A circular economy is the growth engine that Asia needs

Global climate goals depend on it.

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Many of us are well aware that we need clean energy to keep global warming below 1.5 degrees Celsius.

Few people realize that switching to renewables will only take us about half way there. 

Fossil fuels, used to power buildings and transport, make up around about 55% of greenhouse gas emissions. The remaining 45% is directly linked to the production of materials, as well as agriculture, forestry and land use.

A circular economy can address the remaining half of GHG emissions by reshaping the current ‘take–make–waste’ system to one that acknowledges planetary boundaries. The trouble is, few people understand what a circular economy really is. 

Often, the circular economy is viewed as a waste management strategy, unrelated to the economy. That is only one part of a circular economy transition. 

It also requires reshaping supply and demand for goods and services, rethinking industrial policy, reassessing environmental risk portfolios, supporting new markets, and strengthening trade.

A circular economy, the missing part of the climate equation, decouples economic growth from an increasing trajectory of consumption and material extraction. 

Relevant Sustainable Development Goals

That’s especially relevant in developing economies – and especially in Asia.

The region is already home to the world’s two largest consumer countries, the People’s Republic of China and India, and 55% of the world’s consumer class. According to current projections, another 1 billion consumers will join them by 2030. 

A circular economy provides a viable alternative for emerging Asia, delinking negative environmental impact from human well-being and economic growth.

Far from being a threat to economic development, a circular economy could generate $4.5 trillion in additional economic output by 2030

The potential for job creation, innovation and prosperity is vast. 

Policy-makers across the region would do well to take advantage of this financial and environmental win–win solution.


The right incentives

Governments need to lead this transition, by providing the right mix of incentives to spur new business models, technology transfer and design innovation.

They also need to enforce penalties, to curb the worst practices in waste generation and environmental impact. 

The public sector alone, however, cannot transform current linear economy practices. 

Governments may take on early-stage risk and form public-private partnerships to develop circular markets, and spur further domestic and foreign investment.

The right mix of financial incentives and taxes can help level the playing field for circular businesses.

At the same time, regional knowledge and experience-sharing platforms will be crucial, particularly for low-income countries just starting their circular transitions. 

“Regional knowledge-sharing platforms will be crucial.”

Regional alliances may reinforce domestic environmental efforts to change a country’s consumption and waste trajectory. This is particularly relevant for plastic polluters.

Developed economies use about one fifth of natural resources compared with developing economies to produce the same amount of economic output

Thus, as high-income countries shift more of their production to developing economies, there will be a net loss of resource efficiency, which will require more extracted materials and energy while producing more emissions and waste. 

A rise in extracted materials is already evident from this outsourcing trend. This will worsen as production shifts from middle- to lower-income economies. 

Innovation and technology transfer, both regional and international, are therefore critical to avoid further environmental impact and emissions.


Essential building blocks

To help familiarize policy-makers with the essential building blocks of a circular economy, ADB Institute has published a new report: Prospects for Transitioning from a Linear to Circular Economy in Developing Asia

This guide highlights the relative strengths and weaknesses of circular economy approaches in emerging Asia, including regional cooperation, country road maps, regulatory and legal frameworks, private sector participation and innovation.

We need to shift from our current path of unsustainable consumption to a more restorative and regenerative economy.

The highly populated countries in developing Asia need to be major players in a concerted global effort to make that happen.

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Linda Arthur

Senior Specialist, Asian Development Bank Institute

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