Paper with OIES on incentivising the decarbonisation via the adoption of circular economy

April 1, 2021

The Oxford Institute for Energy Studies (OIES) and Enel Foundation have just published a paper authored by Anupama Sen, Luca Meini, and Carlo Napoli, examining how a circular economy can complement existing decarbonisation practices towards net-zero targets. 

In recent years, the replacement of fossil fuels with renewables, and improvements in energy use efficiency have contributed to the reduction of the largest proportions of CO2 emissions. Nevertheless, in the context of accelerated decarbonisation ambitions, this approach may be not enough. First, there is evidence that direct electrification may not be feasible in ‘hard-to-abate’ sectors outside of electricity generation. Second, the predominant approach to decarbonisation has disregarded the globalisation of trade and supply chains and spatial dissociation between places of extraction, production, and consumption. As a consequence, in the current ‘linear’ decarbonisation model, a sole focus on the reduction of emissions from energy production is likely to be insufficient to achieve net-zero objectives, as emissions would need to decline very rapidly to offset the expansion in economic output.

In this paper, the authors asked what other solutions can be used to enhance decarbonisation and meet net-zero carbon targets.

A circular economy can be a strong complement to existing policies in enhancing decarbonisation through non-energy means.

However, some broad conditions need to be met for a circular economy to lead to net economic as well as environmental benefits when extended to an economywide level, including the more intensive use of an existing stock of resources, the development of secondary markets to aid circular flows, and measures to prevent or mitigate unintended consequences or rebound effects.

Therefore, there is a strong case for the establishment of clear public policy frameworks to ensure that circular economy approaches can complement decarbonisation policies while at the same time avoiding unintended consequences of sectoral application at the macro level.

In practical terms, there are barriers to their implementation, including: the fact that prevailing government regulation is still dominantly oriented towards the linear model of economic operation and hence linear decarbonisation; the complexity of consumer behaviour and expectations; the absence of a dominant business model encapsulating the main components of the circular economy approach to decarbonisation.

Circular economy approaches implemented through cohesive public policy frameworks should become an inherent and integrated part of the existing instruments of decarbonisation, as during the energy transition they can fulfil the dual functions of efficiency and decarbonisation (i.e., reducing costs as well as reducing emissions). Moreover, circular economy approaches will continue to be relevant even beyond a time when full decarbonisation has been achieved, by playing their traditional function of improving overall efficiency, ultimately making the adoption of circular economy policies a “no-regrets” strategy for governments.

The full paper can be downloaded here.

The podcast with Anupama Sen and Carlo Napoli, hosted by David Ledesma, is available here.