Final Report Summary - POLFREE (Policy Options for a Resource-Efficient Economy)
Executive Summary:
The three main priorities of ‘Europe 2020’, the 10-year economic growth strategy proposed by the European Commission in 2010, are: smart, sustainable and inclusive growth. The Flagship Initiative for a Resource-Efficient Europe is intended to contribute to the second of these. The Flagship Initiative, and the associated Communication on a Roadmap to a Resource Efficient Europe, provide the principal policy context for this project. The POLFREE (POLicy Options For a Resource Efficient Economy) project was structured around three core Work Packages (WPs), each with distinct but interlinked objectives; an assessment of ‘why have resources been used inefficiently? (WP1), the generation and examination of ‘new concepts and paradigms for policies for resource efficiency’ (WP2), and the construction of ‘scenarios and modelling of policy implementation for resource efficiency’ (WP3). The key results and insights from the project include:
- Development of the ‘web of constrains’ concept, which encapsulates how legislative, business and individual process and decision making, operating at different levels (from individual decision makers to EU level policy), dynamically interact to prevent improved resource efficiency.
- Concepts that provide a vision of deep and far-reaching change the relationship between resource use, the environment and the economy usually fail to provide a clear and credible pathway for implementation. Conversely, concepts that have a clear and credible pathway for implementation would likely result in incremental, minor change rather than radial shifts towards resource efficiency.
- Strategic policy interventions may transform the web of constraints to resource efficiency, into a ‘web of drivers’ for resource efficiency. Over time, windows of opportunity for the development and implementation of radical technologies, concepts, paradigms and practices, or the policy instruments to drive or facilitate them, that were previously untenable, may be opened
- The development of long-term core strategies and targets for the development of a resource-efficient economy is a key precondition to its achievement. The policy mix contained within or introduced to implement this strategy must be internally consistent, hold coherent processes for development, implementation and monitoring and hold credibility and stability.
- Based on the analysis of scenarios applied to the novel coupling between economic and ecological models, it is clear that a ‘Business-as-Usual’ approach to the relationship between the economy and the environment produces highly negative consequences for both. By comparison, a globally co-operative effort (or, failing that, a unilateral effort by the EU) to peruse a resource-efficient economy would produce significant environmental, economic and social benefits (both globally an for the EU). A global approach would be preferred, due to the international nature of environmental challenges and interconnected resource supply chains. The modelling also suggests that a strong, civil society-driven, post-consumerism movement in European civil society may also achieve a resource-efficient economy.
Members of the consortium were (and will continue to be) highly active in engaging with policy makers, industry, academia, NGOs and wider civil society. Key dissemination events included presentations and workshops at the World Resources Forum, EU, UK and Dutch policy making fora, academic conferences and public events. Other dissemination activities included the creation of ‘info-murals’, to visualise the scenarios developed by the project, the creation of a dedicated ‘dissemination’ website, and the production of ‘Policy Briefs’, each focusing on a different element of the project. The production of nine papers for a dedicated POLFREE Special Issue of the highly regarded academic journal Ecological Economics is currently underway.
Project Context and Objectives:
Compared to other environmental themes such as climate change, resource efficiency has been relatively slow to rise up the agenda of public policy. In Agenda 21, for example, the Plan of Action to emerge from the 1992 Rio Summit, it is mentioned only in general terms, such as the statement in Chapter 10 that “it is now essential to resolve these conflicts and move towards more effective and efficient use of land and its natural resources”, but there were no explicit actions or policies proposed for resource efficiency and in practice very little attention was paid to it.
A decade later, however, it had become clear at the EU level at least that the relationship between economic growth and resource use was unsustainable. In its report to the Rio +10 World Summit on Sustainable Development in 2002, the European Commission drew on the conclusions of the Göteborg Summit (EU 2001) the previous year and stated: “In order to bring consumption into line with the carrying capacity of the environment, progress is needed on decoupling resource use from economic growth through significantly improved resource efficiency, dematerialising the economy, and waste prevention.” Progress, however, was slow. The Thematic Strategy on the Sustainable Use of Natural Resources was not published until December 2005. Its major recommendation at the global level was the establishment of an International Resource Panel (IRP), which was first convened in November 2007. In various publications, the IRP have since stressed the importance of decoupling economic growth from resource use and environmental impacts (e.g. the 2011 report ‘Decoupling natural resource use and environmental impacts from economy growth’). Over the same period a new concern was emerging, partly at least driven by high rates of economic growth and growth in resource consumption in emerging economies, about possible scarcities and bottlenecks in availability of and access to key resources, especially those of key importance to new technologies, such as rare earths. Commodity prices have been volatile, and related economic disruption has been higher than in previous decades. Prudence under these circumstances argues that these mineral resources, as well as terrestrial and marine renewable resources, should also be subject to proportionate policies to promote resource efficiency. Aligning the international debate about competition for natural resources with resource efficiency is a striking new feature for emerging new policies. Given that this is a business concern, one may also expect positive side-effects for climate policy. Climate and energy policy issues have also become more important. The accidents of Deep Water Horizon and Fukushima as well as the reports of the IPCC underline the need to speed up moves towards renewable energies and improve energy efficiency. Even more relevant for the purpose of this call are the implications for using other natural resources: fossil fuels are certainly a key natural resource from an environmental viewpoint, but so are land use and biotic resources. The criticality of some resources required for green technologies are also an emerging concern.
These are the main considerations that have led to the inclusion of resource efficiency in Europe 2020 “the EU’s growth strategy for the coming decade”, the three main priorities of which are: smart growth, sustainable growth and inclusive growth. The Flagship Initiative for a Resource-Efficient Europe is intended to contribute to the second of these. For the European Commission, “Resource efficiency means using the Earth's limited resources in a sustainable manner ... Many natural resources are fundamental to our health, well-being and quality of life, so it is essential that we respect the natural limits of the planet's key ecosystems.” The Flagship Initiative on Resource Efficiency, and the associated Communication on a Roadmap to a Resource Efficient Europe, provide the principal policy context for this project.
The POLFREE (POLicy Options For a Resource Efficient Economy) project was structured around three core Work Packages (WPs), each with distinct but interlinked objectives:
- WP1 – Why have resources been used inefficiently? This WP saw the construction of a theoretical framework to assess how resources are currently used and why, with detailed analysis of the trends and policies at EU and Member State (MS) level, cross-country econometric analysis to derive resource-reduction cost curves, and an analysis of constraints to resource efficiency amongst businesses and individuals.
- WP2 – New concepts and paradigms for policies for resource efficiency. This WP explored new concepts and paradigms that may be able to bring about a radical increase in resource efficiency. This included new, resource-efficient business models and ideas for global governance approaches to promote resource efficient economies. This WP also developed a vision for a resource-efficient economy in the EU, and proposed and assessed policy mixes that may be implemented to achieve this vision.
- WP3 - Scenarios and modelling of policy implementation for resource efficiency. This WP saw intensive work on creating, modelling and visualising scenarios for the emergence of resource-efficient economies, through linking quantitative economic and ecological models, and simulating the policies and policy mixes derived in the earlier work, supplemented by LCA analysis for selected products and sectors, to ensure that the policies and business models in the scenarios lead to adequate absolute decoupling of economic activity from resource use and environmental degradation. The scenarios and associated policy analysis were interpreted across economic, ecological and social dimensions.
Project Results:
What are the key characteristics of a resource-efficient economy?
In 2011, the European Commission published a ‘Roadmap to a Resource-Efficient Europe’ by 2050; a key component of the ‘Resource-Efficient Europe Flagship Initiative’, itself part of the Europe 2020 strategy. The overarching objective of this Roadmap is to lay the foundations to achieve the following:
‘By 2050 the EU’s economy has grown in a way that respects resource constraints and planetary boundaries, thus contributing to global economic transformation. Our economy is competitive, inclusive and provides a high standard of living with much lower environmental impacts. All resources are sustainably managed, from raw materials to energy, water, air, land and soil. Climate change milestones have been reached, while biodiversity and the ecosystem services it underpins have been protected, valued and substantially restored.’
This formed the basis for development of the POLFREE ‘Vision’ for a resource-efficient economy in Europe. The Vision, developed by and presented in Deliverable 2.2 provides key qualitative and quantitative characteristics that such an economy should exhibit in 2050. These characteristics were derived first through the identification of significant ‘sustainability visions’ that have been developed in recent years, and then through their subsequent analysis against a common analytical framework, which focuses on two assessment pillars – ‘nature’ and ‘wellbeing and quality of life’. The Vision was then refined in a consultative process with stakeholders.
A key output of this process was the generation of quantitative headline targets for the environmental characteristics of a resource-efficient European economy in 2050. Eight such targets were developed – two for each of the four key major resource categories (materials, land, water and carbon). These values were first derived through an assessment of the (in)consistencies in broad objectives of the existing ‘sustainability visions’, their specific targets, the extent to which these targets converge or diverge, and their realism (based on current understanding of the topics at hand). This process was then complemented by stakeholder consultation. These headline targets are presented in Table 1.
There exists a ‘Web of Constraints’ to a resource-efficient economy
It is clear that across the economy, individually and as a collective, do not use resources as efficiently as we might. A first step in developing a resource-efficient economy is to determine why this is the case. It is common in this respect to consider resource-inefficiency, and other ‘non-optimal’ behaviour and outcomes, to be the result of individual ‘barriers’ or ‘market failures’. Examples include market externalities (such as CO2 emissions or other pollution), split incentives (such as the ‘landlord-tenant dilemma’, in which the landlord is not incentivised to invest in energy efficiency measures as it is the tenants that would receive the benefit), and information failures.
However, Deliverable 1.1 concludes that resource-efficient behaviour, or the absence of it, depends on many factors in simultaneous operation and dynamic interaction. As such, the concept of individual, independent ‘barriers’ to resource efficiency is not sufficient. Instead, a concept of a ‘web of constraints’ is more appropriate. An example of such dynamic factors that comprise a web of constraints acting against resource-efficient heating behaviour in residential properties is illustrated in Figure 1.
The web of constraints refers to the relationship and dynamic interaction between individual, organisational and institutional behaviour patterns, inertia and direct and indirect interconnections between the institutional, social and individual levels. For the purposes of assessing the nature of the existing web of constraints to resource efficiency in the EU, the POLFREE project categorised its components as constraints acting within and emanating from the policy and legislative framework (at the EU level and Member State level), within and acting upon business, and those action upon and emanating from individuals as citizens and consumers.
Policy and Legislative Constraints – European Union
The EU has one of the most advanced policy frameworks in the world for environmental protection, which has steadily grown in both coverage and ambition over time. Resource efficiency has received increasing attention in the environmental policy agenda in recent years, driven significantly by price volatility in commodity markets and its potential impact on supply chains and industrial competitiveness (see Deliverable 1.2). The ‘Europe 2020 strategy for smart, sustainable and inclusive growth’, with its resource efficiency flagship initiative, currently provides the strategic framework for resource efficiency policy development. However, it is clear that the existing policy landscape is insufficient for producing a trajectory for achieving a resource-efficient economy.
The primary focus for environmental policy has been on energy and climate change, with other issues of resource efficiency such as materials, waste and land, largely overlooked in the European policy landscape. In addition, there is a clear focus on the ‘output’ side of the use of resource in the economy (e.g. the generation of waste and pollutants), on which binding targets may be found (e.g. GHG targets), with the ‘input’ side either largely overlooked or addressed through aspirational, non-binding objectives and targets. Indeed, the absence of a more comprehensive set of indicators and associated targets on resource (including materials) efficiency, or resource productivity (GDP/RMC), is a key gap in the current EU strategy on resource efficiency. The European Resource Efficiency Platform proposed in 2014 to introduce such a target (set at a 30% increase in resource productivity by 2030 – a value double that of the existing trend) (see Deliverable 1.2). However, there is evidence to suggest increasing resistance from some Member States to accept quantitative, binding targets (opposition to additional targets for waste prevention, landfill and recycling exemplifies this). Resistance has also been observed in areas such as soil protection, water and air quality. In addition, the resource-efficiency agenda appears to have fallen into the ‘joint-decision’ trap, which favours the status quo and incremental policy shifts, rather than more radical, innovative policy approaches (See Deliverable 1.7).
The first Circular Economy Package, issued in July 2014, did relatively little to alter this picture. It sought to increase existing targets for the recycling of municipal waste and packaging through binding targets, and ban all separated waste from landfill by 2025. Most other provisions and targets were aspirational, however this did include an EU wide target of a 30% increase in resource productivity by 2030, as discussed above. The Package was withdrawn in December 2014, after which it was announced it would be re-introduced with ‘more ambitious’ aims. The reintroduced Package, issued in December 2015, actually reduced the proposed binding targets for recycling, and removed the 2030 resource productivity target. However, it introduced a binding target of limiting landfilling to 10% of all waste by 2030, which was previously a 25% ‘aspirational’ target by 2025. Additionally, it proposed future changes to elements relating to the upper tiers of the Waste Hierarchy, such as a revision of the Ecodesign Directive to improve the ability for product re-use and recycling. However, the majority of such elements are aspirational, and do little to alter the focus on the lower tiers of the Hierarchy.
In line with the concept of the dynamic web of constraints concept described above, different EU policy instruments and their component objectives, targets and operating mechanisms experience multiple interactions – of both a synergistic and conflicting nature. Figure 2, produced by Deliverable 1.2 illustrates such mutually re-enforcing relationships (green) and those in conflict (red) between different policy objectives.
Figure 2 illustrates that the recycling of waste, for instance, could in principle also reduce the consumption of primary raw materials and associated CO2 emissions (although to date no evidence has been found that increased levels of material recycling and resource productivity in the EU have led to decreased demand on primary materials). However, examples of conflicting relationships are more prominent. A key element of EU Transport policy is to encourage the free movement of people and goods, as part of the single market. However, transport is also a significant source of air pollution, land use and fragmentation, and material use. While the link between transport and air pollution has been the primary focus of sustainable transport policies at the EU level, little attention has been paid to material and land use implications (See Deliverable 1.2).
Inconsistency may occur laterally, such as the examples given above, but also over time. An example is EU waste policy. After years of encouraging investment in high-cost incineration infrastructure, the EU shifted focus to emphasise the role of recycling and a limit on incineration of non-recyclable materials. Whilst justified from a resource efficiency perspective, this implies a double investment in waste management infrastructure and competition for waste streams, increasing costs substantially and potentially producing stranded assets (See Deliverable 1.2).
Policy and Legislative Constraints – Member States
There is substantial variation across Member States in terms of resource productivity, and in trends over time. Whilst some countries experienced reducing resource productivity, several countries indicate relative and even absolute decoupling between Domestic Material Consumption (DMC) and GDP growth. Whilst this variation is likely in part to be driven by the varied institutions, policy instruments and frameworks in place across Member States, it must be noted that a substantial factor is likely the growth in outsourcing of primary material extraction (see Deliverable 1.7) rather than a reduction in Total Material Requirement (TMR). Deliverable 1.3 concluded that correlating resource efficiency policy with resource use outcomes is a highly complex exercise, as the dynamic interaction between factors in the ‘web of constraints’ makes it difficult to isolate individual ‘success factors’ (See Deliverable 1.2).
However, Deliverable 1.3 highlights some key weaknesses in the policy framework that may be found in many Member States. A key example is the level of environmental taxation. The weighted average of revenue from environmental taxes in the EU is marginal compared to other types of taxes (such as those on labour), and in 2008 represented just 2.4% of GDP. In addition, the majority of such taxes are energy and transport, with pollution and resource taxation representing just 5% of the total. A key factor in this may be political resistance to such taxation. However, this circumstance is made more serious given the common presence of direct and indirect subsidies to resource-intensive sectors and activities. Various other common weaknesses may be highlighted, such as policy inaction, the use of qualitative rather than quantitative targets, insufficient policy coherence (including a lack of clarity regarding the division of institutional responsibility), information deficits and the strong influence of vested interests.
Another issue is a common inconsistency between policy principles and objectives, and the instruments introduced. A key example, linked to that at the EU level, may be found in the waste sector. Whilst application of the waste hierarchy in policy making should lead to the optimisation of resource use, the focus of policy has been largely on landfill diversion rather than the reduction of waste generation in the first place. As discussed above, under both iterations of the Circular Economy Package proposal, this generally remains the case.
Business-Related Constraints
Deliverable 2.4 concluded that there are three types of Resource Efficiency Measures (REMs) that a business enterprise may undertake:
- Product-oriented measures – Improving the resource-efficiency products or services provided by the business, through redesign of the product or service, or substitution for a more resource-efficient alternative.
- Operational-oriented measures – Improving the resource-efficiency of the internal operations of the business and its supply chain, through, for example, cleaner production, green supply chain management and energy efficiency measures.
- Lifecycle measures – Improving the resource-efficiency of the product or service provided across its entire lifecycle, such as through industrial symbiosis, cradle-to-cradle design and the ability to remanufacture.
Deliverable 2.4 assessed the potential for different examples of such measures, and determined that three measures in particular – green (business) services, cradle-to-cradle design and industrial symbiosis – hold particular promise. Such measures not only hold substantial potential for resource-efficiency gains, but also boost business competitiveness (often across the value chain) (see Deliverable 1.7)
However, Deliverable 1.5 identifies five key (interlinked) categories of constrains that businesses may experience that act to prevent the widespread adoption of these and other REMs, as illustrated in Figure 3.
Institutional constraints are those set by political and governing institutions, including the policy landscape (discussed above), the process by which policy is made, and the level to which they are enforced. Linked to this are market constraints, which include market failures (such as the market externality of pollution), barriers to market entry, monopolistic structures, environmentally harmful subsidies, information deficits and split incentives. This also relates significantly to constraints associated with the role of individuals as citizens/consumers, discussed below. Organisational constraints are those present within a business itself. Examples include supply chain issues, insufficient labour force capabilities, lack of available funds, firm culture and a lack on information. In turn, this links to behavioural constraints exhibited by individuals within the firm, including management and employee attitude to innovation and change, and attitudes and social values. The final category, technological constraints, includes the availability of technology, its cost, its compatibility with the firm and its operations, and with other categories of constraints outlined above (see Deliverable 1.5).
Constraints with Individuals and Consumers/Citizens
Deliverable 1.6 conduced a survey of households, held focus groups and conducted in-depth qualitative interviews across three EU Member States (Austria, Hungary and the Netherlands), in order to assess drivers and constraints to resource efficiency amongst individuals as citizens and consumers. A key conclusion of this investigation was that the public are interested in adopting resource-efficient behaviour, but mostly for non-environmental reasons. For example, whilst around half of the population surveyed indicated a willingness to reduce personal car use, the principal reasons behind this were to save money and to get more exercise. Additionally, whilst between two-thirds and half of respondents in the different countries examined expressed a desire to eat less meat and fish, the primary drivers for this were concerns over personal health and animal welfare. However, regardless of the motivation, such desire is generally not converted into action. As with business-related constraints, the web of constraints acting on individuals as citizens and consumers to prevent this may be broadly grouped into interlinked categories, as illustrated by Figure 4.
Personal factors (including individual characteristics, preferences, attitudes, experiences motivation, knowledge, awareness, location of employment and residence, etc.), societal factors (including culture, social norms and traditions, etc.), policy factors (including policy and legislative framework constraints, discussed above), and organisational factors (including the availability of resource-efficient products and services, advertisement and promotion of different products, etc., heavily linked with business related-constraints discussed above), all interact to produce a web of constraints to resource efficiency amongst individuals.
The presence of and interaction between these factors leads to an apparent inconsistency in resource-efficiency behaviour between individuals and between countries. For example, Deliverable 1.6 finds that practicing recycling is not correlated with reduce personal car use. This may be, for example, due to the lack of poor quality public transport as an alternative (a commonly cited constraint), preventing resource-efficient behaviour (i.e. an ‘organisational’ factor – lack of availability of infrastructure or appropriate products and services).
The ‘Web of Constraints’ may become a ‘Web of Drivers’ for resource efficiency, with the appropriate interventions
Deliverable 2.1 undertook an assessment of thirty of the most prominent concepts and paradigms often touted as potentially substantial contributors to improving resource efficiency and promoting an environmentally sustainable economy. Each concept was assessed in order to examine it’s potential for contributing to such an objective, using three criteria:
- Scope of change. At what scale does the concept focus? Does it focus on improving resource efficiency in a specific sector, a wider value chain, or does it seek to alter the operation of a societal (sub)-system?
- Paradigmatic degree of change. How far does the concept seek to alter activities within the existing utilitarian, neo-classical paradigm, or how far does it seek to change this overarching paradigm? For example, does the concept focus on market-based solutions, does it encourage recognition of the public good character of resource-related issues (and this the need for government intervention), or does it seek to induce fundamental paradigm shifts in the economic system, in values, or institutions?
- Clarity of change. Does the concept provide a clear and explicit pathway or formula for how it may be implemented, and what implementation may mean? Or is it unclear in such respects, and only provide a vague or conceptual definition?
Each concept was awarded a ‘high’ (1), ‘medium’ (0) or ‘low’ (-1) score for each criterion. A summary of the analysis is illustrated in Table 2. For more information, including definitions of each of the concepts, please refer to Deliverable 2.1
From this analysis, Deliverable 2.1 drew two key conclusions. The first is that concepts that provide a vision of deep and far-reaching change, usually fail to provide a clear and credible pathway for implementation. The second is that concepts that have a clear and credible pathway for implementation would likely result in incremental, minor change rather than radial shifts towards resource efficiency. The reasoning behind these conclusions is relatively intuitive. Radical, paradigmatic change implies a shift away from existing practices, infrastructure and in some cases power structures, such that securing the societal and political will to implement them is, in the short-term at least, extremely difficult. Such a situation is emblematic of the web of constraints.
Due to the complex, dynamic interactions between the different components of the web of constraints, an alteration to one aspect may induce changes (either positive or negative) in other areas. As such, strategic policy interventions may transform the web of constraints to resource efficiency, into a ‘web of drivers’ for resource efficiency. Over time, windows of opportunity for the development and implementation of radical technologies and practices, or the policy instruments to drive or facilitate them, that were previously untenable, may be opened (see Deliverable 1.1). Due to the mutli-aspect nature of resource-inefficiency and its consequences, and the web of constraints to its correction, a ‘first-best optimum’ approach of applying a single policy instrument to counter the problem is insufficient. A policy instrument mix, instrument applying ‘second-best’ theory and the Tinbergen Rule, must be employed (see Deliverable 2.3).
Deliverable 2.3 identified nine policy ‘fields’ from which instruments in the policy mix may be drawn. Under each policy field, three instruments were selected for further analysis, representing instruments aiming to achieve ‘low-hanging fruits’ in resource efficiency, more direct market interventions, and those that aim at inducing a systematic transformation of production and consumption patterns. Each instrument in each policy field was assessed against the following six design criteria:
- Stringency – The ambition of the instrument, relative to existing characteristics of targeted actors and contextual (e.g. market) factors.
- Profitability – Whether or not implementation of the instrument would likely lead to a financial return to targeted actors.
- Predictability – The certainty and foreseeability of the detail of the instrument (now and in the future), and subsequent impacts.
- Flexibility – How prescriptive the instrument is in how targeted actors must meet its requirements, and the options available to do so.
- Differentiation – The level to which the instrument places differentiated requirements or other properties on actors with different characteristics or contextual conditions.
- Depth – The extent to which the instrument provides an incentive to continually improve or stimulate investment in resource efficient technologies and practices.
Each instrument was assigned a score of 1 to 5 against each of these criteria, with 1 indicating a low score (e.g. low stringency, poor profitability, etc.), 5 indicating a high score (e.g. ambitious, highly predictable, etc.). From this assessment, Deliverable 2.3 drew three key conclusions. The first is that the more ambitious (stringent) an instrument is, the lower the immediate profitability to the actors targeted. There is a clear trade-off between those instruments that offer the highest potential for increasing resource efficiency, and those that are most easily introduced (as discussed above). The second conclusion is that there is a clear trade-off between the predictability of an instrument, and its flexibility. This is a relatively intuitive notion. Taking the example of a tax, a clear, long-term rate trajectory comes at the expense of the ability of policy makers to alter it in light of contextual developments (such as technological developments, or evidence of effectiveness). However, there are approaches to deal with this trade-off, such as pre-determined rules for the revision of key design elements (e.g. degression mechanisms for renewable support instruments). The third conclusion is that there is a trade-off between the level of specificity (differentiation) of an instrument and its depth. For example, whilst regulatory instruments are more easily able to take into account different characteristics between sectors, firms or regions, they tend not to provide the dynamic incentive to continually improve resource efficiency (beyond the level required by the regulation). The reverse generally holds true for economic instruments, such as taxes.
These conclusions further solidify the need for a policy mix, in order to overcome or reduce the presence of these trade-offs. Deliverable 2.3 also advances criteria for selecting the appropriate instruments for development of an effective resource efficiency policy mix. The first is consistency, which may be defined in terms of ‘weak consistency’ (the absence of contradictions or conflicts within or between instruments and elements of the policy mix), and ‘strong consistency’ (the presence of complementarities, mutual support and synergies between instruments and elements of the policy mix). The introduction of instruments that enable mutual benefits with existing instruments, and that aim to reduce the presence of negative interactions or side effects, should be a priority.
Broadly, any instrument that internalises negative externalities (such as a resource intensity-based tax) or reduces perverse subsidisation (environmentally harmful subsides), acts to improve the overall efficiency of market processes and acts in a mutually supportive manner with other categories of policy instrument (in a well-designed mix). However, there is also a wide range of potential conflicts. An example is instruments intended to directly promote electric vehicles, in order to reduce emissions of greenhouse gasses and local air pollutants. Deliverable 3.6 undertook lifecycle assessments (LCA) of electric (lithium-ion) passenger cars (EVs), and an internal combustion passenger car (diesel and gasoline). Whilst the lifecycle of EVs does indeed produce fewer GHG and local air pollutant emissions (although the manufacturing phase is around double the GHG intensity than for internal combustion vehicles, this is offset by the ‘use’ phase of the vehicles), they require more intensive use of metals, chemicals and energy (again during the manufacturing stage), and produce significantly higher toxicity impacts both in terms of human health and for water contamination. As such, an instrument mix that does not account for such impacts is not producing effects fully consistent with its objective.
The second criterion of an effective resource efficiency policy mix is coherence of the policy processes for development, implementation and monitoring of instruments, within and between different levels of governance. Such a criterion is particularly important in the EU, with competences split between the EU, national and local levels. Indeed, Deliverable 4.2 that a division in competences in such a way is desirable; whilst some instruments may be most effectively and efficiently applied at the EU level, some instruments are more appropriately introduced at the national or local levels. A priority for the existing policy mix in the EU should be to improve co-ordination within and between governance levels for existing instruments.
The third and final criterion is credibility and stability from the perspective of targeted entities and other market actors, to provide confidence in the market for long-term investment in resource-efficient technologies and practices. Credibility is influenced by a range of factors, such as political commitment, the operationalisation of targets by the instrument mix, and the delegation of competences to independent agencies. Of course, consistency and coherence of the policy mix and related processes are also important factors in whether actors perceive the instrument mix to be credible. Similarly, instrument mix stability is linked to the ‘flexibility’ and ‘predictability’ assessment criteria applied to individual instruments, as discussed above. However, ‘stability’ also concerns overarching strategies, targets and policy processes that transcend individual instruments. Indeed, the development of long-term core strategies and targets for the development of a resource-efficient economy is a key precondition to its achievement (see Deliverable 2.3).
Policy intervention to achieve a resource-efficient economy by 2050 would be environmentally and economically beneficial
Governance and Resource-Efficiency Transition Scenarios
Deliverable 2.5 sought to map out, describe and analyse the different approaches to governance of resources, the actors involved, and the interactions between them. Figure 5 illustrates the results of this analysis.
From Figure 5, two distinct governance approaches and three categories of actors may be distilled. The first approach is ‘top-down’ governance, led by two categories of governance actors - international institutions and local, national and supra-national governments. Top down governance driven by international institutions (such as the Bretton Woods Institutions and UN Institutions and Agencies) occurs through both ‘hard law’, such as binding multilateral agreements or conventions, coming into effect when ratified by the majority of countries, and ‘soft law’ such as objective-based, non-binding ‘agreements’ and co-operative initiatives. Examples of the former with most relevance to resources include the Convention on Biological Diversity, The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, and The Convention on the Protection and Use of Transboundary and International Lakes. Examples of the latter include Agenda 21, the Millennium Declaration and the recently developed Sustainable Development Goals (SDGs). At present, no specific permanent international organisations exist for the management of resources. Top-down governance driven by local, national or supranational governments (such as the EU), includes both the implementation of international governance mechanisms, but also provides the specific policy and regulatory framework actors within those jurisdictions are subject to, and may also introduce ‘soft’ initiatives.
The second approach is ‘bottom-up’ governance, driven by the third category of actors - civil society (including individuals, companies, NGOs, community groups and academics). ‘Bottom-up’ governance mechanisms of particular relevance to resource management include voluntary certification schemes (such as Fair Trade and Marine Stewardship and Forestry Stewardship Certification), Corporate and Social Responsibility (CSR) reporting, and the Model Mining Development Agreement Project. Deliverable 2.5 concludes that such mechanisms are traditionally thought of as local and regional level activities, however increasingly they are having a global reach.
Based on the categorisation of actors developed by Deliverable 2.5 Deliverable 3.5 defined three alternative, plausible future socio-economic development pathways to achieve the Vision for a resource-efficient economy in 2050, as described above, and the associated headline targets presented in Table 1. For each scenario, specific narratives and policy mixes were developed for each of the key resource-intensive sectors (power, industry, buildings, mobility and land use). The policy instruments include combinations and different emphases on economic instruments (e.g. taxes and subsidies), regulation (e.g. standards, binding targets, bans), cooperation instruments (e.g. international agreements), information-based instruments (e.g. certification, labelling and awareness campaigns), Research, Development and Innovation (RD&I) (e.g. research funding), and ‘self-committing’ elements (e.g. changes in values and behaviour, that may or may not be stimulated through policy initiatives). Each scenario was subject to stakeholder consultation before finalisation. The three scenarios are:
- Global Cooperation – Global commitment to resource-efficiency and a sustainable economy is expressed through strong, binding targets and processes set by multilateral agreements, with all countries committed to achieving their aims (with the EU playing a strong global role). The emphasis shifts to ‘green growth’, with integrated resource markets generating a high level of trade in commodities (supported by agreements on transparency and governance). An Integrated Resource Management Agency (IRMA) is established to support global information gathering and sharing, and to co-ordinate and implement resource-related targets, instruments and processes across different policy fields. Harmonised market-based instruments predominate, with lifestyles and preferences of society driven by extrinsic motivations, and shaped by top-down structures and systems.
- EU Goes Ahead - Multilateral agreements and processes are present, but are manifest mainly through issue-focussed ‘coalitions of the willing’, concerned with information sharing and voluntary measures. Although a global commodity market is in place, availability of resources is commonly disrupted due to instances of ‘resource nationalism’. This contributes to the decision by the EU to unilaterally pursue a resource-efficient, environmentally sustainable economy by 2050, through ‘green growth’. Top down structures and market-based instruments again dominate (with mechanisms introduced to protect the international competitiveness of Industry in the EU), supported by regulations and standards, with the focus on developing and deploying new resource-efficient, low-carbon technologies, rather than wholesale changes in behaviour.
- Civil Society Leads - As with ‘EU Goes Ahead’, although multilateral agreements and processes are present, they are relatively weak, and disruption to the free trade in resources is relatively common. Although in this scenario the EU again pursues a transition to a resource-efficient, low-carbon economy, this is driven by intrinsic changes in the behaviour and preferences of civil society and non-governmental actors. The role of the EU and Member State governments is not so much to lead the transition, but to create the appropriate conditions for this bottom-up process to develop. Significant changes in the lifestyle of European citizens occurs, including a focus on local, seasonal food, a radical shirt from personal transport to public transport, walking and cycling, and a dramatic decrease in employment in the formal economy in favour of volunteering in the local community, and increased leisure time. Progress is measured using a ‘Beyond GDP’ approach, which incorporates health, happiness and the ‘ecological rucksack’ of the individual.
A Business-as-Usual scenario was also elaborated, in which increased concern for the environmental sustainability of the economy fails to materialise, either with ‘top-down’ institutions (international, EU-level, national or local), or ‘bottom-up’, civil society actors. As such, associated policy measures in the EU or the rest of the world are not introduced, or for those currently in place, ambition is not increased.
Modelling Approaches and Modelling Results
In order to assess the implications of the three scenarios for the transition to a resource-efficient economy, each scenario was analysed by two economic models of different theoretical backgrounds – GINFORS and EXIOMOD.
GINFORS is a global model, with a deep sectoral and regional structure. It uses a Neo-Keynesian theoretical approach, with assumptions of bounded rationality, agents acting with information deficits on imperfect markets, with imperfect foresight regarding future developments. The integration of a Multi-Regional Input Output (MRIO) model means that GINFORS is able to calculate all direct and indirect emissions and material flows related to the activity of the sectors and countries depicted (see Deliverable 3.7a).
EXIOMOD (Extended Input-Output MODel) is a Computable General Equilibrium (CGE) model, which uses standard Walrasian closure to guarantee equilibrium between supply and demand. Prices and quantities are perfectly flexible and adjust in each time period to clear all markets. The ‘extended’ definition refers to the ability of the model to extend the analysis of a standard Input-Output (IO) analysis to environmental impacts (amongst others). EXIOMOD employs the detailed Mutli-regional Environmentally Extended Supply and Use Input-Output database EXIOMOD, which estimates emissions and resource extractions by sector, and trade in different commodities between countries (in both monetary and physical terms) (see Deliverable 3.7b).
In order to allow for a holistic analysis, GINFORS and EXIOMOD were both linked to the Lund-Postdam-Jena dynamic global vegetation model with management land (LPJmL). LPJmL uses process-based representations of major bio-geochemical, bio-geographical and bio-geophysical processes to simulate the role of vegetation and soils in the earth system, particularly with respect to their influence on the global cycles of carbon and water, the effects of human land use on the global environment, and the impacts of climate change on natural ecosystems and agriculture. Such coupling required new features and modules in both GINFORS and EXIOMOD, to maintain consistency in the analysis and to facilitate data exchange. Such technical aspects are detailed in Deliverable 3.1 and Deliverable 3.3 for EXIOMOD, and Deliverable 3.2 and Deliverable 3.4 for GINFORS.
The first key conclusion resulting from the application of the four scenarios (the three ‘transition’ and the Business-as-Usual scenario) to the two model couplings is that different modelling approaches may produce very different results and conclusions. Whilst the ‘transition’ scenarios applied to the GINFORS/LPJmL coupling largely achieve the targets for a resource-efficient economy as presented in Table 1, this is not the case in the EXIOMOD/LPJmL coupling. This may be explained by three key differences between the models and simulations. The first and most important key difference is the modelling principles employed by the two economic models. GINFORS employs a Neo-Keynesian approach using econometrically based parameterisations, whilst EXIOMOD employs a CGE approach using literature-based parameterisations. In EXIOMOD, the assumption of price elasticities of zero for intermediate demand means that taxation of such goods on a resource-intensity basis is not able to change the structure of production directly. This is a key contributor to the inability of the EXIOMOD/LPJmL model coupling to successfully project a resource-efficient future. Additionally, the assumption of a price elasticity of demand of -1 for consumption goods shifts the supply function to the right, and generates a new equilibrium with a lower price and a higher demand and production. This raises the input of resources. This rebound effect is strengthened by a strong reduction in imports, which have a price elasticity of -5. As such, the reduction of the consumer price will strongly reduce imports and increase domestic production further. The second key difference is the different approach to implementing the scenarios and associated policy mixes in the models. The third key difference is the specific implementation of the Reference (Business-as-Usual) scenario, against which the ‘transition’ scenarios are compared (See Deliverable 3.7c). For these reasons, the remaining conclusions from the modelling are based on the results of the GINFORS/LPJmL coupling.
Four key conclusions may be taken from the (GINFORS/LPJmL) modelling. The first is that a Business-as-Usual approach to the relationship between the economy and the environment produces highly negative consequences for both. By 2050, increasing consumption of fossil fuels driven by economic and population growth leads to global CO2 emissions more than doubling from 1990 levels, producing an increase in global average surface temperatures of between 4 and 6°C by the end of the century. Other environmental pressures also increase to 2050, such as an increase in global raw material consumption per capita (~40% from present levels), global water abstraction (~35% from 2000) and agricultural land use (~10% from present levels). Such increasing demand induces higher prices for key commodities, such as oil, ores and crops (average increase in real prices by 1.6%, 4% and 2.1% per year, respectively). Average GDP growth rates reduce over time, both globally (from around 2.6% over the last 20 years, to 2.1% from the present day to 2050), and in the EU (from around 1.5% over the last 20 years, to 0.9% from the present day to 2050). Employment reduces by around 30 million by 2050 (a reduction of around 15% from current levels). In this future, the risk of resource nationalism and conflict increases over time, along with social issues resulting from increased prices for essential commodities (e.g. crops) (see Deliverable 3.7a). Substantial costs from the impact of climate change may also be expected, but are not considered in the simulations.
The second key conclusion from the modelling is that global cooperation to achieve a resource-efficient economy would be highly favourable against a Business-as-Usual approach. In the Global Cooperation scenario, global CO2 emissions peak at around 2020, and decrease to around 11% below 1990 levels by 2050. The policy mix induces strong investments in new resource-efficient technologies, reducing demand for resources, and consequently prices (including food prices), against the Business-as-Usual scenario. All environmental targets listed in Table 1 are achieved. Social tensions arising from increasing food prices in the Business-as-Usual scenario are likely to be less prominent (if not diffused), along with the risk of resource conflicts and damage costs from climate change. Global GDP is consistently higher than in the Business-as-Usual scenario (5.2% by 2050), whilst GDP in the EU is even stronger (8.2% by 2050) - a function of the role of the EU as a consumer rather than producer of resources. Employment is also higher. Only some resource-producing industries, such as mining and quarrying, coke and refined petroleum and food and beverages, experience reduced value-added against a Business-as-Usual trajectory; all other economic sectors are ‘winners’. The results of this scenario suggest that an appropriate policy mix, when well targeted, may produce economic as well as environmental benefit, leading to ‘decoupling’ of economic growth and environmental degradation, both within the EU and globally.
Indeed, the results of the modelling and the findings of Deliverable 2.5 suggest that resource efficiency and the sustainable use of resources can and should be tackled at the international level. Given the high and increasingly interconnected nature and interdependency of international trade, and the transboundary impacts of environmental degradation (including climate change), a cooperative global effort would be the approach most likely to guard against the environmental, economic and social consequences a Business-as-Usual scenario is projected to bring. As the world’s largest importer, a member of the G8, home to three of the top ten largest stock exchanges in the world (by market capitalisation) and to four of the 10 largest companies globally (based on the Fortune 500), Europe is a significant player in global governance, and can use its influence in agenda setting at important international fora to ensure that resource use sustainability remains in focus. Priorities for action may be to establish a clear and targeted governance structure for resources, perhaps through the establishment of an Integrated Resource Management Agency (as discussed in Section 5.1). There are also clear opportunities to address some issues of resource use sustainability, such as through extended Sustainable Commodity Agreements.
However, it must be recognised that there is general scepticism surrounding multilateral approaches to environmental issues. Until recently, this was exemplified by the repeated failure to reach a global consensus on a process to tackle climate change. If a globally cooperative approach fails to materialise in the foreseeable future, the EU may reap substantial benefits if it pursues resource efficiency unilaterally. Under the EU Goes Ahead scenario, the EU is the only region in the world that rigorously improves its resource efficiency and the environmental impact of their use (meeting the targets presented in Table 1). By doing so, it insulates itself from increasing commodity prices (which increase in line with the Business-as-Usual scenario, as the reduction in EU resource consumption is relatively insignificant in the face of continually increasing global demand). It also realises a first-mover advantage through the development and deployment of new resource-efficient technologies and behaviours. As such, GDP in the EU grows at a higher rate than in the Global Cooperation scenario, to 12.4% larger than the Business-as-Usual scenario by 2050, whilst employment is increased by 3.5 million jobs (~2%) by 2050 against the Business-as-Usual scenario (see Deliverable 3.7a). Deliverable 1.4 concludes that even limited increases in efficiency in the use of key resource inputs to industrial processes in the EU would yield a global reduction in resource extractions by up to 2 billion tonnes within five years, accompanied by an increase in EU GDP by 0.1-0.6% per year. However, as the rest of the world continues along a Business-as-Usual pathway, leading to the increasing potential for conflicts and damages from climate change (CO2 emissions remain on a trajectory for 4°C increase), the implications of which are not examined by the models but which are likely to be costly, a globally cooperative approach should remain the priority.
The modelling also suggests that a strong post-consumerism movement in European civil society may also drive resource efficiency, and achieve the targets presented in Table 1. Whilst international developments are similar to those under the EU Goes Ahead scenario, key differences emerge in the EU. Although the impact on employment is positive (9% increase in the number of jobs by 2050 against Business-as-Usual), this is a result of the increase in part-time jobs and reduced working time per capita. This produces lower labour productivities and wages. Annual GDP growth reduces to zero by 2050, with the absolute size of the EU’s economy over 21% lower than Business-as-Usual by 2050. However, it is also assumed that this scenario emerges as a ‘Beyond GDP’ future in the EU, in which measures of progress are diversified beyond growth in GDP.
Although an independent shift in culture towards more resource-efficient practices and preferences may achieve the Vision of a resource-efficient economy described in Section 2, policy makers cannot rely on such a shift coming to pass. However, Deliverable 2.5 concludes that the policy framework should facilitate ‘bottom-up’ actions and processes, in order to maximise their potential.
Potential Impact:
We believe that this project has produced substantial progress beyond the existing state of knowledge regarding the use of resources, the drivers behind it, its impacts and what may be done about it, as follows:
1) Developing a clear understanding of the reasons for inefficient resource use, and the economic, policy, legal and institutional factors that make moving towards more efficient resource so difficult to achieve. By developing the concept of a ‘web of constraints’ to resource efficiency, which encapsulates how these aspects, operating at different levels (from individual decision makers to EU level policy), dynamically interact, we move beyond the idea of individual ‘barriers’ to resource efficiency that may be addressed individually and in isolation.
2) Although increasing attention has been paid in recent years to resource efficiency in the environmental policy agenda at the EU level in particular, it is clear that the existing policy landscape is insufficient for producing a trajectory for achieving a resource-efficient economy in the EU. The primary focus for environmental policy has been on energy and climate change, and where policy for resource efficiency is present, the focus is on the ‘output’ side of resource use, with the input side either overlooked, or addressed through aspirational, non-biding objectives and targets. The EU’s the resource-efficiency agenda appears to have fallen into the ‘joint-decision’ trap, which favours the status quo and incremental policy shifts, rather than more radical, innovative policy approaches.
3) A wide range of concepts and paradigms are often touted as potentially substantial contributors to improving resource efficiency and promoting an environmentally sustainable economy. However, concepts that provide a vision of deep and far-reaching change, usually fail to provide a clear and credible pathway for implementation. Conversely, concepts that have a clear and credible pathway for implementation would likely result in incremental, minor change rather than radial shifts towards resource efficiency.
4) Due to the complex, dynamic interactions between the different components of the web of constraints, an alteration to one aspect may induce changes (either positive or negative) in other areas. As such, strategic policy interventions may transform the web of constraints to resource efficiency, into a ‘web of drivers’ for resource efficiency. Over time, windows of opportunity for the development and implementation of radical technologies, concepts, paradigms and practices, or the policy instruments to drive or facilitate them, that were previously untenable, may be opened.
5) The development of long-term core strategies and targets for the development of a resource-efficient economy is a key precondition to its achievement. The policy mix contained within or introduced to implement this strategy must hold three key characteristics. Firstly, the policy mix must be internally consistent. At a minimum, ‘weak consistency’ ((he absence of contradictions or conflicts within or between instruments and elements of the policy mix), must be achieved. Ideally, ‘strong consistency’ (the presence of complementarities, mutual support and synergies between instruments and elements of the policy mix), should be sought. The introduction of instruments that enable mutual benefits with existing instruments at both the EU and Member State level, and that aim to reduce the presence of negative interactions or side effects, should be a priority for the immediate future. The second characteristic is coherence of the policy processes for development, implementation and monitoring of instruments, within and between different levels of governance. Another priority for the future should be to improve co-ordination within and between governance levels for existing instruments relating to resource efficiency. The third and final characteristic is credibility and stability from the perspective of targeted entities and other market actors, to provide confidence in the market for long-term investment in resource-efficient technologies and practices.
6) Based on the analysis of scenarios applied to the novel coupling between economic and ecological models, it is clear that ‘decoupling’ between economic growth and resource consumption and environmental degradation may be achieved, and is desirable. A Business-as-Usual approach to the relationship between the economy and the environment (i.e. a future in which no additional measures are taken to improve the sustainability of resource use), produces highly negative consequences for both. Commodity prices rise, environmental pressures increase, GDP growth and employment reduces over time (both globally and in the EU). Social issue become prominent, along with increasing costs from climate change and the risk of ‘resource nationalism’ and conflict. In comparison, a globally co-operative effort to peruse a resource-efficient economy would produce significant environmental, economic and social benefits (both globally an for the EU). Whilst a global approach would be preferred, due to the international nature of challenges such as decarbonisation and the interconnected nature of resource supply chains, the EU still stands to gain substantially in terms of environmental quality, economic growth and associated social objectives (compared to a ‘business-as-usual’ future in a situation in which it peruses resource efficiency unilaterally. Aside from top-down policy, the modelling also suggests that a strong post-consumerism movement in European civil society may also achieve a resource-efficient economy. As such, the policy framework should facilitate ‘bottom-up’ actions and processes, in order to maximise their potential.
Such advances in the state of knowledge confirm to policy makers that continuing with current patterns and trends of resource consumption is likely to become increasingly detrimental to the environment, economy and society. By pursuing an international effort to decouple resource use from environmental degradation, or failing that, a unilateral EU-level approach, such impacts may be avoided. Whilst the current policy landscape insufficient to achieve this, a comprehensive long-term policy strategy, congnisant of the ‘web of constraints’, would alter our current trajectory and lead from incremental to radical improvements in resource efficiency over time.
Over the course of the project, members of the consortium were (and will continue to be) highly active in engaging with policy makers, industry, academia, NGOs and wider civil society, in order to disseminate these insights, and to encourage their adoption. Key dissemination events and activities include:
- A presentation to MEPs at the European Parliament in March 2015, on the lessons learned from the POLFREE project
- A presentation to the European Society for Ecological Economics conference entitled ‘Understanding the Bumpy Road to Resource Efficiency: From the Concept of Barriers’ towards ‘Web of Constraints’, in June 2015.
- A dedicated POLFREE/DYNAMIX workshop session, entitled ‘Resource Efficiency and the Circular Economy: Policy Mixes and Scenarios’, at the annual World Resource Forum (WRF) in Davos, Switzerland, in October 2015. POLFREE research was also presented in various other sessions at the WRF.
- A dedicated POLFREE workshop session, entitled ‘What does a Resource-Efficient Europe Look Like? Policy Options and Scenarios’, at the Ellen MacArthur Foundation’s ‘Disruptive Innovation Festival’ in November 2015.
- A joint, two-day POLFREE/DYNAMIX Final Conference held in Brussels in February 2016, designed specifically to disseminate the key lessons from the two sister projects to a wide range of participating stakeholders.
- A workshop for Dutch policy makers entitled ‘Implications of POLFREE scenarios for Dutch Energy Transition Policy’, in The Hague, in March 2016.
- A presentation at an event in the UK Parliament entitled ‘Spotlight on the Circular Economy’, in March 2016, in order to disseminate lessons from POLFREE in the context of the re-tabled EU Circular Economy Package.
- The creation of four, large-scale ‘info-murals’, to visualise the four scenarios developed under the project (three ‘transition’ scenarios, and a ‘Business-as-Usual’ case), and their associated modeling results. The final versions of these info-murals were displayed at the Final Conference.
- The creation of a dedicated ‘dissemination’ website (www.polfree.seri.at) containing interviews with key researchers from the consortium regarding the key insights from the project, information on the four scenarios developed by the project, as a set of six ‘Policy Briefs’ (see below).
- The production of six ‘Policy Briefs’, each focusing on a different element of the project. These briefs were first made available at the Final Conference, and are now permanently available on the POLFREE dissemination website. The briefs are entitled:
o Understanding the Web of Constraints to Resource Efficiency in Europe – Lessons for Policy
o Constraints to Resource-Efficient Consumer Behaviour
o Constraints to Resource-Efficient Business Models and Practices
o Global Governance for Resource-Efficient Economies
o Policy Mixes for a Resource-Efficient Europe
o Pathways to a Resource-Efficient and Low-Carbon Europe – Lessons from the Modeling
- Two specific dissemination items that will occur post-project are:
o The production of nine papers for a dedicated POLFREE Special Issue of the highly regarded academic journal Ecological Economics.
o A summary article on the key results and insights generated by POLFREE, to be published jointly by the French Embassy in London and the UK Chamber of Commerce periodical publication. This will also be presented at the London offices of accountancy firm PwC, to their staff and those from the business-community outreach charity ‘Business in the Community’, in June 2016.
List of Websites:
Project website addresses: www.polfree.eu (main project website) www.polfree.seri.at (dissemination website)
The three main priorities of ‘Europe 2020’, the 10-year economic growth strategy proposed by the European Commission in 2010, are: smart, sustainable and inclusive growth. The Flagship Initiative for a Resource-Efficient Europe is intended to contribute to the second of these. The Flagship Initiative, and the associated Communication on a Roadmap to a Resource Efficient Europe, provide the principal policy context for this project. The POLFREE (POLicy Options For a Resource Efficient Economy) project was structured around three core Work Packages (WPs), each with distinct but interlinked objectives; an assessment of ‘why have resources been used inefficiently? (WP1), the generation and examination of ‘new concepts and paradigms for policies for resource efficiency’ (WP2), and the construction of ‘scenarios and modelling of policy implementation for resource efficiency’ (WP3). The key results and insights from the project include:
- Development of the ‘web of constrains’ concept, which encapsulates how legislative, business and individual process and decision making, operating at different levels (from individual decision makers to EU level policy), dynamically interact to prevent improved resource efficiency.
- Concepts that provide a vision of deep and far-reaching change the relationship between resource use, the environment and the economy usually fail to provide a clear and credible pathway for implementation. Conversely, concepts that have a clear and credible pathway for implementation would likely result in incremental, minor change rather than radial shifts towards resource efficiency.
- Strategic policy interventions may transform the web of constraints to resource efficiency, into a ‘web of drivers’ for resource efficiency. Over time, windows of opportunity for the development and implementation of radical technologies, concepts, paradigms and practices, or the policy instruments to drive or facilitate them, that were previously untenable, may be opened
- The development of long-term core strategies and targets for the development of a resource-efficient economy is a key precondition to its achievement. The policy mix contained within or introduced to implement this strategy must be internally consistent, hold coherent processes for development, implementation and monitoring and hold credibility and stability.
- Based on the analysis of scenarios applied to the novel coupling between economic and ecological models, it is clear that a ‘Business-as-Usual’ approach to the relationship between the economy and the environment produces highly negative consequences for both. By comparison, a globally co-operative effort (or, failing that, a unilateral effort by the EU) to peruse a resource-efficient economy would produce significant environmental, economic and social benefits (both globally an for the EU). A global approach would be preferred, due to the international nature of environmental challenges and interconnected resource supply chains. The modelling also suggests that a strong, civil society-driven, post-consumerism movement in European civil society may also achieve a resource-efficient economy.
Members of the consortium were (and will continue to be) highly active in engaging with policy makers, industry, academia, NGOs and wider civil society. Key dissemination events included presentations and workshops at the World Resources Forum, EU, UK and Dutch policy making fora, academic conferences and public events. Other dissemination activities included the creation of ‘info-murals’, to visualise the scenarios developed by the project, the creation of a dedicated ‘dissemination’ website, and the production of ‘Policy Briefs’, each focusing on a different element of the project. The production of nine papers for a dedicated POLFREE Special Issue of the highly regarded academic journal Ecological Economics is currently underway.
Project Context and Objectives:
Compared to other environmental themes such as climate change, resource efficiency has been relatively slow to rise up the agenda of public policy. In Agenda 21, for example, the Plan of Action to emerge from the 1992 Rio Summit, it is mentioned only in general terms, such as the statement in Chapter 10 that “it is now essential to resolve these conflicts and move towards more effective and efficient use of land and its natural resources”, but there were no explicit actions or policies proposed for resource efficiency and in practice very little attention was paid to it.
A decade later, however, it had become clear at the EU level at least that the relationship between economic growth and resource use was unsustainable. In its report to the Rio +10 World Summit on Sustainable Development in 2002, the European Commission drew on the conclusions of the Göteborg Summit (EU 2001) the previous year and stated: “In order to bring consumption into line with the carrying capacity of the environment, progress is needed on decoupling resource use from economic growth through significantly improved resource efficiency, dematerialising the economy, and waste prevention.” Progress, however, was slow. The Thematic Strategy on the Sustainable Use of Natural Resources was not published until December 2005. Its major recommendation at the global level was the establishment of an International Resource Panel (IRP), which was first convened in November 2007. In various publications, the IRP have since stressed the importance of decoupling economic growth from resource use and environmental impacts (e.g. the 2011 report ‘Decoupling natural resource use and environmental impacts from economy growth’). Over the same period a new concern was emerging, partly at least driven by high rates of economic growth and growth in resource consumption in emerging economies, about possible scarcities and bottlenecks in availability of and access to key resources, especially those of key importance to new technologies, such as rare earths. Commodity prices have been volatile, and related economic disruption has been higher than in previous decades. Prudence under these circumstances argues that these mineral resources, as well as terrestrial and marine renewable resources, should also be subject to proportionate policies to promote resource efficiency. Aligning the international debate about competition for natural resources with resource efficiency is a striking new feature for emerging new policies. Given that this is a business concern, one may also expect positive side-effects for climate policy. Climate and energy policy issues have also become more important. The accidents of Deep Water Horizon and Fukushima as well as the reports of the IPCC underline the need to speed up moves towards renewable energies and improve energy efficiency. Even more relevant for the purpose of this call are the implications for using other natural resources: fossil fuels are certainly a key natural resource from an environmental viewpoint, but so are land use and biotic resources. The criticality of some resources required for green technologies are also an emerging concern.
These are the main considerations that have led to the inclusion of resource efficiency in Europe 2020 “the EU’s growth strategy for the coming decade”, the three main priorities of which are: smart growth, sustainable growth and inclusive growth. The Flagship Initiative for a Resource-Efficient Europe is intended to contribute to the second of these. For the European Commission, “Resource efficiency means using the Earth's limited resources in a sustainable manner ... Many natural resources are fundamental to our health, well-being and quality of life, so it is essential that we respect the natural limits of the planet's key ecosystems.” The Flagship Initiative on Resource Efficiency, and the associated Communication on a Roadmap to a Resource Efficient Europe, provide the principal policy context for this project.
The POLFREE (POLicy Options For a Resource Efficient Economy) project was structured around three core Work Packages (WPs), each with distinct but interlinked objectives:
- WP1 – Why have resources been used inefficiently? This WP saw the construction of a theoretical framework to assess how resources are currently used and why, with detailed analysis of the trends and policies at EU and Member State (MS) level, cross-country econometric analysis to derive resource-reduction cost curves, and an analysis of constraints to resource efficiency amongst businesses and individuals.
- WP2 – New concepts and paradigms for policies for resource efficiency. This WP explored new concepts and paradigms that may be able to bring about a radical increase in resource efficiency. This included new, resource-efficient business models and ideas for global governance approaches to promote resource efficient economies. This WP also developed a vision for a resource-efficient economy in the EU, and proposed and assessed policy mixes that may be implemented to achieve this vision.
- WP3 - Scenarios and modelling of policy implementation for resource efficiency. This WP saw intensive work on creating, modelling and visualising scenarios for the emergence of resource-efficient economies, through linking quantitative economic and ecological models, and simulating the policies and policy mixes derived in the earlier work, supplemented by LCA analysis for selected products and sectors, to ensure that the policies and business models in the scenarios lead to adequate absolute decoupling of economic activity from resource use and environmental degradation. The scenarios and associated policy analysis were interpreted across economic, ecological and social dimensions.
Project Results:
What are the key characteristics of a resource-efficient economy?
In 2011, the European Commission published a ‘Roadmap to a Resource-Efficient Europe’ by 2050; a key component of the ‘Resource-Efficient Europe Flagship Initiative’, itself part of the Europe 2020 strategy. The overarching objective of this Roadmap is to lay the foundations to achieve the following:
‘By 2050 the EU’s economy has grown in a way that respects resource constraints and planetary boundaries, thus contributing to global economic transformation. Our economy is competitive, inclusive and provides a high standard of living with much lower environmental impacts. All resources are sustainably managed, from raw materials to energy, water, air, land and soil. Climate change milestones have been reached, while biodiversity and the ecosystem services it underpins have been protected, valued and substantially restored.’
This formed the basis for development of the POLFREE ‘Vision’ for a resource-efficient economy in Europe. The Vision, developed by and presented in Deliverable 2.2 provides key qualitative and quantitative characteristics that such an economy should exhibit in 2050. These characteristics were derived first through the identification of significant ‘sustainability visions’ that have been developed in recent years, and then through their subsequent analysis against a common analytical framework, which focuses on two assessment pillars – ‘nature’ and ‘wellbeing and quality of life’. The Vision was then refined in a consultative process with stakeholders.
A key output of this process was the generation of quantitative headline targets for the environmental characteristics of a resource-efficient European economy in 2050. Eight such targets were developed – two for each of the four key major resource categories (materials, land, water and carbon). These values were first derived through an assessment of the (in)consistencies in broad objectives of the existing ‘sustainability visions’, their specific targets, the extent to which these targets converge or diverge, and their realism (based on current understanding of the topics at hand). This process was then complemented by stakeholder consultation. These headline targets are presented in Table 1.
There exists a ‘Web of Constraints’ to a resource-efficient economy
It is clear that across the economy, individually and as a collective, do not use resources as efficiently as we might. A first step in developing a resource-efficient economy is to determine why this is the case. It is common in this respect to consider resource-inefficiency, and other ‘non-optimal’ behaviour and outcomes, to be the result of individual ‘barriers’ or ‘market failures’. Examples include market externalities (such as CO2 emissions or other pollution), split incentives (such as the ‘landlord-tenant dilemma’, in which the landlord is not incentivised to invest in energy efficiency measures as it is the tenants that would receive the benefit), and information failures.
However, Deliverable 1.1 concludes that resource-efficient behaviour, or the absence of it, depends on many factors in simultaneous operation and dynamic interaction. As such, the concept of individual, independent ‘barriers’ to resource efficiency is not sufficient. Instead, a concept of a ‘web of constraints’ is more appropriate. An example of such dynamic factors that comprise a web of constraints acting against resource-efficient heating behaviour in residential properties is illustrated in Figure 1.
The web of constraints refers to the relationship and dynamic interaction between individual, organisational and institutional behaviour patterns, inertia and direct and indirect interconnections between the institutional, social and individual levels. For the purposes of assessing the nature of the existing web of constraints to resource efficiency in the EU, the POLFREE project categorised its components as constraints acting within and emanating from the policy and legislative framework (at the EU level and Member State level), within and acting upon business, and those action upon and emanating from individuals as citizens and consumers.
Policy and Legislative Constraints – European Union
The EU has one of the most advanced policy frameworks in the world for environmental protection, which has steadily grown in both coverage and ambition over time. Resource efficiency has received increasing attention in the environmental policy agenda in recent years, driven significantly by price volatility in commodity markets and its potential impact on supply chains and industrial competitiveness (see Deliverable 1.2). The ‘Europe 2020 strategy for smart, sustainable and inclusive growth’, with its resource efficiency flagship initiative, currently provides the strategic framework for resource efficiency policy development. However, it is clear that the existing policy landscape is insufficient for producing a trajectory for achieving a resource-efficient economy.
The primary focus for environmental policy has been on energy and climate change, with other issues of resource efficiency such as materials, waste and land, largely overlooked in the European policy landscape. In addition, there is a clear focus on the ‘output’ side of the use of resource in the economy (e.g. the generation of waste and pollutants), on which binding targets may be found (e.g. GHG targets), with the ‘input’ side either largely overlooked or addressed through aspirational, non-binding objectives and targets. Indeed, the absence of a more comprehensive set of indicators and associated targets on resource (including materials) efficiency, or resource productivity (GDP/RMC), is a key gap in the current EU strategy on resource efficiency. The European Resource Efficiency Platform proposed in 2014 to introduce such a target (set at a 30% increase in resource productivity by 2030 – a value double that of the existing trend) (see Deliverable 1.2). However, there is evidence to suggest increasing resistance from some Member States to accept quantitative, binding targets (opposition to additional targets for waste prevention, landfill and recycling exemplifies this). Resistance has also been observed in areas such as soil protection, water and air quality. In addition, the resource-efficiency agenda appears to have fallen into the ‘joint-decision’ trap, which favours the status quo and incremental policy shifts, rather than more radical, innovative policy approaches (See Deliverable 1.7).
The first Circular Economy Package, issued in July 2014, did relatively little to alter this picture. It sought to increase existing targets for the recycling of municipal waste and packaging through binding targets, and ban all separated waste from landfill by 2025. Most other provisions and targets were aspirational, however this did include an EU wide target of a 30% increase in resource productivity by 2030, as discussed above. The Package was withdrawn in December 2014, after which it was announced it would be re-introduced with ‘more ambitious’ aims. The reintroduced Package, issued in December 2015, actually reduced the proposed binding targets for recycling, and removed the 2030 resource productivity target. However, it introduced a binding target of limiting landfilling to 10% of all waste by 2030, which was previously a 25% ‘aspirational’ target by 2025. Additionally, it proposed future changes to elements relating to the upper tiers of the Waste Hierarchy, such as a revision of the Ecodesign Directive to improve the ability for product re-use and recycling. However, the majority of such elements are aspirational, and do little to alter the focus on the lower tiers of the Hierarchy.
In line with the concept of the dynamic web of constraints concept described above, different EU policy instruments and their component objectives, targets and operating mechanisms experience multiple interactions – of both a synergistic and conflicting nature. Figure 2, produced by Deliverable 1.2 illustrates such mutually re-enforcing relationships (green) and those in conflict (red) between different policy objectives.
Figure 2 illustrates that the recycling of waste, for instance, could in principle also reduce the consumption of primary raw materials and associated CO2 emissions (although to date no evidence has been found that increased levels of material recycling and resource productivity in the EU have led to decreased demand on primary materials). However, examples of conflicting relationships are more prominent. A key element of EU Transport policy is to encourage the free movement of people and goods, as part of the single market. However, transport is also a significant source of air pollution, land use and fragmentation, and material use. While the link between transport and air pollution has been the primary focus of sustainable transport policies at the EU level, little attention has been paid to material and land use implications (See Deliverable 1.2).
Inconsistency may occur laterally, such as the examples given above, but also over time. An example is EU waste policy. After years of encouraging investment in high-cost incineration infrastructure, the EU shifted focus to emphasise the role of recycling and a limit on incineration of non-recyclable materials. Whilst justified from a resource efficiency perspective, this implies a double investment in waste management infrastructure and competition for waste streams, increasing costs substantially and potentially producing stranded assets (See Deliverable 1.2).
Policy and Legislative Constraints – Member States
There is substantial variation across Member States in terms of resource productivity, and in trends over time. Whilst some countries experienced reducing resource productivity, several countries indicate relative and even absolute decoupling between Domestic Material Consumption (DMC) and GDP growth. Whilst this variation is likely in part to be driven by the varied institutions, policy instruments and frameworks in place across Member States, it must be noted that a substantial factor is likely the growth in outsourcing of primary material extraction (see Deliverable 1.7) rather than a reduction in Total Material Requirement (TMR). Deliverable 1.3 concluded that correlating resource efficiency policy with resource use outcomes is a highly complex exercise, as the dynamic interaction between factors in the ‘web of constraints’ makes it difficult to isolate individual ‘success factors’ (See Deliverable 1.2).
However, Deliverable 1.3 highlights some key weaknesses in the policy framework that may be found in many Member States. A key example is the level of environmental taxation. The weighted average of revenue from environmental taxes in the EU is marginal compared to other types of taxes (such as those on labour), and in 2008 represented just 2.4% of GDP. In addition, the majority of such taxes are energy and transport, with pollution and resource taxation representing just 5% of the total. A key factor in this may be political resistance to such taxation. However, this circumstance is made more serious given the common presence of direct and indirect subsidies to resource-intensive sectors and activities. Various other common weaknesses may be highlighted, such as policy inaction, the use of qualitative rather than quantitative targets, insufficient policy coherence (including a lack of clarity regarding the division of institutional responsibility), information deficits and the strong influence of vested interests.
Another issue is a common inconsistency between policy principles and objectives, and the instruments introduced. A key example, linked to that at the EU level, may be found in the waste sector. Whilst application of the waste hierarchy in policy making should lead to the optimisation of resource use, the focus of policy has been largely on landfill diversion rather than the reduction of waste generation in the first place. As discussed above, under both iterations of the Circular Economy Package proposal, this generally remains the case.
Business-Related Constraints
Deliverable 2.4 concluded that there are three types of Resource Efficiency Measures (REMs) that a business enterprise may undertake:
- Product-oriented measures – Improving the resource-efficiency products or services provided by the business, through redesign of the product or service, or substitution for a more resource-efficient alternative.
- Operational-oriented measures – Improving the resource-efficiency of the internal operations of the business and its supply chain, through, for example, cleaner production, green supply chain management and energy efficiency measures.
- Lifecycle measures – Improving the resource-efficiency of the product or service provided across its entire lifecycle, such as through industrial symbiosis, cradle-to-cradle design and the ability to remanufacture.
Deliverable 2.4 assessed the potential for different examples of such measures, and determined that three measures in particular – green (business) services, cradle-to-cradle design and industrial symbiosis – hold particular promise. Such measures not only hold substantial potential for resource-efficiency gains, but also boost business competitiveness (often across the value chain) (see Deliverable 1.7)
However, Deliverable 1.5 identifies five key (interlinked) categories of constrains that businesses may experience that act to prevent the widespread adoption of these and other REMs, as illustrated in Figure 3.
Institutional constraints are those set by political and governing institutions, including the policy landscape (discussed above), the process by which policy is made, and the level to which they are enforced. Linked to this are market constraints, which include market failures (such as the market externality of pollution), barriers to market entry, monopolistic structures, environmentally harmful subsidies, information deficits and split incentives. This also relates significantly to constraints associated with the role of individuals as citizens/consumers, discussed below. Organisational constraints are those present within a business itself. Examples include supply chain issues, insufficient labour force capabilities, lack of available funds, firm culture and a lack on information. In turn, this links to behavioural constraints exhibited by individuals within the firm, including management and employee attitude to innovation and change, and attitudes and social values. The final category, technological constraints, includes the availability of technology, its cost, its compatibility with the firm and its operations, and with other categories of constraints outlined above (see Deliverable 1.5).
Constraints with Individuals and Consumers/Citizens
Deliverable 1.6 conduced a survey of households, held focus groups and conducted in-depth qualitative interviews across three EU Member States (Austria, Hungary and the Netherlands), in order to assess drivers and constraints to resource efficiency amongst individuals as citizens and consumers. A key conclusion of this investigation was that the public are interested in adopting resource-efficient behaviour, but mostly for non-environmental reasons. For example, whilst around half of the population surveyed indicated a willingness to reduce personal car use, the principal reasons behind this were to save money and to get more exercise. Additionally, whilst between two-thirds and half of respondents in the different countries examined expressed a desire to eat less meat and fish, the primary drivers for this were concerns over personal health and animal welfare. However, regardless of the motivation, such desire is generally not converted into action. As with business-related constraints, the web of constraints acting on individuals as citizens and consumers to prevent this may be broadly grouped into interlinked categories, as illustrated by Figure 4.
Personal factors (including individual characteristics, preferences, attitudes, experiences motivation, knowledge, awareness, location of employment and residence, etc.), societal factors (including culture, social norms and traditions, etc.), policy factors (including policy and legislative framework constraints, discussed above), and organisational factors (including the availability of resource-efficient products and services, advertisement and promotion of different products, etc., heavily linked with business related-constraints discussed above), all interact to produce a web of constraints to resource efficiency amongst individuals.
The presence of and interaction between these factors leads to an apparent inconsistency in resource-efficiency behaviour between individuals and between countries. For example, Deliverable 1.6 finds that practicing recycling is not correlated with reduce personal car use. This may be, for example, due to the lack of poor quality public transport as an alternative (a commonly cited constraint), preventing resource-efficient behaviour (i.e. an ‘organisational’ factor – lack of availability of infrastructure or appropriate products and services).
The ‘Web of Constraints’ may become a ‘Web of Drivers’ for resource efficiency, with the appropriate interventions
Deliverable 2.1 undertook an assessment of thirty of the most prominent concepts and paradigms often touted as potentially substantial contributors to improving resource efficiency and promoting an environmentally sustainable economy. Each concept was assessed in order to examine it’s potential for contributing to such an objective, using three criteria:
- Scope of change. At what scale does the concept focus? Does it focus on improving resource efficiency in a specific sector, a wider value chain, or does it seek to alter the operation of a societal (sub)-system?
- Paradigmatic degree of change. How far does the concept seek to alter activities within the existing utilitarian, neo-classical paradigm, or how far does it seek to change this overarching paradigm? For example, does the concept focus on market-based solutions, does it encourage recognition of the public good character of resource-related issues (and this the need for government intervention), or does it seek to induce fundamental paradigm shifts in the economic system, in values, or institutions?
- Clarity of change. Does the concept provide a clear and explicit pathway or formula for how it may be implemented, and what implementation may mean? Or is it unclear in such respects, and only provide a vague or conceptual definition?
Each concept was awarded a ‘high’ (1), ‘medium’ (0) or ‘low’ (-1) score for each criterion. A summary of the analysis is illustrated in Table 2. For more information, including definitions of each of the concepts, please refer to Deliverable 2.1
From this analysis, Deliverable 2.1 drew two key conclusions. The first is that concepts that provide a vision of deep and far-reaching change, usually fail to provide a clear and credible pathway for implementation. The second is that concepts that have a clear and credible pathway for implementation would likely result in incremental, minor change rather than radial shifts towards resource efficiency. The reasoning behind these conclusions is relatively intuitive. Radical, paradigmatic change implies a shift away from existing practices, infrastructure and in some cases power structures, such that securing the societal and political will to implement them is, in the short-term at least, extremely difficult. Such a situation is emblematic of the web of constraints.
Due to the complex, dynamic interactions between the different components of the web of constraints, an alteration to one aspect may induce changes (either positive or negative) in other areas. As such, strategic policy interventions may transform the web of constraints to resource efficiency, into a ‘web of drivers’ for resource efficiency. Over time, windows of opportunity for the development and implementation of radical technologies and practices, or the policy instruments to drive or facilitate them, that were previously untenable, may be opened (see Deliverable 1.1). Due to the mutli-aspect nature of resource-inefficiency and its consequences, and the web of constraints to its correction, a ‘first-best optimum’ approach of applying a single policy instrument to counter the problem is insufficient. A policy instrument mix, instrument applying ‘second-best’ theory and the Tinbergen Rule, must be employed (see Deliverable 2.3).
Deliverable 2.3 identified nine policy ‘fields’ from which instruments in the policy mix may be drawn. Under each policy field, three instruments were selected for further analysis, representing instruments aiming to achieve ‘low-hanging fruits’ in resource efficiency, more direct market interventions, and those that aim at inducing a systematic transformation of production and consumption patterns. Each instrument in each policy field was assessed against the following six design criteria:
- Stringency – The ambition of the instrument, relative to existing characteristics of targeted actors and contextual (e.g. market) factors.
- Profitability – Whether or not implementation of the instrument would likely lead to a financial return to targeted actors.
- Predictability – The certainty and foreseeability of the detail of the instrument (now and in the future), and subsequent impacts.
- Flexibility – How prescriptive the instrument is in how targeted actors must meet its requirements, and the options available to do so.
- Differentiation – The level to which the instrument places differentiated requirements or other properties on actors with different characteristics or contextual conditions.
- Depth – The extent to which the instrument provides an incentive to continually improve or stimulate investment in resource efficient technologies and practices.
Each instrument was assigned a score of 1 to 5 against each of these criteria, with 1 indicating a low score (e.g. low stringency, poor profitability, etc.), 5 indicating a high score (e.g. ambitious, highly predictable, etc.). From this assessment, Deliverable 2.3 drew three key conclusions. The first is that the more ambitious (stringent) an instrument is, the lower the immediate profitability to the actors targeted. There is a clear trade-off between those instruments that offer the highest potential for increasing resource efficiency, and those that are most easily introduced (as discussed above). The second conclusion is that there is a clear trade-off between the predictability of an instrument, and its flexibility. This is a relatively intuitive notion. Taking the example of a tax, a clear, long-term rate trajectory comes at the expense of the ability of policy makers to alter it in light of contextual developments (such as technological developments, or evidence of effectiveness). However, there are approaches to deal with this trade-off, such as pre-determined rules for the revision of key design elements (e.g. degression mechanisms for renewable support instruments). The third conclusion is that there is a trade-off between the level of specificity (differentiation) of an instrument and its depth. For example, whilst regulatory instruments are more easily able to take into account different characteristics between sectors, firms or regions, they tend not to provide the dynamic incentive to continually improve resource efficiency (beyond the level required by the regulation). The reverse generally holds true for economic instruments, such as taxes.
These conclusions further solidify the need for a policy mix, in order to overcome or reduce the presence of these trade-offs. Deliverable 2.3 also advances criteria for selecting the appropriate instruments for development of an effective resource efficiency policy mix. The first is consistency, which may be defined in terms of ‘weak consistency’ (the absence of contradictions or conflicts within or between instruments and elements of the policy mix), and ‘strong consistency’ (the presence of complementarities, mutual support and synergies between instruments and elements of the policy mix). The introduction of instruments that enable mutual benefits with existing instruments, and that aim to reduce the presence of negative interactions or side effects, should be a priority.
Broadly, any instrument that internalises negative externalities (such as a resource intensity-based tax) or reduces perverse subsidisation (environmentally harmful subsides), acts to improve the overall efficiency of market processes and acts in a mutually supportive manner with other categories of policy instrument (in a well-designed mix). However, there is also a wide range of potential conflicts. An example is instruments intended to directly promote electric vehicles, in order to reduce emissions of greenhouse gasses and local air pollutants. Deliverable 3.6 undertook lifecycle assessments (LCA) of electric (lithium-ion) passenger cars (EVs), and an internal combustion passenger car (diesel and gasoline). Whilst the lifecycle of EVs does indeed produce fewer GHG and local air pollutant emissions (although the manufacturing phase is around double the GHG intensity than for internal combustion vehicles, this is offset by the ‘use’ phase of the vehicles), they require more intensive use of metals, chemicals and energy (again during the manufacturing stage), and produce significantly higher toxicity impacts both in terms of human health and for water contamination. As such, an instrument mix that does not account for such impacts is not producing effects fully consistent with its objective.
The second criterion of an effective resource efficiency policy mix is coherence of the policy processes for development, implementation and monitoring of instruments, within and between different levels of governance. Such a criterion is particularly important in the EU, with competences split between the EU, national and local levels. Indeed, Deliverable 4.2 that a division in competences in such a way is desirable; whilst some instruments may be most effectively and efficiently applied at the EU level, some instruments are more appropriately introduced at the national or local levels. A priority for the existing policy mix in the EU should be to improve co-ordination within and between governance levels for existing instruments.
The third and final criterion is credibility and stability from the perspective of targeted entities and other market actors, to provide confidence in the market for long-term investment in resource-efficient technologies and practices. Credibility is influenced by a range of factors, such as political commitment, the operationalisation of targets by the instrument mix, and the delegation of competences to independent agencies. Of course, consistency and coherence of the policy mix and related processes are also important factors in whether actors perceive the instrument mix to be credible. Similarly, instrument mix stability is linked to the ‘flexibility’ and ‘predictability’ assessment criteria applied to individual instruments, as discussed above. However, ‘stability’ also concerns overarching strategies, targets and policy processes that transcend individual instruments. Indeed, the development of long-term core strategies and targets for the development of a resource-efficient economy is a key precondition to its achievement (see Deliverable 2.3).
Policy intervention to achieve a resource-efficient economy by 2050 would be environmentally and economically beneficial
Governance and Resource-Efficiency Transition Scenarios
Deliverable 2.5 sought to map out, describe and analyse the different approaches to governance of resources, the actors involved, and the interactions between them. Figure 5 illustrates the results of this analysis.
From Figure 5, two distinct governance approaches and three categories of actors may be distilled. The first approach is ‘top-down’ governance, led by two categories of governance actors - international institutions and local, national and supra-national governments. Top down governance driven by international institutions (such as the Bretton Woods Institutions and UN Institutions and Agencies) occurs through both ‘hard law’, such as binding multilateral agreements or conventions, coming into effect when ratified by the majority of countries, and ‘soft law’ such as objective-based, non-binding ‘agreements’ and co-operative initiatives. Examples of the former with most relevance to resources include the Convention on Biological Diversity, The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, and The Convention on the Protection and Use of Transboundary and International Lakes. Examples of the latter include Agenda 21, the Millennium Declaration and the recently developed Sustainable Development Goals (SDGs). At present, no specific permanent international organisations exist for the management of resources. Top-down governance driven by local, national or supranational governments (such as the EU), includes both the implementation of international governance mechanisms, but also provides the specific policy and regulatory framework actors within those jurisdictions are subject to, and may also introduce ‘soft’ initiatives.
The second approach is ‘bottom-up’ governance, driven by the third category of actors - civil society (including individuals, companies, NGOs, community groups and academics). ‘Bottom-up’ governance mechanisms of particular relevance to resource management include voluntary certification schemes (such as Fair Trade and Marine Stewardship and Forestry Stewardship Certification), Corporate and Social Responsibility (CSR) reporting, and the Model Mining Development Agreement Project. Deliverable 2.5 concludes that such mechanisms are traditionally thought of as local and regional level activities, however increasingly they are having a global reach.
Based on the categorisation of actors developed by Deliverable 2.5 Deliverable 3.5 defined three alternative, plausible future socio-economic development pathways to achieve the Vision for a resource-efficient economy in 2050, as described above, and the associated headline targets presented in Table 1. For each scenario, specific narratives and policy mixes were developed for each of the key resource-intensive sectors (power, industry, buildings, mobility and land use). The policy instruments include combinations and different emphases on economic instruments (e.g. taxes and subsidies), regulation (e.g. standards, binding targets, bans), cooperation instruments (e.g. international agreements), information-based instruments (e.g. certification, labelling and awareness campaigns), Research, Development and Innovation (RD&I) (e.g. research funding), and ‘self-committing’ elements (e.g. changes in values and behaviour, that may or may not be stimulated through policy initiatives). Each scenario was subject to stakeholder consultation before finalisation. The three scenarios are:
- Global Cooperation – Global commitment to resource-efficiency and a sustainable economy is expressed through strong, binding targets and processes set by multilateral agreements, with all countries committed to achieving their aims (with the EU playing a strong global role). The emphasis shifts to ‘green growth’, with integrated resource markets generating a high level of trade in commodities (supported by agreements on transparency and governance). An Integrated Resource Management Agency (IRMA) is established to support global information gathering and sharing, and to co-ordinate and implement resource-related targets, instruments and processes across different policy fields. Harmonised market-based instruments predominate, with lifestyles and preferences of society driven by extrinsic motivations, and shaped by top-down structures and systems.
- EU Goes Ahead - Multilateral agreements and processes are present, but are manifest mainly through issue-focussed ‘coalitions of the willing’, concerned with information sharing and voluntary measures. Although a global commodity market is in place, availability of resources is commonly disrupted due to instances of ‘resource nationalism’. This contributes to the decision by the EU to unilaterally pursue a resource-efficient, environmentally sustainable economy by 2050, through ‘green growth’. Top down structures and market-based instruments again dominate (with mechanisms introduced to protect the international competitiveness of Industry in the EU), supported by regulations and standards, with the focus on developing and deploying new resource-efficient, low-carbon technologies, rather than wholesale changes in behaviour.
- Civil Society Leads - As with ‘EU Goes Ahead’, although multilateral agreements and processes are present, they are relatively weak, and disruption to the free trade in resources is relatively common. Although in this scenario the EU again pursues a transition to a resource-efficient, low-carbon economy, this is driven by intrinsic changes in the behaviour and preferences of civil society and non-governmental actors. The role of the EU and Member State governments is not so much to lead the transition, but to create the appropriate conditions for this bottom-up process to develop. Significant changes in the lifestyle of European citizens occurs, including a focus on local, seasonal food, a radical shirt from personal transport to public transport, walking and cycling, and a dramatic decrease in employment in the formal economy in favour of volunteering in the local community, and increased leisure time. Progress is measured using a ‘Beyond GDP’ approach, which incorporates health, happiness and the ‘ecological rucksack’ of the individual.
A Business-as-Usual scenario was also elaborated, in which increased concern for the environmental sustainability of the economy fails to materialise, either with ‘top-down’ institutions (international, EU-level, national or local), or ‘bottom-up’, civil society actors. As such, associated policy measures in the EU or the rest of the world are not introduced, or for those currently in place, ambition is not increased.
Modelling Approaches and Modelling Results
In order to assess the implications of the three scenarios for the transition to a resource-efficient economy, each scenario was analysed by two economic models of different theoretical backgrounds – GINFORS and EXIOMOD.
GINFORS is a global model, with a deep sectoral and regional structure. It uses a Neo-Keynesian theoretical approach, with assumptions of bounded rationality, agents acting with information deficits on imperfect markets, with imperfect foresight regarding future developments. The integration of a Multi-Regional Input Output (MRIO) model means that GINFORS is able to calculate all direct and indirect emissions and material flows related to the activity of the sectors and countries depicted (see Deliverable 3.7a).
EXIOMOD (Extended Input-Output MODel) is a Computable General Equilibrium (CGE) model, which uses standard Walrasian closure to guarantee equilibrium between supply and demand. Prices and quantities are perfectly flexible and adjust in each time period to clear all markets. The ‘extended’ definition refers to the ability of the model to extend the analysis of a standard Input-Output (IO) analysis to environmental impacts (amongst others). EXIOMOD employs the detailed Mutli-regional Environmentally Extended Supply and Use Input-Output database EXIOMOD, which estimates emissions and resource extractions by sector, and trade in different commodities between countries (in both monetary and physical terms) (see Deliverable 3.7b).
In order to allow for a holistic analysis, GINFORS and EXIOMOD were both linked to the Lund-Postdam-Jena dynamic global vegetation model with management land (LPJmL). LPJmL uses process-based representations of major bio-geochemical, bio-geographical and bio-geophysical processes to simulate the role of vegetation and soils in the earth system, particularly with respect to their influence on the global cycles of carbon and water, the effects of human land use on the global environment, and the impacts of climate change on natural ecosystems and agriculture. Such coupling required new features and modules in both GINFORS and EXIOMOD, to maintain consistency in the analysis and to facilitate data exchange. Such technical aspects are detailed in Deliverable 3.1 and Deliverable 3.3 for EXIOMOD, and Deliverable 3.2 and Deliverable 3.4 for GINFORS.
The first key conclusion resulting from the application of the four scenarios (the three ‘transition’ and the Business-as-Usual scenario) to the two model couplings is that different modelling approaches may produce very different results and conclusions. Whilst the ‘transition’ scenarios applied to the GINFORS/LPJmL coupling largely achieve the targets for a resource-efficient economy as presented in Table 1, this is not the case in the EXIOMOD/LPJmL coupling. This may be explained by three key differences between the models and simulations. The first and most important key difference is the modelling principles employed by the two economic models. GINFORS employs a Neo-Keynesian approach using econometrically based parameterisations, whilst EXIOMOD employs a CGE approach using literature-based parameterisations. In EXIOMOD, the assumption of price elasticities of zero for intermediate demand means that taxation of such goods on a resource-intensity basis is not able to change the structure of production directly. This is a key contributor to the inability of the EXIOMOD/LPJmL model coupling to successfully project a resource-efficient future. Additionally, the assumption of a price elasticity of demand of -1 for consumption goods shifts the supply function to the right, and generates a new equilibrium with a lower price and a higher demand and production. This raises the input of resources. This rebound effect is strengthened by a strong reduction in imports, which have a price elasticity of -5. As such, the reduction of the consumer price will strongly reduce imports and increase domestic production further. The second key difference is the different approach to implementing the scenarios and associated policy mixes in the models. The third key difference is the specific implementation of the Reference (Business-as-Usual) scenario, against which the ‘transition’ scenarios are compared (See Deliverable 3.7c). For these reasons, the remaining conclusions from the modelling are based on the results of the GINFORS/LPJmL coupling.
Four key conclusions may be taken from the (GINFORS/LPJmL) modelling. The first is that a Business-as-Usual approach to the relationship between the economy and the environment produces highly negative consequences for both. By 2050, increasing consumption of fossil fuels driven by economic and population growth leads to global CO2 emissions more than doubling from 1990 levels, producing an increase in global average surface temperatures of between 4 and 6°C by the end of the century. Other environmental pressures also increase to 2050, such as an increase in global raw material consumption per capita (~40% from present levels), global water abstraction (~35% from 2000) and agricultural land use (~10% from present levels). Such increasing demand induces higher prices for key commodities, such as oil, ores and crops (average increase in real prices by 1.6%, 4% and 2.1% per year, respectively). Average GDP growth rates reduce over time, both globally (from around 2.6% over the last 20 years, to 2.1% from the present day to 2050), and in the EU (from around 1.5% over the last 20 years, to 0.9% from the present day to 2050). Employment reduces by around 30 million by 2050 (a reduction of around 15% from current levels). In this future, the risk of resource nationalism and conflict increases over time, along with social issues resulting from increased prices for essential commodities (e.g. crops) (see Deliverable 3.7a). Substantial costs from the impact of climate change may also be expected, but are not considered in the simulations.
The second key conclusion from the modelling is that global cooperation to achieve a resource-efficient economy would be highly favourable against a Business-as-Usual approach. In the Global Cooperation scenario, global CO2 emissions peak at around 2020, and decrease to around 11% below 1990 levels by 2050. The policy mix induces strong investments in new resource-efficient technologies, reducing demand for resources, and consequently prices (including food prices), against the Business-as-Usual scenario. All environmental targets listed in Table 1 are achieved. Social tensions arising from increasing food prices in the Business-as-Usual scenario are likely to be less prominent (if not diffused), along with the risk of resource conflicts and damage costs from climate change. Global GDP is consistently higher than in the Business-as-Usual scenario (5.2% by 2050), whilst GDP in the EU is even stronger (8.2% by 2050) - a function of the role of the EU as a consumer rather than producer of resources. Employment is also higher. Only some resource-producing industries, such as mining and quarrying, coke and refined petroleum and food and beverages, experience reduced value-added against a Business-as-Usual trajectory; all other economic sectors are ‘winners’. The results of this scenario suggest that an appropriate policy mix, when well targeted, may produce economic as well as environmental benefit, leading to ‘decoupling’ of economic growth and environmental degradation, both within the EU and globally.
Indeed, the results of the modelling and the findings of Deliverable 2.5 suggest that resource efficiency and the sustainable use of resources can and should be tackled at the international level. Given the high and increasingly interconnected nature and interdependency of international trade, and the transboundary impacts of environmental degradation (including climate change), a cooperative global effort would be the approach most likely to guard against the environmental, economic and social consequences a Business-as-Usual scenario is projected to bring. As the world’s largest importer, a member of the G8, home to three of the top ten largest stock exchanges in the world (by market capitalisation) and to four of the 10 largest companies globally (based on the Fortune 500), Europe is a significant player in global governance, and can use its influence in agenda setting at important international fora to ensure that resource use sustainability remains in focus. Priorities for action may be to establish a clear and targeted governance structure for resources, perhaps through the establishment of an Integrated Resource Management Agency (as discussed in Section 5.1). There are also clear opportunities to address some issues of resource use sustainability, such as through extended Sustainable Commodity Agreements.
However, it must be recognised that there is general scepticism surrounding multilateral approaches to environmental issues. Until recently, this was exemplified by the repeated failure to reach a global consensus on a process to tackle climate change. If a globally cooperative approach fails to materialise in the foreseeable future, the EU may reap substantial benefits if it pursues resource efficiency unilaterally. Under the EU Goes Ahead scenario, the EU is the only region in the world that rigorously improves its resource efficiency and the environmental impact of their use (meeting the targets presented in Table 1). By doing so, it insulates itself from increasing commodity prices (which increase in line with the Business-as-Usual scenario, as the reduction in EU resource consumption is relatively insignificant in the face of continually increasing global demand). It also realises a first-mover advantage through the development and deployment of new resource-efficient technologies and behaviours. As such, GDP in the EU grows at a higher rate than in the Global Cooperation scenario, to 12.4% larger than the Business-as-Usual scenario by 2050, whilst employment is increased by 3.5 million jobs (~2%) by 2050 against the Business-as-Usual scenario (see Deliverable 3.7a). Deliverable 1.4 concludes that even limited increases in efficiency in the use of key resource inputs to industrial processes in the EU would yield a global reduction in resource extractions by up to 2 billion tonnes within five years, accompanied by an increase in EU GDP by 0.1-0.6% per year. However, as the rest of the world continues along a Business-as-Usual pathway, leading to the increasing potential for conflicts and damages from climate change (CO2 emissions remain on a trajectory for 4°C increase), the implications of which are not examined by the models but which are likely to be costly, a globally cooperative approach should remain the priority.
The modelling also suggests that a strong post-consumerism movement in European civil society may also drive resource efficiency, and achieve the targets presented in Table 1. Whilst international developments are similar to those under the EU Goes Ahead scenario, key differences emerge in the EU. Although the impact on employment is positive (9% increase in the number of jobs by 2050 against Business-as-Usual), this is a result of the increase in part-time jobs and reduced working time per capita. This produces lower labour productivities and wages. Annual GDP growth reduces to zero by 2050, with the absolute size of the EU’s economy over 21% lower than Business-as-Usual by 2050. However, it is also assumed that this scenario emerges as a ‘Beyond GDP’ future in the EU, in which measures of progress are diversified beyond growth in GDP.
Although an independent shift in culture towards more resource-efficient practices and preferences may achieve the Vision of a resource-efficient economy described in Section 2, policy makers cannot rely on such a shift coming to pass. However, Deliverable 2.5 concludes that the policy framework should facilitate ‘bottom-up’ actions and processes, in order to maximise their potential.
Potential Impact:
We believe that this project has produced substantial progress beyond the existing state of knowledge regarding the use of resources, the drivers behind it, its impacts and what may be done about it, as follows:
1) Developing a clear understanding of the reasons for inefficient resource use, and the economic, policy, legal and institutional factors that make moving towards more efficient resource so difficult to achieve. By developing the concept of a ‘web of constraints’ to resource efficiency, which encapsulates how these aspects, operating at different levels (from individual decision makers to EU level policy), dynamically interact, we move beyond the idea of individual ‘barriers’ to resource efficiency that may be addressed individually and in isolation.
2) Although increasing attention has been paid in recent years to resource efficiency in the environmental policy agenda at the EU level in particular, it is clear that the existing policy landscape is insufficient for producing a trajectory for achieving a resource-efficient economy in the EU. The primary focus for environmental policy has been on energy and climate change, and where policy for resource efficiency is present, the focus is on the ‘output’ side of resource use, with the input side either overlooked, or addressed through aspirational, non-biding objectives and targets. The EU’s the resource-efficiency agenda appears to have fallen into the ‘joint-decision’ trap, which favours the status quo and incremental policy shifts, rather than more radical, innovative policy approaches.
3) A wide range of concepts and paradigms are often touted as potentially substantial contributors to improving resource efficiency and promoting an environmentally sustainable economy. However, concepts that provide a vision of deep and far-reaching change, usually fail to provide a clear and credible pathway for implementation. Conversely, concepts that have a clear and credible pathway for implementation would likely result in incremental, minor change rather than radial shifts towards resource efficiency.
4) Due to the complex, dynamic interactions between the different components of the web of constraints, an alteration to one aspect may induce changes (either positive or negative) in other areas. As such, strategic policy interventions may transform the web of constraints to resource efficiency, into a ‘web of drivers’ for resource efficiency. Over time, windows of opportunity for the development and implementation of radical technologies, concepts, paradigms and practices, or the policy instruments to drive or facilitate them, that were previously untenable, may be opened.
5) The development of long-term core strategies and targets for the development of a resource-efficient economy is a key precondition to its achievement. The policy mix contained within or introduced to implement this strategy must hold three key characteristics. Firstly, the policy mix must be internally consistent. At a minimum, ‘weak consistency’ ((he absence of contradictions or conflicts within or between instruments and elements of the policy mix), must be achieved. Ideally, ‘strong consistency’ (the presence of complementarities, mutual support and synergies between instruments and elements of the policy mix), should be sought. The introduction of instruments that enable mutual benefits with existing instruments at both the EU and Member State level, and that aim to reduce the presence of negative interactions or side effects, should be a priority for the immediate future. The second characteristic is coherence of the policy processes for development, implementation and monitoring of instruments, within and between different levels of governance. Another priority for the future should be to improve co-ordination within and between governance levels for existing instruments relating to resource efficiency. The third and final characteristic is credibility and stability from the perspective of targeted entities and other market actors, to provide confidence in the market for long-term investment in resource-efficient technologies and practices.
6) Based on the analysis of scenarios applied to the novel coupling between economic and ecological models, it is clear that ‘decoupling’ between economic growth and resource consumption and environmental degradation may be achieved, and is desirable. A Business-as-Usual approach to the relationship between the economy and the environment (i.e. a future in which no additional measures are taken to improve the sustainability of resource use), produces highly negative consequences for both. Commodity prices rise, environmental pressures increase, GDP growth and employment reduces over time (both globally and in the EU). Social issue become prominent, along with increasing costs from climate change and the risk of ‘resource nationalism’ and conflict. In comparison, a globally co-operative effort to peruse a resource-efficient economy would produce significant environmental, economic and social benefits (both globally an for the EU). Whilst a global approach would be preferred, due to the international nature of challenges such as decarbonisation and the interconnected nature of resource supply chains, the EU still stands to gain substantially in terms of environmental quality, economic growth and associated social objectives (compared to a ‘business-as-usual’ future in a situation in which it peruses resource efficiency unilaterally. Aside from top-down policy, the modelling also suggests that a strong post-consumerism movement in European civil society may also achieve a resource-efficient economy. As such, the policy framework should facilitate ‘bottom-up’ actions and processes, in order to maximise their potential.
Such advances in the state of knowledge confirm to policy makers that continuing with current patterns and trends of resource consumption is likely to become increasingly detrimental to the environment, economy and society. By pursuing an international effort to decouple resource use from environmental degradation, or failing that, a unilateral EU-level approach, such impacts may be avoided. Whilst the current policy landscape insufficient to achieve this, a comprehensive long-term policy strategy, congnisant of the ‘web of constraints’, would alter our current trajectory and lead from incremental to radical improvements in resource efficiency over time.
Over the course of the project, members of the consortium were (and will continue to be) highly active in engaging with policy makers, industry, academia, NGOs and wider civil society, in order to disseminate these insights, and to encourage their adoption. Key dissemination events and activities include:
- A presentation to MEPs at the European Parliament in March 2015, on the lessons learned from the POLFREE project
- A presentation to the European Society for Ecological Economics conference entitled ‘Understanding the Bumpy Road to Resource Efficiency: From the Concept of Barriers’ towards ‘Web of Constraints’, in June 2015.
- A dedicated POLFREE/DYNAMIX workshop session, entitled ‘Resource Efficiency and the Circular Economy: Policy Mixes and Scenarios’, at the annual World Resource Forum (WRF) in Davos, Switzerland, in October 2015. POLFREE research was also presented in various other sessions at the WRF.
- A dedicated POLFREE workshop session, entitled ‘What does a Resource-Efficient Europe Look Like? Policy Options and Scenarios’, at the Ellen MacArthur Foundation’s ‘Disruptive Innovation Festival’ in November 2015.
- A joint, two-day POLFREE/DYNAMIX Final Conference held in Brussels in February 2016, designed specifically to disseminate the key lessons from the two sister projects to a wide range of participating stakeholders.
- A workshop for Dutch policy makers entitled ‘Implications of POLFREE scenarios for Dutch Energy Transition Policy’, in The Hague, in March 2016.
- A presentation at an event in the UK Parliament entitled ‘Spotlight on the Circular Economy’, in March 2016, in order to disseminate lessons from POLFREE in the context of the re-tabled EU Circular Economy Package.
- The creation of four, large-scale ‘info-murals’, to visualise the four scenarios developed under the project (three ‘transition’ scenarios, and a ‘Business-as-Usual’ case), and their associated modeling results. The final versions of these info-murals were displayed at the Final Conference.
- The creation of a dedicated ‘dissemination’ website (www.polfree.seri.at) containing interviews with key researchers from the consortium regarding the key insights from the project, information on the four scenarios developed by the project, as a set of six ‘Policy Briefs’ (see below).
- The production of six ‘Policy Briefs’, each focusing on a different element of the project. These briefs were first made available at the Final Conference, and are now permanently available on the POLFREE dissemination website. The briefs are entitled:
o Understanding the Web of Constraints to Resource Efficiency in Europe – Lessons for Policy
o Constraints to Resource-Efficient Consumer Behaviour
o Constraints to Resource-Efficient Business Models and Practices
o Global Governance for Resource-Efficient Economies
o Policy Mixes for a Resource-Efficient Europe
o Pathways to a Resource-Efficient and Low-Carbon Europe – Lessons from the Modeling
- Two specific dissemination items that will occur post-project are:
o The production of nine papers for a dedicated POLFREE Special Issue of the highly regarded academic journal Ecological Economics.
o A summary article on the key results and insights generated by POLFREE, to be published jointly by the French Embassy in London and the UK Chamber of Commerce periodical publication. This will also be presented at the London offices of accountancy firm PwC, to their staff and those from the business-community outreach charity ‘Business in the Community’, in June 2016.
List of Websites:
Project website addresses: www.polfree.eu (main project website) www.polfree.seri.at (dissemination website)
