Trade and Circular Economy Workshop - Session 1 - Shardul Agrawala
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Trade and Circular Economy Workshop - Session 1 - Shardul Agrawala
- 1. INTERNATIONAL TRADE AND THE CIRCULAR ECONOMY Shardul Agrawala Head Environment and Economy Integration (EEI) Division, Environment Directorate OECD Workshop on Trade and Circular Economy Paris, 26-27 February 2020
- 2. 1. Key questions for discussion 2. How trade matters for a Circular Economy – 3 Examples 3. Conceptualizing interlinkages between Trade and the Circular Economy 4. Impacts of a Circular Economy Transition on Trade flows 5. Specific issues for key material streams – Recycling waste and secondary materials – Reuse, remanufacturing – second-hand goods 6. Towards a mutually supportive Trade and Circular Economy Agenda 2 Outline
- 3. 1. Key questions for discussion • In what ways can the circular economy be supported by international trade? • Are domestic approaches enough to close, extend and narrow material loops? • How broad should the circular economy be and how relevant is trade? 3 3
- 4. 2. Example 1 - Decoupling material use and the role of trade Source: OECD (2019) Indicators – Gross Domestic Product, Domestic Material Consumption 4 Trade Source: OECD (2013), "Material resources", OECD Environment Statistics (database) 4
- 5. Example 2 – Trade in waste 5 Source: OECD (forthcoming), Trade and Environment Indicators 5 5
- 6. Example 2 (cont’d) –Import restrictions are re-shaping the plastic waste system 6 Source: UN COMTRADE (2019), HS3915 Monthly global exports of plastics waste by destination: 2016 to 2018 6
- 7. 7 Example 3 - Closing higher values loops across borders
- 8. 8 3. Trade and Circular Economy - broad interlinkages National boundary Repair Recycling (secondary raw materials) Eco- design policies Refurbishment and Remanufacturing Reuse (second-hand goods) Trade in second-hand goods Trade in waste for recovery Trade in goods for refurbishment and remanufacturing Trade in secondary raw materials Product-service-systems Trade flows: CE impacts on trade Policy alignment Trade in waste, secondary material, second-hand goods International co-operation Trade in services Source: Yamaguchi (2018) “International Trade and the Transition to a More Resource Efficient and Circular Economy: A Concept Paper”
- 9. 4. International trade can contribute to reduced material use 9 Effects of CE policies on global materials use by driver (percentage deviation from baseline in 2040) Source: Dellink (2020, forthcoming), The consequences of a more resource efficient and circular economy for international trade patterns - a modelling assessment -60% -50% -40% -30% -20% -10% 0% Aluminium Copper Iron and steel Other non-ferrous metals Non-metallic minerals Scale effect Efficiency effect Trade effect 9
- 10. 5. Specific issues for key material streams Recycling – waste and secondary materials • Potential opportunities – Trade can help boost global recycling rates by shipping waste to countries with comparative advantage in sorting and processing. – Trade in environmental goods and services for efficient waste management. • Potential challenges – Definition and classification of waste and secondary materials. – Regulating transboundary movement of waste (e.g. Basel Convention, proximity principle, import and export restrictions) – Waste flows to destinations with insufficient waste management capacity – Illegal waste trade / informal sector – Potential downcycling 10 10
- 11. 5. Specific issues for key material streams Reuse, remanufacturing – second hand goods • Potential opportunities – Promoting re-use of products through exports of second-hand goods (e.g. used cars, second-hand textiles). – Trade can provide opportunities for refurbishment and remanufacturing. • Potential challenges – Exports of second-hand goods could be considered as “leakage” from the official system (e.g. extended producer responsibility schemes). – Second-hand good imports may hinder the transition towards energy efficient and low carbon economies due to slower market transformation or place additional pressures on the management of end-of-life products. – Issues in recovering end-of-life products across borders for refurbishment and remanufacturing as they are often legally classified as waste. – No comprehensive data on second-hand goods and goods for refurbishment and remanufacturing. 11 11
- 12. 6. Towards a mutually supportive trade and circular economy agenda International trade flows will shift according to structural changes induced by a circular economy Trade will create opportunities for enhancing resource efficiency via comparative advantage Need to seriously consider international standards & mutual recognition - material content, recyclability Advances needed in data availability, definition and classification of waste Innovation and digitalization will provide additional opportunities 12 12
Editor's Notes
- In 2016, global trade in waste and scrap accounted for 227 M tonnes & USD 96 billion Over the period of 2003 to 2016, amount of trade increased by: 48% in weight 183% in value In 2016, metal, paper and plastic waste and scrap together accounted for: 94% in weight 97% in value
- Implication of import restrictions on waste trade – example of plastic waste above China made 3 notifications to restrict imports on waste and scrap in effect from 2018. A WTO notification was made in July 2017 and listed 24 types of waste and scrap to be prohibited for imports from 1 January 2018. An additional WTO notification was made in November 2017 to set forth a maximum level of contamination (0.5% by weight) for 11 categories of waste and scrap to come into effect from 1 March 2018. A further announcement was made in April 2018 to further add 32 categories of waste and scrap to be prohibited for imports taking effect sequentially either from 31 December 2018 or 31 December 2019 All trade restrictions applied with motivation to prevent and control environment pollution. This led to reduced imports of (plastic) waste to China and HK China (light blue, orange area) This has two main implications: Restrictions may provoke increased domestic incineration and landfilling for exporters lacking domestic capacity to process materials (at least in the short term). Restrictions can risk diverting waste and scrap exports to alternative sinks in Asia with relatively weak treatment standards (In response - Indonesia, Malaysia, Thailand, Vietnam have announced to impose similar restrictions) While there is no short term solution, this may require more managed forms of trade in waste. The Basel COP (in 29 April to 10 May 2019) had two significant outcomes in this regard: First, Parties adopted an amendment to the Basel Convention to improve controls on the transboundary movement of plastic waste. Second, Parties agreed on updated technical guidelines on environmentally sound management of e-wastes, and will work to further distinguish export of wastes for refurbishment while preventing potential loopholes for end-of-life products to be exported under the guise of “repairability.”
- There are broad interlinkages between international trade and the circular economy. Circular economy initiatives are largely facilitated through domestic policies. Policy action to close, extend and narrow material loops – such as through reuse, repair, recycling, eco-design, and product service systems (providing lighting services instead of selling light bulbs = longer lasting and sustainable products, easier to collect at end-of-life) - are commonly considered at the national level. However, circular economy transition can have several implications for trade, such as through: Trade in second-hand goods Trade in goods for refurbishment and remanufacturing Trade in waste for recovery Trade in secondary raw materials Trade in services (as the circular economy transition has high service content) Trade can provide potential opportunities for circular economy flows, and resource efficiency There are several aspect to consider to further establish our understanding on these interlinkages: The Circular Economy transition can have impacts on trade patterns Policy alignment between trade and circular economy may be necessary Need to better understand the nature of trade in waste, secondary materials, second-hand goods There may be a role for international co-operation – to facilitate these trade flows, e.g. standards for material content, to avoiding hazardous content, recyclability, repairability
- This graph shows more clearly how important trade is in reducing materials use - Global production of Aluminium products declines with 12% compared to baseline; this scales down Aluminium ores use proportionately; - Improved efficiency in production of aluminium products brings ores use down with another 10%; - The rest of the full decline is the combination of shifts in regional production and shifts in regional sourcing of aluminium ores; together these amount to 15% aluminium ores reduction. - Similar stories for the other materials. - Strongest trade effect for non-ferrous metals, almost none for iron ores.
- Potential opportunities Can help boost global recycling rates. Shipping waste to countries with comparative advantage in sorting & processing Role for trade as primary & secondary materials are geographically concentrated Trade in environmental goods and services could enable environmental sound management of waste. Potential challenges Definition and classification of waste and secondary materials. Regulating transboundary movement of waste (e.g. Basel Convention, proximity principle, import and export restrictions) Waste flows to destinations with insufficient waste management capacity. Illegal waste trade and the informal sector Potential downcycling Fragmentation of eco-design, eco-labelling and recyclability standards for material quality and phase out of hazardous content Recyclability standards may ensure the quality of secondary raw materials Eco-design and eco-labelling may also be important to ensure products that are easier to recycle and refrain from using hazardous content. Benefits should not to be at expense of environmental consequences
- Potential opportunities Promoting re-use of products through exports of second-hand goods providing economic and environmental benefits to the global economy (e.g. used cars, second-hand textiles). Trade can provide opportunities for refurbishment and remanufacturing to facilitate a circular economy transition Potential challenges Exports of second-hand goods could be considered as “leakage” from the official system such as in extended producer responsibility schemes. Second-hand good imports may hinder the transition towards energy efficient and low carbon economies due to slower market transformation or place additional pressures on the management of end-of-life products. Issues in recovering end-of-life products across borders for refurbishment and remanufacturing as they are often legally classified as waste. Currently no comprehensive data on second-hand goods and goods for refurbishment and remanufacturing.
- International trade flows may shift according to structural changes induced by a circular economy Competitive position on markets for metals and minerals will impact trade patters Trade impacts will be region-specific even with a uniform implementation of the policy package Trade can provide potential opportunities for resource efficiency via comparative advantage Trade barriers should be avoided to the extent possible - e.g. import and export restrictions But benefits should not be at the expense of environmental consequences insufficient waste management capacity, Illegal trade in waste informal sector In some cases there may be a need for more managed forms of trade Basel Convention – significant improvements very recently on plastic waste and also on e-waste Proximity principle – could be revisited Potential trade offs to be considered For example, lock-in of importing economies to inefficient secondary goods Possible need for international standards & mutual recognition – material content Avoiding hazardous content Recyclability Repairability Need to advance in data availability, definition and classification of waste Digital trade and Innovation may provide additional opportunities – such as tracking material flows, tracking material content
- Concept paper – rationale, objective and scope Rationale A towards a more resource efficient and circular economy (CE) is gaining political attention. A CE transition has broad linkages with international trade (e.g. via global value chains, trade in second-hand goods and end-of-life products). Existing research is limited. Objective To set forth potential interaction of international trade and the circular economy in order to guide further research areas to explore on this topic. Released 18 October 2018