The ‘Ready steady grow’ report, by the charity and think tank Green Alliance, has identified and addressed obstacles hindering the expansion of the circular economy.
The model suggested diverges from the prevailing ‘take, make, use, and dispose’ linear approach by prioritising the prolonged circulation of materials at their highest value.
Characteristics of circular models encompass designing for longevity, embracing reuse and sharing systems, and establishing ‘reverse supply chains’ for reprocessing, resale, or redistribution of goods. While recycling remains vital, the circular economy places greater emphasis on reusing and remanufacturing materials to uphold their value.
What are the economic advantages of adopting a circular economy?
According to WRAP estimates, transitioning to a circular economy could boost gross value added by £82 billion by 2030. Furthermore, Cambridge Econometrics suggests it might contribute to a 1% GDP increase by 2035.
Research indicates that the economic benefits of the circular economy arise from heightened consumer spending power and the creation of higher-paying jobs. For instance, for every thousand tonnes of waste, recycling generates two jobs compared to 0.1 jobs in waste treatment and disposal.
The report underscores the UK’s favourable position to benefit significantly from the circular economy due to its economic structure, which features limited extractive industries and primary manufacturing. It predicts that regions with higher unemployment rates, such as Wales and the East Midlands, could experience an upsurge in skilled circular jobs.
What impedes the progress of the circular economy?
Through an analysis of ten case studies on circular businesses, the Green Alliance report identifies prevailing business and consumer behaviours as a substantial hurdle to circular economy adoption, particularly in the realm of leasing or rental services. Consumer preferences for inexpensive, easily attainable, and lower-quality goods hinder the growth of circular businesses that offer longer-lasting products.
An imbalanced tax landscape is also highlighted as a significant barrier to circular economy development. The current taxation system disadvantages circular practices, applying uniform VAT rules to both linear and circular economies, despite the latter’s environmental benefits. This leads to multiple taxation of reused and remanufactured goods.
Furthermore, the report points out that substantial initial costs pose challenges for circular business expansion. Consumers are often hesitant to buy circular products due to added cost burdens.
How can the Treasury facilitate circular economy growth?
The report presents three recommendations for the Treasury to foster circular economy expansion.
Firstly, the Green Alliance proposes the Treasury should ‘level the playing field’ between the linear and circular economies. To encourage repair and affordability, the report suggests zero-rating VAT for high-impact waste like electronics, encompassing spare parts and labour.
Secondly, the report advocates for tax reliefs aimed at leasing businesses to rectify the uneven taxation landscape. Currently, tax relief schemes like the Seed Enterprise Investment Scheme (SEIS) can be inaccessible, rendering new businesses ineligible if their gross assets surpass £200,000.
The third recommendation is for the Treasury to provide financial support to new circular businesses. The report recommends a dedicated £800 million fund to address the imbalance in waste-related funding and stimulate the growth of new circular enterprises, thereby alleviating the burden of high upfront costs.
Lastly, the report underscores the necessity for a deeper understanding of the impacts of tax measures. It highlights the need for routine collection of evidence regarding the impact of environmentally motivated tax reliefs and whether they align with their social and economic goals.
Effecting widespread change entails a comprehensive understanding of policy impacts on behaviour. While cost is often presumed to be the primary driver of consumer activity, this simplification overlooks the intricate decisions consumers make. The Green Alliance suggests early testing of policy ideas with public and business input, considering factors such as convenience, trust, and fairness.
A link to the full report can be found here.
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