Decisive but powerless: the new Circular Economy Action Plan

sybren By Sybren Bosch,
on 06 April 2020

It’s an easy thing to miss in these times, but on Wednesday 11 March, European Commissioner Timmermans launched the new Circular Economy Action Plan. As part of the Green Deal, the European Commission wants to take the next step from the previous Action Plan that was launched in 2015. “Everyone wants to hook onto the aims of the Green Deal,” said Diederik Samsom, Timmermans’ chief of staff, in an interview in de Volkskrant (in Dutch) three weeks ago. One important building block of this is the transition to a circular economy.

The new Circular Economy Plan is full of ambition, and there is a desire for decisiveness – something that is desperately needed at a time when our challenges are getting bigger. At the same time, the circular economy needs actual system change – and we feel our powerlessness to make that happen. Yet we must continue to do our best.

Focus on product groups

The approach set out in the Action Plan is based on product groups, including ICT, textiles and packaging material. A number of agreements and actions are set out for each product group, such as efforts to standardize cellphone chargers and more uniform compositions of packaging material to enable better recycling.

Don’t get me wrong, this product group approach could really make a difference. Take ICT, for example: this sector is dominated by a small number of powerful players. From the perspective of an individual client, no matter how large they are, it seems impossible to influence these producers to put a more circular product on the market. They are all-powerful, and their revenue model dominates the market. But by setting new standards across Europe, they will be forced to move along with a large proportion of their market.

New regulations

A stack of new regulations has also been announced. There will be an extension of the EcoDesign guidelines for various product groups, for example, which will include design principles and agreements on minimum product lifespans. A ‘right to repair’ has also been announced, including for ICT products. In addition, stricter regulations will be introduced on the use of toxic substances, in order to prevent reuse, and microplastics are tackled sharply to prevent future environmental impact.

These new regulations demonstrate decisiveness. The Commission wants to impose stricter requirements on our products, in order to reduce their environmental and material impacts and to offer consumers better products. With these new agreements, the European Commission will be at the wheel, driving the industry toward more sustainable and circular products.

Little connection with the economic system

The difficult thing about the strategy is that it appears to be mainly about the technical side of the circular economy; the economic side hardly gets a mention. Companies are still being stimulated to max-out their production, thereby stimulating the use of even more raw materials. They serve the interests of their shareholders, after all, who benefit from the maximum profit. Counteracting these perverse incentives requires a redesign of our economic rules.

Yet this is barely visible in the strategy. In the chapter Crosscutting actions, there is a paragraph Getting the economics right, which mainly contains voluntary initiatives. Consider, for example, a business-led initiative to develop environmental accounting principles and an encouragement of member states to apply (…) environmental taxation and VAT-rates to promote circular economy activity.

Shifting from the taxation of labor to the taxation of raw materials seems to be one of the most effective ways to contribute to a circular economy. However, this shift is barely suggested in the plan. It is also difficult: labor taxation is at Member State level, and in an internal free market, commodity taxation is only really effective at EU level. In order to be able to make this tax shift, labor tax would first have to become (partly) European – a move no Member State would agree to. This therefore requires a great deal of diplomacy and a well thought-out introduction. Yet we must make a start if we ever want this to happen; simply ignoring it highlights our powerlessness to tackle the economic system.

Seeing through our crisis

With the strong position the Green Deal has in the new European policy, sustainability appears to be high on the European agenda. At the same time, we now see – in the early weeks of the corona crisis – that when companies are really crashing, attention is quick to focus on maintaining economic activity. The extent to which the plans of the Green Deal will be implemented remains to be seen.

In the coming months, Europe will sink into a deep valley. Without knowing exactly how things will develop in this time, it is clear there will be a period of recovery. “Times of crisis bring out the best in people,” said Rutger Bregman in a column (in Dutch) for De Correspondent. I read the plan as an invitation to build our future-proof economy together after this crisis. Not only from an economic, but also from an ecological perspective.

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