Circular economy (CE) which was introduced in 1990 is a sustainable development strategy proposed to tackle urgent problems of environmental degradation and resource scarcity. The 3R principles of CE are to reduce, reuse and recycle materials. Unlike the current linear economic system these principles create the base for a circular economic system wherein all materials are recycled, all energy is derived from renewables, activities support and rebuild the eco-system and resources are used to generate value and support human health and a healthy society. Reduction refers to minimizing inputs of primary energy and raw materials which can be achieved through improvements in production efficiency. Reuse suggests using byproducts and waste from one stage of the production in another stage. This includes the use of products to their maximum use capacity.
The aim of the CE is to radically limit the extraction of raw materials and dramatically reduce the production of waste. Since its inception, the concept has been further elaborated on by various schools of thought including: Regenerative Design; Performance Economy; Cradle to Cradle; Blue Economy; Permaculture; Biomimicry; and Industrial Ecology.
Levers needed to embed circular economy thinking in production and consumption systems include: setting targets; adopting taxation, fiscal, pricing and industrial policies; and new legislation – which is a responsibility of national and regional governments through their different arms and semi-autonomous agencies. Whereas the governments have the mandate to create the policies, legal frameworks and implementation monitoring and reporting, there is need for public private partnerships to raise the resources to finance these initiatives, which can prove to be capital intensive initially. In addition, government agencies could set specific Target measures that are either for specific products or industries. Specific targets could be four measures: resource intensity (resources used per unit GDP), waste intensity (waste per unit GDP), waste recycling rate and pollutant treatment rate.
China is the only country that has attempted to apply the concept of CE as a development strategy on a large scale. Ideally, successful implementation of the CE policy must take place simultaneously at all three levels of aggregation: micro, meso and macro.
At the low level of aggregation and activity area, namely production of firms and agricultural products, producers are encouraged and required to adapt cleaner production methods and eco-designs. China’s Cleaner Production Promotion Law was enacted in 2003 (Geng et al., 2010b; Negny et al., 2012; Peng et al., 2005). The law addresses key issues related to generating pollution and the efficient use of resources at all stages of the production process. A survey conducted by Yu et al. (2008) on electrical and electronic manufacturing firms showed little evidence of eco-design in their products.
At the intermediate meso level, the CE practices include developing eco-industrial parks and eco-agricultural systems. These must be complemented with other measures such as environmental friendly designs of industrial parks and managing the waste accordingly. Here, focus is on regulation and management of urban consumption of energy, water and land to reduce their use, as well as on managing and recycling of waste water and solid waste to improve the quality of life and general public well-being (Zhu and Huang, 2005).
Finally, the CE practice at the aggregate macro level requires forming complex and extensive cooperative networks and active cooperation between industries and industrial parks including primary, secondary and tertiary sectors in production areas and in the residential sector. In the context of China, the macro level is aimed at major cities or regions/provinces.
The experience gained from four Chinese pilot cities that applied CE, provides limited guidance on CE implementation at the macro level. Key challenges include lack of reliable information, shortage of advanced environmental technology, enforcement of legislations, weak economic incentives, poor management and lack of public awareness. Using a range of policies can overcome the challenges and also for providing guidance on the design of an optimal future direction of the development strategy to prevent a reversion to old practices and standards.
Responsibility for sustainable development lies with individual states, although climate, environmental degradation and globalization have increased states’ mutual interdependence. Thus sustainable development calls for measures at local, national, regional and global levels. Agreements have also been reached under the UN framework convention on climate change for supporting developing countries in their transition.
Mainstream economics perpetuates linear thinking with concepts such as GDP and the use of GDP growth as a sole performance measure for national economies. Performance measures such as circulation of resources need to be introduced into economists’ models, to create an interest in the real flow of resources that underpins abstractions such as income and wealth.