress in its implementation put
their competitiveness and survival in the market at risk (Bag et al. 2021).
Both the circular economy and digitalisation are in an emerging state and
there are very few references on how to make the most of digital technologies to
effectively implement a circular economic model that guarantees the sustainability
of the production and consumption system (Kristoffersen et al. 2020). Despite this,
many authors find a positive link between the circular economy and digitalisation
(Barteková and Börkey 2022; Bag et al. 2021; Sarc et al. 2019).
Among the main advantages offered by 4.0 technologies is their capacity for
process monitoring, data collection, data mining, data treatment and data processing,
which generates information that can be easily shared between different sectors,
companies or individuals. In this way, digitalisation can address one of the main
barriers that hinder the operability of circular economy models, such as providing
access and facilitating the exchange of data, information and knowledge across
different actors involved.
The circular economy is presented as a closed cycle, in which the circularity of
the flow of materials and products depends on the interaction of different productive
sectors (industries, services, waste managers, etc.) and consumers themselves.
To guarantee this circular flow, it is essential that in parallel there is a flow of
information and knowledge that allows information on the materials that comprise
the products, their processing and manufacture, as well as information on repair and
recycling that maximises the recovery of all the materials that constitute the product.
When it comes to the reuse of equipment or any of its components, information on
its condition and origin is extremely important for scheduling or carrying out the
relevant maintenance tasks or possible repairs. The absence of this information leads
to inefficiencies in the production processes in which this equipment is involved,
which would result in a higher consumption of material and economic resources.
Currently, the lack of information on the origin, conditions and quality of products
and recycled or reused materials generates mistrust among consumers, preventing
the adoption of a circular economy model. The implementation of different digital
technologies would facilitate the availability of this information, contributing to
increase the added value of products and materials by reintroducing them into
the market and ensuring the closure of the product and material cycle. There are
numerous types of digital technologies, which by their characteristics and purposes
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can be more easily adapted to some contexts than others. Since there is no room for
mentioning all existing types of digital technologies, the most relevant and versatile
ones for different processes and fields are mentioned below:
• Internet of Things: It is conceived as a dynamic information management
that exchanges and collects data from different electronic systems that transfer
products, service, process, activity, or task data in real time (Tavera Romero et
al. 2021). This digital tool allows the generation, collection and the analysis of the
information required to achieve the principles of circular supply chains, such as
waste and resource traceability, reverse logistics, independence of limited natural
resources, remote production, remanufacturing and reuse.
• Big Data: The main role of Big Data is to gather data and information from different platforms and users to achieve an effective decision-making (Kazancoglu
et al. 2021). The importance of data lies in the possibility of using it to improve
both services and products adjusting their quality or characteristics to the user
demand, reducing rework and promoting circular economy actions such as reuse
and recycling and extending the useful life of products (Chauhan et al. 2022).
• Artificial Intelligence: According to Agrawal et al. (2021), within the CE
framework artificial intelligence enables to improve the efficiency of production
processes and product lifespan through the analysis of the large amount of data
generated in the process. Therefore, this tool becomes very useful to make
decisions that support the principles of circular economy.
• Blockchain: it can be defined as a secure digital database (thanks to cryptography) that facilitates all kinds of transactions (not only economic ones) between
different actors without the need for intermediaries. Blockchain can generate
incentives to set new pricing systems and promote the exchange of resources at
lower prices, in a transparent and secure way (Treiblmaier and Beck 2019). This
new form of trade promotes waste reduction, as well as the reuse and recycling
of products and materials.
• Cloud Computing: it is a digital tool that provides access to remote computing and processing applications hosted by a company or a service supplier.
Implementing these platforms in companies allows them to operate in a more
coordinated and efficient way, integrating different departments, greatly improving the efficiency of the use of resources and reducing waste while scaling the
decision-making process.
As mentioned previously, the technologies presented above are not the only
ones in existence, nor are they the only ones with positive effects on the drive
towards a circular economy model. Moreover, different types of digitalisation can
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Fig. 14.5 Effect of combining different digital technologies on the circular economy. (Source:
Barteková and Börkey 2022)
contribute to achieving the same principle of the circular economy, as can be seen in
Fig. 14.5. However, the combination of different digital tools can magnify their
effects. The impact of digitalisation on the circular economy is enhanced when
different digital technologies are combined, allowing its scalability and extending
its effects to different levels and areas.
Digital technology can transform the way we traditionally produce and consume,
helping companies and the production sector to meet one of the main challenges: to
become sustainable producers. In this situation, the digitalisation of the production
and consumption system becomes a tool with great potential as an enabler of
sustainable production and the circular economy. The main characteristics of digital
technologies include the generation and processing of data, which in turn can
be shared in real time between different departments of the same company or
between different companies and sectors. The availability and simultaneous flow
of information allows different operators to interact, promoting a more efficient
use of resources and reducing waste. In addition, the fact that information can
be collected and shared in real time allows production or services to be adjusted
to changes in the market or demand, speeding up the decision-making process
and the capacity to act, again resulting in a more efficient use of resources and
less waste generation. Another feature of digital technology that helps to achieve
the principles of the circular economy is the decentralisation of information, raw
material sourcing and production. The reintroduction of products or materials into
the market extends the useful life of products and increases the number of sources
of supply of products or raw materials, which significantly reduces the pressure
on natural resources, as well as the production of waste that severely damages the
environment. Finally, a major advantage of digital technologies that should be taken
into account is virtualisation, which allows the recreation of a physical environment
14 Challenges and Recommendations for a Green Circular Economy
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in which simulations and scenarios can be run, thus reducing industrial waste, as
well as promoting environmental practices or increasing recycling opportunities.
Some of the main areas of the circular economy in which digitalisation is
particularly useful are the following (Chauhan et al. 2022):
• Remanufacturing: one of the main actions within the circular economy is to
promote remanufacturing. The main barriers that the productive sector encounters when carrying out remanufacturing are the high demand for material and
economic resources involved, as well as time. In this sense, digitalisation tools
could help to overcome these barriers by implementing optimisation models that
allow the selection of those parts that are potentially recoverable in terms of costs,
materials and time.
• Collaboration: thanks to the collection and flow of data between producers and
consumers, a collaborative environment that favours the reuse and recycling of
products and materials through a new business model can be generated.
• Valorisation, recycling and resource recovery: many of the features of digitalisation ultimately favour the valorisation, recycling and recovery of resources.
Information flows not only connect suppliers and consumers but can also use
digital techniques to optimise resource recovery and analyse their viability.
• Reverse logistics and closing the loop: the application of digital technologies
can be instrumental in the collection, treatment and transport of waste for
remanufacturing. At a logistical level, it would be possible to carry out an
inventory of materials to be reintroduced into the market in an efficient and
controlled way, thus closing the cycle.
• Waste segregation: In order to close the material and product cycle and to
optimally recover, reuse and recycle, it is essential to have identified, checked
and segregated materials. This is currently a time-consuming and laborious task,
but the improvement and sophistication of a material triage and sorting system
would speed up the process, enhancing the circular flow of materials.
Therefore, digitalisation can be one of the key elements in the transformation
towards a circular economic model.
14.4 Conclusions
The transition from the traditional linear economic model to a circular one aims
to put an end to the excessive consumption of natural resources and reduce the
pressure on them. This means promoting strategies based on the reduction, reuse,
recycling and recovery of products in all phases of the production, distribution
and consumption cycle, guaranteeing the social, economic and environmental wellbeing of the present and future generations. This is a complex process, due to the
large number of public and private actors, companies, technology and resources
involved. However, despite the complexity of the transition, circular economy model
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is key to protecting the environment and improving people’s quality of life in a
sustainable way.
There is a great deal of research on progress towards the circular economy both at
company level, and by industrial sectors with applications at local, regional or global
level, and especially on the barriers to implementing the circular economy. Numerous limitations have been mentioned such as costly start-up costs, challenging global
supply chains, blocking of resource-intensive facilities, shortcomings in cooperation
between firms, insufficient consumer awareness, and limited dissemination of
innovations; limited investment on technology; lack of economic incentives to
promote an efficient use of resources or avoid contamination; weak support attitudes
from consumers and industries; lack of environmental education and culture; scarce
information resources; limited political support; or no effective legislation. All
these constraints, which can be grouped into four factors: technological, financial,
political and social, are in turn drivers for change, i.e., they are potential aspects that
need to be improved in order to achieve a sustainable production system based on
the circular economy.
Digital technology and innovation are increasingly recognised as a potentially
powerful tool to drive the transformation towards a circular economic model that
generates more inclusive and sustainable economic and social growth. To ensure
the transition towards a circular economy model, the analysis of the socio-economic
and political context is essential, as it will allow the identification of the main
economic sectors, and therefore those with the greatest potential, and the political
predisposition and support to implement circular economy strategies. It should be
stressed that circular economy has a multidimensional character, requiring the joint
action and participation of all the actors involved, so that in order to abandon
the current linear economic model, a broad institutional change in markets, public
policies and social practices is required.
Both digitalisation and innovation can help to achieve a more efficient production
and consumption system. One of the main characteristics of digitalisation and
innovation is that they can be applied at micro, meso and macro levels contributing
to overcome the obstacles standing in the way of large-scale implementation of
greener business models, decoupling economic activity from natural resource use
and their environmental impacts.
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