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Transition to Circular Economy: An Analysis

by Yuvaraj Mandal

Although people acknowledge that resources are consumed at an alarming rate which jeopardizes future supplies and contributes to carbon dioxide accumulation, they consider a circular economy as a trade-off between environment conservation and profits. This article deals with what a circular economy is, its impact on employment, its shortcoming and its reality in India.

What is a circular economy?

The United Nations Industrial Development Organization describes a circular economy as the process of value-creation by extending product lifespan and efficiently utilising resources. Hence, a proper waste reallocation system which facilitates the concepts of reuse, reduce and recycle occupies a central position in such an economy. 

Circular economy ends up creating a closed loop wherein the resources are continuously reused and recycled, leaving no waste behind. It also needs the support of renewable energy sources for minimising residue and an interdependent community structure to promote sustainability. For example, the Tokyo Olympics was based on the idea of a circular economy and therefore, all metals like gold and silver were extracted from donated electronic waste to make medals for athletes.   


Can a circular economy avert the climate crisis?

At present, numerous enterprises are still following linear business models. The linear model refers to the practice of resource exploitation and utilisation, with no regard given to recycling or reusing. As of now, the global economy is merely 8.6 percent circular, which depicts the influence of such a traditional model.

Recently, the Indian government has focussed on the idea of a circular economy by notifying several rules like Plastic Waste Management Rules, Construction and Demolition Waste Management Rules etc. It also increased its installed renewable energy capacity by 15 times during 2014-21 and formed the International Solar Alliance. This is a welcome step as India recycles only 20 percent of its consumption. Hence, the focus of developing nations like India on harnessing their renewable energy and investing in their recycling capacity shows the extent to which a circular economy can help avert the climate crisis. 

After all, nearly half of the emissions which cause global warming come from the production of everyday items like clothes, food and cars, among others. A report released by a non-profit named Circle Economy shows that doubling the current circularity rate of the world will help to prevent global temperatures from rising above 2 degrees Celsius. Since harmful by-products from important sectors like steel, cement and plastics are expected to rise as much as four-folds by 2050, it is essential to transition to a circular economy. 

What are the problems associated with a circular economy?

As mentioned before, a circular economy is concerned with creating a closed loop of recycling and reusing. However, is a perfect closed loop achievable? Something as simple as paper recycling may be restricted to a certain number of cycles. Although steel and glass are infinitely recyclable, some grades of plastic are extremely difficult to recycle such as PVC pipes. Furthermore, the quality of recycled products is not guaranteed to meet consumers’ expectations. With repeated recycling and reusing, the quality of most materials decreases and this phenomenon is commonly known as downcycling. Even reusing a product for a different purpose may not be as effective as purchasing the latest product which is catered to serve that purpose. 

    On the other hand, recycling is a costly affair as compared to simple waste disposal techniques like landfill or incineration. In New York City, collecting and delivering each tonne of waste to the recycling facility itself takes 200 dollars more than what it would cost to dispose off in a landfill. Moreover, manufacturing products from recycled materials may cost more than using virgin materials, which may be detrimental to the living standards of low-income classes. 

    Even though transitioning to cleaner transportation facilities is necessary, are electric vehicles really environment friendly? Perhaps, the increased electricity demand can be met by renewable energy. However, the manufacturing process of electric vehicles involves batteries made of rare earth metals like lithium, graphite and cobalt, which requires extensive mining. Moreover, depleted lithium batteries are becoming a major challenge for global EV players to recycle and reuse properly.  

Example of an Indian sector which provides considerable opportunity for circularity

Almost everything—beginning from automobiles to buildings—is dependent on steel. Further, government-funded infrastructure projects such as the Pradhan Mantri Awas Yojana, Bharatmala, and Jal Jeevan Mission are projected to consume as much as 160 million tonnes of steel. In fact, India is the world’s second-largest steel producer. Due to this, the steel industry contributes a staggering 2 percent of India’s GDP as well as employs 2.6 million people directly and indirectly. On the other hand, recycling one ton of scrap reduces iron ore and coking coal consumption by 1.1 tons and 0.6-0.7 tons respectively. The introduction of new Vehicle Scrappage Policy in 2021 will surely increase the availability of such metal scraps for recycling.

Furthermore, green hydrogen can substitute the need for coal in the furnaces and effectively help to decarbonise the industry. The carbon dioxide emitted can also be combined with water and slag to create eco-friendly bricks, which can probably complement India’s growing need for construction materials. 

Initiatives of Indian cities which promote circular economy 

Most of the circular economy initiatives can be found in India’s cleanest cities, namely – Surat and Indore. 

Surat was recently showcased in COP26 for its ability to earn 140 crore rupees by selling recycled wastewater and its aim to achieve a net liquid zero discharge city. It also uses smart water metres and streetlights to efficiently use its resources as well as plans to electrify its entire bus system. India’s first six-lane highway made of steel slag was inaugurated in Surat, depicting its commitment to achieving a near-perfect circular economy.

On the other hand, Indore has recently witnessed the inauguration of Asia’s largest bio-methanation plant, which converts five hundred tonnes of daily waste into compressed natural gas (CNG) and compost. While this compost is used in promoting sustainable farming, CNG will reduce the ever-growing automobile emissions. Moreover, Indore had set up a plastic recovery centre, organised thousands of rag pickers into Self Help groups (SHGs), conducted regular health camps and provided health insurance schemes to them. As a result, Niti Aayog recently praised Indore for its plastic waste management. 

Transitioning to a circular economy will surely disrupt the existing industrial establishments. Will it lead to job losses?

Since the circular economy focuses on recycling-reusing and renewable energy, employment in extractive and petroleum-based industries will obviously be impacted. This may seem like an impending economic disaster. However, a literature review by International Institute for Sustainable Development states:

  1. Climate change reduces the GDP growth rate of East Asian, Pacific and South Asian countries by 7.5 percent approximately. 
  2. Renewable energy sources are far more labour-intensive than fossil fuel industries. Hence, a circular economy may lead to 6 million job losses, but in return will create 24 million new innovative jobs.

Clearly, if countries transition to circular economies, the slowing down of climate change will permit them to maintain their current GDP growth rates as long as possible. In addition, research suggests that circular industries will help in offsetting a fifth of the estimated loss in skilled employment in Britain alone. Such an economy will therefore be especially beneficial in times when skilled jobs are becoming competitive and recessions are becoming common.

Since reuse and remanufacturing is creating 8-20 jobs per thousand tonnes of waste when compared to a meagre 0.1 jobs per thousand tonnes of waste sent to landfill, the circular economy is the ‘economy of the future’.

Is a circular economy feasible in developing countries like India or is it just a fantasy of the developed world? 

    A circular economy is not a modern-era concept. Ancient India is well-known for its sustainability practices and environmental conservation. If the developing world follows such low-cost alternatives to modern factory-made products, then the shift to circularity will be relatively easy. 

For example, in place of plastic toothbrushes and combs, ancient Indians used to have bamboo toothbrushes and neem combs. Terracotta pots were further used to store grains and water, instead of plastic containers and bottles. So, not only these items were easy to dispose off, but they were also perfectly biodegradable and easy to reuse. 

Nowadays, green buildings are often looked up to as means of promoting sustainability by builders and architects. Interestingly, in pre-historic times, houses in cold regions were constructed using Cob – a natural mixture of water, sub-soil and fibrous materials like straws. 


Therefore, there is a need for a proper investigation into India’s traditional practices.  Already multiple Indian cities and industries have moved ahead on the path of sustainable development. Currently lagged with problems, a circular economy with a proper technology base will surely help in averting the climate crisis.

Yuvaraj Mandal is a rising second-year undergraduate student at Ashoka University.

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