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Marina Fischer-Kowalski & Dominik Wiedenhofer, An optimal policy mix for resource use. WWWforEurope Policy Brief No. 5, September 2014

Squaring the circle: Circling the economy and other strategies for a socio-ecological transition

The world is facing a new set of global challenges including climate change, energy security, food and water scarcity, international migration flows, and new technologies. There are a number of indications that the world economy approaches certain physical restraints, like the fact that the growth of agricultural yields has fallen behind population growth or the problem that ore grades of many metals are rapidly declining.

It has become common knowledge that it will not be possible for people everywhere to be able to enjoy a lifestyle that equals today’s predominant lifestyle in the industrialised countries. China and India increase their demand for resources, natural resources witness unprecedented price rises (due to the increased demand and due to mounting technical obstacles in exploitation). Up till now these developments tend to be underrated in projections and scenarios. The industrialised world has witnessed a decoupling of growth and resources since the 1970s – per capita resource use has stagnated or even declined.

The reasons for this are saturation in the construction of infrastructure to a certain amount, a trend towards saving labour and to some extent saving energy (with saving of materials a somewhat unintended by-product) and the outsourcing of resource-intensive production to emerging economies. And it has to be noted: This development of decoupling observed in the industrial world takes place on a very high level of material use, a level which cannot be emulated by the rest of the world.

To cope with these medium- and long-run perspectives in Europe, it will be necessary to re-orient lifestyles toward more sustainable paths and to kick-start a socio-ecological transition. Europe does have competitive advantages to establish a front-runner role in this process, as Marina Fischer-Kowalski and Dominik Wiedenhofer explain in their new WWWforEurope Policy Brief "An optimal policy mix for resource use".

Above all, a common and inspiring vision of systemic change is needed: Europe could take a lead in this endeavour. Even now the European public perceives the problems of climate change, resource scarcity and the decline of biodiversity as real. Some measures are already being taken but not always consistently. The energy transition is under way. Reducing the share of fossil fuels further will not only help the climate, it will also provide a substantial relief in terms of transport and, in consequence, the need for transport infrastructure investment and maintenance.

The "Circular Economy" is a new attractive vision gaining momentum, but still lacking appeal to a broader array of stakeholders. The term implies the careful use and re-use of resources. Europe exceeds the world economy in terms of "circularity" but even within the EU-27 this means that just about 38% of processed materials are biodegradable or recycled. Policy should try to convey this vision on a European level and make it appealing to business and innovators.

Europe has witnessed an increasing resource productivity of its production – the Policy Brief suggests that this should be fostered by setting clear goals. Targeting resource productivity is the most appropriate way to achieve resource savings without harming economic growth. But one has to be careful not to bring about rebound effects (which happens when higher efficiency causes additional consumption).

WWWforEurope is still in the process of modelling scenarios of a globally sustainable resource use, incorporating both direct and indirect effects – what effects does a policy have in the domestic economy and what are the consequences for other parts of the world? In a best practice model the focus of technological change is shifted from labour/capital saving to energy/resource saving.

And finally, in a radical reduction model carbon prices are increased drastically with revenues used to lower social security contributions: This would dampen GDP growth but the model converges towards full employment in the long run. These first modelling exercises suggest that there is a fair economic chance for reducing material use, stimulating innovations in design and recycling as well as developing and employing a well-educated, creative labour force.


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