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DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS •

POTENTIAL FOR DENMARK AS A CIRCULAR ECONOMY

A CASE STUDY FROM: DELIVERING THE CIRCULAR

ECONOMY – A TOOLKIT FOR POLICY MAKERS

kom (2015) 0595 - Bilag 1: Kopi af ERU alm. del - bilag 93 "Potential for Denmark as a circular economy. A case study from: Delivering the circular economy - a toolkit for policy making", fra Erhvervs- og Vækstministeriet

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

POTENTIAL FOR DENMARK AS A CIRCULAR ECONOMY

A CASE STUDY FROM: DELIVERING THE CIRCULAR

ECONOMY – A TOOLKIT FOR POLICY MAKERS

This report presents findings from a Denmark case study,

undertaken as part of developing a methodology for circular

economy policymaking. The findings, identifying circular

economy opportunities, barriers and policy options, were first

presented in the report Delivering the circular economy – a

toolkit for policymakers by the Ellen MacArthur Foundation.

They may be of special interest to Danish stakeholders,

although this report does not recommend any specific policy

intervention to Denmark or any other country. While the

findings cannot be directly transposed to other countries, they

might serve as a source of inspiration.

DRAFT VERSION (June 12, 2015) • CONFIDENTIAL • PLEASE DO NOT DISTRIBUTE

DELIVERING

THE CIRCULAR

ECONOMY

A toolkit for policymakers

DELIVERING THE

CIRCULAR ECONOMY

A TOOLKIT

FOR POLICYMAKERS

Readers who are interested in further material around the circular economy, and the

methodology used in this case study, are encouraged to read the full toolkit report, as

well as other Ellen MacArthur Foundation publications. These can be downloaded from

the Ellen MacArthur Foundation website:

www.ellenmacarthurfoundation.org/books-and-reports

CONTENTS

List of figures

Foreword

Acknowledgements

Executive Summary

Introduction

National perspective

Food & Beverage

Construction & Real Estate

Machinery

Packaging

Hospitals

132

Appendix

About the Ellen MacArthur Foundation

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

LIST OF FIGURES

Figure A: 10 circular economy opportunities in the Denmark case study

Figur A: 10 muligheder i den cirkulære økonomi i case studiet af Danmark

Figure 1: Circularity baselining in the Denmark pilot

Figure 2: Policy landscape in the Denmark pilot

Figure 3: Results of sector prioritisation in Denmark pilot

Figure 4: The ReSOLVE framework: six action areas for businesses and

countries wanting to move towards the circular economy

Figure 5: Qualitative opportunity prioritisation of focus sectors in the Denmark pilot

Figure 6: Ten circular economy opportunities in five focus sectors

Figure 7: Illustrative status of circular economy in Denmark today and

potential by 2035

Figure 8: Short-term and long-term scenarios used in the Denmark pilot

Figure 9: Estimated potential impact of further transitioning to the circular

economy in Denmark

Figure 10: Breakdown of potential economic impact by quantified opportunity

Figure 11: Barrier matrix for the ten prioritised opportunities in Denmark

Figure 12: Main sources of food waste in global food value chain –

production and consumption

Figure 13: Examples of what remanufacturing and new business models

could look like for pumps in Denmark

Figure 14: Estimated potential adoption rates and value creation in

wind turbines and pumps in the Denmark pilot

Figure 15: Share of plastic packaging collected for recycling in Denmark

Figure 16: Share of purchased goods in Danish hospitals that could be

covered by performance models

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

Figure A1: Summary of methods and data used in the sector selection

in the Denmark pilot

Figure A2: Overview of scoring of ‘Role in national economy’ in the Denmark pilot

Figure A3: Overview of scoring of ‘Circularity potential’ in the Denmark pilot

Figure B1: Qualitative assessment of potential of opportunities for the

Construction & Real Estate sector in the Denmark pilot

Figure B2: Schematic overview of sector-specific impact quantification

Figure B3: Value capture in cascading bio-refineries

Figure B4: Reduction of avoidable food waste

Figure B5: Industrialised production and 3D printing of building modules;

reuse and high-value recycling of components and materials

Figure B6: Sharing and multi-purposing of buildings

Figure B7: Remanufacturing and new business models

Figure B8: Increased recycling of plastic packaging

Figure B9: Performance models in procurement in the hospital sector

Figure B10: Key sources for assumptions & estimates for each circular economy

opportunity

Figure B11: Pork and Dairy – Price ‘delta’ per sector and waste stream

Figure B12: Pork and Dairy – volume allocation per sector and waste stream

Figure C1: Overview of a Computable general equilibrium (CGE) model

Figure C2: Sectoral and geographical aggregates in the CGE Model

in the Denmark pilot

Figure C3: Generic structure of production functions in the CGE Model

Figure C4: Potential approaches and trade-offs for representing circularity

within a CGE framework

Figure C5: Overview of a ‘hybrid’ CGE approach

Figure C6: Data sources used in the baseline calibration and CGE modelling in the

Denmark pilot

Figure D1: Prioritisation of policy options – ‘Value capture in cascading

bio-refineries

Figure D2: Snapshot and description of the policy assessment tool

Figure D3: Worked example of the implementation of the scoring methodology.

Figure E1: Circular economy – an industrial system that is restorative and

regenerative by design

Figure E2: The economic opportunity of the circular economy

Figure E3: Estimated potential contribution of the circular economy to

economic growth, job creation and reduction of greenhouse gas emissions

100

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128

130

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

FOREWORD

FROM DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS

Flemming Besenbacher

Chairman of the Supervisory Board of Carlsberg A/S

How can we create prosperity for a growing world

population while strengthening the systems that support

us? How can we achieve continued economic development

while preserving the resource base that is fuelling this

economy? The growing interest around these questions

suggests it is time to rethink the way we operate. The

circular economy holds the promise of reconciling these seemingly opposing

objectives and creating long-term value. It is my firm belief that the ‘take-make-

waste’ economy is about to be replaced by a circular, restorative approach

where we no longer consider anything to be ‘waste’.

The circular economy is of particular interest to Carlsberg because our products

depend on well-functioning natural systems and a stable supply of raw

materials. We are working in this area through our partnership platform – the

Carlsberg Circular Community – to develop innovations and practical solutions

optimised for the circular economy.

This toolkit represents a valuable blueprint for policymakers who want to

stimulate the progression from a linear to a circular economy. It rightfully

positions the circular economy as a unique opportunity for dialogue and

collaboration between private and public entities to achieve the common

goal of long-term value creation.

I therefore encourage governments across the world to apply this toolkit and

work closely with businesses to unleash the circular economy in their country

and unlock its true potential. I also urge companies to continue to lead the

way to a more resilient operating model, decoupled from resource constraints.

Carlsberg is determined to do so.

FLEMMING BESENBACHER

JUNE 2015

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

FORORD

Flemming Besenbacher

Bestyrelsesformand for Carlsberg A/S

Hvordan kan vi skabe velstand for en voksende global

befolkning, mens vi samtidig styrker de systemer, som

understøtter os? Hvordan kan vi opnå fortsat økonomisk

udvikling, mens vi samtidig bevarer de ressourcer, der

er grundlaget for vores økonomiske fremskridt? Den

voksende interesse i disse spørgsmål indikerer, at det er tid

til at tænke nye tanker om den måde, som tingene fungerer på. Den cirkulære

økonomi giver løfter om at kunne forene disse tilsyneladende modsatrettede

målsætninger og skabe værdi på langt sigt. Det er min faste overbevisning,

at det er tid til at erstatte ‘brug og smid-væk’ økonomien med en cirkulær,

genoprettende tilgang, hvor ‘affald’ som koncept ikke længere eksisterer.

Den cirkulære økonomi er af særlig interesse for Carlsberg, fordi vores

produkter er afhængige af velfungerende systemer i naturen og en stabil

forsyning af råvarer. Vi arbejder inden for dette område igennem vores

partnerskabsplatform – the Carlsberg Circular Community – for at udvikle

innovative og praktiske løsninger, der er optimeret til den cirkulære økonomi.

Dette ’toolkit’ udgør en værdifuld formular for politikere, som ønsker at

stimulere, at vi bevæger os fremad fra en lineær til en cirkulær økonomi. Det

placerer med rette den cirkulære økonomi som en unik mulighed for dialog og

samarbejde mellem private og offentlige virksomheder for at opnå et fælles mål

om at skabe værdi på langt sigt.

Jeg opfordrer derfor regeringer verden rundt til at anvende dette ’toolkit’ og

arbejde tæt sammen med erhvervslivet for at få åbnet op for mulighederne

i den cirkulære økonomi i deres lande og få låst op for det sande potentiale

heri. Jeg opfordrer også virksomhederne til at føre an frem imod en mere

modstandsdygtig model for den måde, vi gør tingene på, hvor vi ikke længere

er begrænsede af ressourcemæssige hensyn. Carlsberg er fast besluttet på at

gå denne vej.

FLEMMING BESENBACHER

JUNI 2015

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

GLOBAL PARTNERS OF THE

ELLEN MACARTHUR FOUNDATION

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

DISCLAIMER

This report has been produced by a team from the Ellen MacArthur Foundation,

which takes full responsibility for the report’s contents and conclusions. While the key

contributors and contributors listed in the acknowledgements provided significant input

to the development of this report, their participation does not necessarily equate to

endorsement of the report’s contents or conclusions. The McKinsey Center for Business

and Environment provided analytical support. NERA Economic Consulting provided

support for the macroeconomic and policy analysis for this report.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

ACKNOWLEDGEMENTS

PROJECT FUNDER

ELLEN MACARTHUR FOUNDATION

PROJECT TEAM

Andrew Morlet

Chief Executive

Jocelyn Blériot

Executive Officer,

Lead, Communications and Policy

Stephanie Hubold

Lead, Gov. & Cities Programme

Rob Opsomer

Project Manager

Dr. Mats Linder

Analyst

Ian Banks

Analyst

KEY CONTRIBUTORS

DANISH BUSINESS AUTHORITY

Anders Hoffmann

Deputy Director General

Dorte Vigsø

Chief Advisor

Jes Lind Bejer

Special Advisor

Markus Bjerre

Head of Section

Stine Nynne Larsen

Special Advisor

DANISH ENVIRONMENTAL

PROTECTION AGENCY

Claus Torp

Deputy Director General

Mikkel Stenbæk Hansen

Deputy Head of Department

Lisbet Poll Hansen

Deputy Head of Department

Birgitte Kjær

Technical Advisor

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

CONTRIBUTORS

3GF, DANISH MINISTRY OF FOREIGN

AFFAIRS

Eva Grambye

Special Envoy, Head of Department

AARHUS UNIVERSITY HOSPITAL

Thomas Møller

Environmental Manager

AALBORG UNIVERSITY

Lene Lange

Professor

ACCIÓ GOVERNMENT OF CATALONIA

AXIOMA SOLUCIONES

Ignacio Canal

Assistant Manager

CARLSBERG GROUP

Simon Boas

Director Corporate Communications

and CSR

CONFEDERATION OF DANISH

INDUSTRY

Karin Klitgaard

Director, Environmental Policy

Nina Leth-Espensen

Advisor

DANISH AGRICULTURE AND FOOD

COUNCIL

Mads Helleberg Dorff Christiansen

Chief Policy Advisor

DANISH CHAMBER OF COMMERCE

Jakob Zeuthen

Head of Environmental Policy

DANISH CROWN A/S

Charlotte Thy

Environmental Manager

DANISH METALWORKERS’ UNION

Rasmus Holm-Nielsen

Consultant

DANISH REGIONS

Morten Rasmussen

Team Leader Procurement and

Health Innovation

DANISH WIND INDUSTRIES

ASSOCIATION

Jacob Lau Holst

Chief Operating Officer

DC INGREDIENTS

Jens Fabricius

VP Business Development

DE FORENEDE DAMPVASKERIER A/S

Nynne Jordal Dujardin

Environmental Manager

DUTCH MINISTRY OF INFRASTRUCTURE

AND THE ENVIRONMENT

Kees Veerman

Policy Coordinator

EUROPEAN BANK FOR

RECONSTRUCTION AND

DEVELOPMENT

Dr. Nigel Jollands

Senior Policy Manager

ELLEN MACARTHUR FOUNDATION

Ella Jamsin

Research Manager

Ken Webster

Head of Innovation

ECOXPAC

Martin Pedersen

Chief Executive Officer

Michael Michelsen

Global Business Manager

Kristian Søllner

Chief Technical Officer

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

GRUNDFOS

Pernille Blach Hansen

Group Vice President

Jørgen Bjelskou

Group Public Affairs Director

Anna Pattis

Lead Sustainable Product Specialist

Nils Thorup

Chief Technical Advisor

Peter Meulengracht Jensen

Environmental Project Manager

HANSEN AGENDA

Ditte Lysgaard Vind

Senior Consultant

Ida Auken

Member of the World Economic Forum

Meta-Council on the Circular Economy

2014-2016; Member of Danish Parliament

Søren Gade

Former Member of Danish Parliament,

The Liberal Party

LONDON WASTE AND RECYCLING

BOARD (LWARB)

Wayne Hubbard

Chief Operating Officer

MARKS & SPENCER

Kevin Vyse

Primary Foods Packaging Technologist &

Packaging Innovation Lead

MATACHANA GROUP

Marino Alonso

Marketing Director

NCC CONSTRUCTION

Vibeke Grupe Larsen

Senior manager, Sustainability

NOVOZYMES A/S

Anders Lyngaa Kristoffersen

Head of Public Affairs Denmark

OUROBOROS AS

Jasper Steinhausen

Business Developer & Owner

PHILIPS NORDIC

Jens Ole Pedersen

Business to Government Manager Philips

Healthcare Nordics

RAGN-SELLS

Johan Börje

Market Director

SCOTTISH GOVERNMENT

Callum Blackburn

Policy Manager – Circular Economy

SIEMENS WINDPOWER

Karin Borg

Division EHS Manager

Jonas Pagh Jensen

Division EHS Specialist

SUEZ ENVIRONMENT

Henry Saint-Bris

Senior VP Marketing & Institutional

relations

Christophe Scius

European Affairs Manager

Frederic Grivel

VP Marketing

TEKNOLOGISK INSTITUT/GENVIND

PROJECT

Mads Kogsgaard Hansen

Head of Section, Centre for Plastics

Technology

THE ECONOMIC MODEL DREAM

Dr. Peter Stephensen

Research Director

THE ROYAL SWEDISH ACADEMY OF

ENGINEERING SCIENCES

Caroline Ankarcrona

Project Manager for “Resource

efficient business models – increased

competitiveness”

UNITED FEDERATION OF DANISH

WORKERS

Jesper Lund-Larsen

Political Advisor

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

UNITED NATIONS DEVELOPMENT

PROGRAMME, INFORMAL

INTERAGENCY TASK TEAM ON

SUSTAINABLE PROCUREMENT IN THE

HEALTH SECTOR (IIATT-SPHS).

Dr. Christoph Hamelmann

Coordinator

Mirjana Milic

Associate Coordinator

UNIVERSITY COLLEGE LONDON

(UCL) INSTITUTE FOR SUSTAINABLE

RESOURCES

Professor Paul Ekins OBE,

Director; Professor of Resources and

Environmental Policy

UNIVERSITY OF COPENHAGEN

Professor Peter Birch Sørensen,

Department of Economics

UNIVERSITY OF SHEFFIELD

Professor SC Lenny Koh

Director of Advanced Resource

Efficiency Centre (AREC)

VESTAS WIND SYSTEMS A/S

Klaus Rønde

Senior Manager, Management Systems &

HSE Analysis

Pia Christoffersen

HSE Specialist, QSE EMEA Region

Peter Garrett

Life Cycle Assessment Specialist,

Management Systems & HSE Analysis

WRAP

Steve Creed

Director Business Growth

PRODUCTION

Ruth Sheppard

Editor

ELLEN MACARTHUR FOUNDATION

Sarah Churchill-Slough

Design

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

EXECUTIVE SUMMARY

In its research to date, the Ellen MacArthur Foundation has demonstrated that the

circular economy can be a significant value creation opportunity. As many policymakers

and regulators become interested in this promising model, they look for concrete

guidance on how to create enabling framework conditions and, as appropriate, set

direction to unlock its economic and environmental opportunities. The Ellen MacArthur

Foundation therefore developed the report Delivering the circular economy – a toolkit

for policymakers – published in June 2015 – which takes a country and policymaker

perspective, and aims at identifying circular economy opportunities, barriers, and policy

interventions to overcome these barriers. In the context of this toolkit (referred to as the

‘toolkit report’ throughout the text), an extensive case study was performed in Denmark,

which is the focus of this report.

Delivering the circular economy – a toolkit for policymakers

is the result of a

collaboration led by the Ellen MacArthur Foundation, with the Danish Business Authority

and the Danish Environmental Protection Agency as key contributors. The toolkit

report and the Denmark case study were developed in collaboration with Danish and

international stakeholders, including leading policymakers, businesses and academics.

The McKinsey Center for Business and Environment provided analytical support. NERA

Economic Consulting provided support for the macroeconomic and policy analysis

presented herein. The MAVA Foundation funded the project.

THE OPPORTUNITY FOR DENMARK

Denmark is internationally recognised for innovative initiatives in circular

economy and sustainability. Yet, the pilot study identified significant

opportunities to further the transition towards a circular economy.

Denmark has many leading companies pioneering circular economy solutions, a long

and rich tradition of innovative policies that stimulate the circular economy, as well as a

long-term strategic commitment to energy efficiency and renewable energy. Denmark

outperforms EU28 on a majority of selected resource and innovation metrics, such as

share of renewable energy or Eco-innovation index. Still, significant value is left on the

table across the economy, which could be unlocked by, e.g. improved utilisation of assets

and better use of waste or by-products as a resource. For example, one third of all waste

is incinerated for heat and power generation before extracting its full potential value as a

resource, and the materials that are looped back into the value chains are predominantly

recycled for material value instead of being used in higher-value cycles, such as reuse or

remanufacturing.

Even in a country with a starting position as advanced as Denmark’s, a

transition towards the circular economy can bring about lasting benefits of

a more innovative, resilient and productive economy. Modelling conducted

in this study suggests that by 2035 it could lead to an increase in GDP by

0.8–1.4%, the creation of an additional 7,000–13,000 job equivalents, a

3–7% reduction in carbon footprint, 5–50% reduction in virgin resource

consumption for selected materials and an increase in net exports by 3–6 %.

These positive effects on the Danish economy are based on five selected sectors,

covering 25% of the economy. It is assumed in the modelling that the share of renewable

energy in the circular economy scenario increases at the same pace as in the baseline

scenario, meaning that no further shift towards renewable energy is included in the

estimated benefits.

Ten circular economy opportunities were identified in five focus sectors, and

the largest economic potential was found in Construction & Real Estate and in

Food & Beverage.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

The ten opportunities and their estimated economic impact by 2035 are shown in Figure

Summaries of ten circular economy opportunities, their key barriers and policy

options identified, are given in the five sector boxes.

The economic impact of circular economy estimated for Denmark could, if the right

enabling conditions are established, mostly be captured within the next 20 years. But

even as circular economy opportunities take time to realise, it is estimated that up to

20% of the net value created by 2035 could be realised already by 2020.

Figure A: 10 circular economy opportunities in the Denmark case study

NET VALUE

CREATED

EUR MILLION, 2035

300 - 500

SECTOR

OPPORTUNITY

FOOD AND

BEVERAGE

Value capture in

cascading

bio-refineries

Reduction of

avoidable

food waste

Industrialised production

and 3D printing

building modules

Reuse and high-value

recycling

of components

and materials

Sharing

and multi-

purposing of buildings

Remanufacturing

and

new business models

Increased

recycling

plastic packaging

Bio-based

packaging

where beneficial

Performance models

procurement

Waste reduction

and

recycling

150 - 250

CONSTRUCTION

AND REAL

ESTATE

450 - 600

100 - 150

300 - 450

MACHINERY

PLASTIC

PACKAGING

150 - 250

Not assessed

HOSPITALS

70 - 90

Not assessed

HOW POLICYMAKERS CAN ENABLE THE OPPORTUNITIES

While the majority of the ten circular economy opportunities identified in

Denmark have a sound underlying profitability, there are often non-financial

barriers limiting further scale-up or holding back development pace. Both

policymakers and industry players can play important roles in helping

businesses overcome these barriers. To this end, close collaboration is needed

between governmental bodies, as well as with businesses and other society

stakeholders.

The key barriers include unintended consequences of existing regulations (e.g.

definitions of waste that hinder trade and transport of products for remanufacturing),

social factors such as a lack of experience among companies and policymakers to detect

and capture circular economy opportunities, and market failures such as imperfect

information (e.g. for businesses to repair, disassemble and remanufacture products)

Three opportunities were not quantified economically due to lack of input data and high degrees of uncer-

tainty. The sector-specific impact was used as input for a general equilibrium, macroeconomic model to

assess the impact on the whole economy. It is therefore not directly comparable to the estimated econo-

my-wide impact for Denmark.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

and unaccounted, negative externalities (e.g. carbon emissions). In addition to creating

enabling conditions, policymakers can, as appropriate, set direction for a transition to

the circular economy.

As businesses are already starting the transition, the circular economy offers an

opportunity for policymakers to collaborate with businesses. An important conclusion

from the Denmark case study is that there is a need for cooperation between different

government departments (including business/industry, finance and environment) so

that no new unintended policy barriers are created and – like the business solution

– the policy response is designed to maximise system effectiveness. Other society

stakeholders, including citizens and consumers, labour unions, environmental

organisations and the scientific and educational community, should also be engaged.

In several cases, EU-level policy interventions would need to complement

national Danish policies, as the value chains of many sectors extend across

borders.

Product policy and promoting the market for secondary raw materials are just two

examples that could be coordinated at the European level in order to simplify and

reduce the cost of doing (circular) business.

FOOD & BEVERAGE

Value capture in cascading bio-

refineries, which extract a variety

of nutraceutical and chemical

products from by-product and

waste streams, could lead to a net

value of EUR 300–500 (50–80)

million p.a. by 2035 (2020).

Key barriers include:

•

access to capital to build and

scale up capacity;

availability of mature technology;

unintended consequences of

existing regulation.

Reduction of avoidable food

waste, by building awareness

and knowledge for consumers,

leveraging best practices for

businesses, smart technologies

and creating markets for second-

tier foods, could lead to a net

value of EUR 150–250 (30–40)

million p.a. by 2035 (2020).

Key barriers include:

•

consumers’ custom and habit;

businesses capabilities and skills;

imperfect information;

split incentives among players in

the value chain.

Identified policy options include:

•

setting long-term strategic targets

for bio-refineries;

supporting capacity building for

existing technologies and create

markets;

supporting technological

development.

Identified policy options include:

•

informing and educating

consumers;

setting up quantitative food

waste targets;

support capability building;

introducing fiscal incentives.

•

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

CONSTRUCTION & REAL ESTATE

Industrialised production and 3D printing

of building modules, reducing time

and material cost of construction and

renovation, could lead to a net value of

EUR 450–600 (40–60) million p.a. by

2035 (2020).

Key barriers include:

•

inadequately defined legal frameworks;

immature 3D printing technology;

custom and habit and capabilities and

skills in the industry.

•

custom and habit;

capabilities and skills.

Identified policy options include:

•

augmenting building codes;

running industry-wide training

programmes;

creating support for material inventory

software and databanks.

Identified policy options include:

•

augmenting building codes;

supporting the development of module

production facilities;

setting a clear legal framework for 3D

printing materials.

Sharing and multi-purposing of

buildings to increase the utility of

existing floor space could lead to a

net value of EUR 300–450 (100–140)

million p.a. by 2035 (2020).

Key barriers include:

•

inadequately defined legal

frameworks;

unintended consequences of existing

regulation.

Reuse and high-value recycling of

components and materials, enabled by,

e.g., design for disassembly and new

business models, could lead to a net value

of EUR 100–150 (10–12) million p.a. by

2035 (2020).

Key barriers include:

•

split incentives and lack of information

across the construction value chain;

Identified policy options include:

•

clarifying the existing legislation;

providing financial incentives or

support to new business models;

creating portals for public building

availability.

MACHINERY

Remanufacturing and new business

models based on performance contracts

and reverse logistics could lead to a net

value of EUR 150–200 (50–100) million

p.a. by 2035 (2020). In addition, similar

opportunities of EUR 100–400 (50–

150) million p.a. could be captured in

adjacent sectors through extrapolation

of these activities.

Key barriers include

•

lack of capabilities and skills;

imperfect information about

existing opportunities;

unintended consequences of

existing regulation.

Identified policy options include

•

supporting remanufacturing

pilots and conducting information

campaigns;

amending existing regulatory

frameworks;

adopting an overarching

government strategy on

remanufacturing.

•

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

PACKAGING

Increased recycling of plastic

packaging, driven by better packaging

design, higher collection rates, and

improved separation technology, could

lead to a reduction in the demand

for virgin plastic material by 70–100

thousand tonnes p.a. by 2035.

Key barriers include:

•

low profitability in the reverse

value chain (driven by unaccounted

externalities and price volatility);

collection and separation technology;

split incentives across the value chain.

Bio-based packaging where

beneficial, leading to an

innovation-driven shift to from

petro-based plastics to bio-based

alternatives for selected packaging

applications.

Key barriers include:

•

technologic maturity

profitability (driven by unaccounted

externalities);

inadequately defined legal

frameworks.

•

Identified policy options include:

•

improving the collection infrastructure;

increasing national recycling targets;

standardising collection and

separation systems;

increasing incineration taxes.

Identified policy options include:

•

funding of innovation and B2B

collaboration;

investing in improved end-of-use

pathways of bio-based packaging;

working to clarify the EU regulatory

framework.

HOSPITALS

Performance models in procurement of

hospital equipment, such as advanced

diagnostic, IT or laboratory equipment,

could lead to a net value of EUR 70–90

(10–15) million p.a. by 2035 (2020).

Key barriers include:

•

insufficient capabilities and skills due

to lack of experience;

imperfect information;

custom and habit in hospital

operations.

Waste reduction and recycling in

hospitals, through systematic and

centrally managed initiatives.

Key barriers include:

•

insufficient capabilities and skills

due to lack of experience;

custom and habit in hospital

operations;

imperfect information

Identified policy options include:

•

piloting of waste reduction and

recycling management integrated in

staff training;

setting waste minimisation and

recycling targets;

increasing fiscal incentives to avoid

waste generation.

Identified policy options include:

•

setting up guidelines and targets;

capability building;

defining procurement rules.

•

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

RESUMÉ

Ellen MacArthur Foundation har med sin forskning dokumenteret, at cirkulær økonomi

har et stort potentiale for at skabe forretningsmæssig værdi i virksomheder. Flere og

flere politikere og embedsmænd er interesserede i cirkulær økonomi og efterspørger

konkret vejledning til, hvordan de kan skabe de rette rammevilkår, der muliggør en

omstilling til cirkulær økonomi. Og til hvordan der opstilles en vision og en retning for at

udnytte de økonomiske og miljømæssige muligheder, som cirkulær økonomi indeholder.

Til dette formål har Ellen MacArthur Foundation udarbejdet rapporten Delivering

the circular economy – a toolkit for policymakers, som blev offentliggjort i juni 2015.

Rapportens perspektiv er på lande- og myndighedsniveau og sigter imod at identificere

økonomiske muligheder og barrierer i den cirkulære økonomi samt politiske initiativer,

der kan fjerne disse barrierer. Som en del af denne rapport (omtales i det følgende som

‘toolkit-rapporten’) er der udført et omfattende case studie i Danmark. Nærværende

rapport fokuserer på dette case studie.

Rapporten Delivering the circular economy – a toolkit for policymakers er resultatet af

et samarbejde under ledelse af Ellen MacArthur Foundation og med Erhvervsstyrelsen

og Miljøstyrelsen som vigtige bidragsydere. Toolkit-rapporten og case studiet, der er

lavet om Danmark, er udarbejdet med bidrag fra danske og udenlandske interessenter,

herunder førende erhvervsfolk, embedsmænd og forskere. Endvidere har McKinsey

Center for Business and Environment bidraget til analysen, og NERA Economic

Consulting har bidraget til den makroøkonomiske analyse samt analysen af politiske

virkemidler. MAVA Foundation har finansieret projektet.

MULIGHEDERNE FOR DANMARK

Danmark er internationalt anerkendt for innovative initiativer inden for

cirkulær økonomi og bæredygtighed. Alligevel har case studiet af dansk

økonomi påvist et betydeligt potentiale ved at tage yderligere skridt hen

imod en cirkulær økonomi.

Danmark har mange virksomheder, der ligger i front med at udvikle løsninger inden for

den cirkulære økonomi. Dette skyldes bl.a. en lang tradition for innovativ politikskabelse

i Danmark, som stimulerer grøn omstilling, samt et langsigtet og strategisk engagement

i at øge energieffektiviteten og producere vedvarende energi. Danmark præsterer bedre

end EU28 på de fleste udvalgte ressource- og innovationsindikatorer, såsom andelen af

vedvarende energi og eco-innovationsindekset. Alligevel er der stadig muligheder for

at skabe betydelig værdi i økonomien, f.eks. ved at forbedre udnyttelsen af aktiver og

skabe en bedre ressourceudnyttelse af affald og biprodukter. I Danmark. går en tredjedel

af alt affald til forbrænding, hvorved der produceres varme og el, men dette sker, før

den fulde værdi af affaldet er blevet udnyttet som en materialeressource. Når materialer

tilbageføres i værdikæden, sker det primært ved genanvendelse, snarere end ved højere

værdiudnyttelse, såsom ved genbrug eller genfremstilling.

Selvom Danmark har taget flere initiativer, som peger i retning af en

omstilling til cirkulær økonomi, er der stadig et stort potentiale med varige

effekter ved at skabe en mere innovativ, modstandsdygtig og produktiv

økonomi. De modeller, der er anvendt i denne analyse, viser, at Danmark i

2035 kan opnå en stigning i BNP på 0,8–1,4 %, tillige med skabelse af, hvad

der svarer til yderligere 7.000–13.000 job, 3–7 % reduktion i Danmarks

CO2-aftryk, 5–50 % reduktion i forbruget af nye ressourcer for udvalgte

materialer, samt en stigning i nettoeksporten på 3–6 %.

Disse positive effekter på den danske økonomi er baseret på fem udvalgte sektorer,

som tilsammen dækker 25 % af økonomien. I modelleringen antages det, at andelen af

vedvarende energi i et cirkulært scenarie stiger i samme takt som i baseline-scenariet,

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

dvs. at yderligere stigninger i andelen af vedvarende energi ikke er medregnet i

resultaterne. Resultatet af denne analyse understøttes af et stigende antal internationale

forskningsresultater, som ligeledes peger på, at effekten af en omstilling til en cirkulær

økonomi sandsynligvis vil være positiv i forhold til økonomisk vækst, jobskabelse og

miljøet.

Der er fundet ti særligt oplagte muligheder inden for den cirkulære

økonomi i Danmark i fem sektorer; det største økonomiske potentiale er

fundet inden for Byggeindustrien og Bygninger samlet set, samt inden for

Fødevareindustrien.

De ti muligheder og deres beregnede økonomiske potentiale frem mod 2035 vises i

figur A. De fem sektorbokse giver en opsummering af de ti muligheder inden for den

cirkulære økonomi, de væsentligste barrierer samt mulige politiske virkemidler.

Det økonomiske potentiale af cirkulær økonomi, som beregnes for Danmark, kan

i overvejende grad opnås inden for de næste 20 år, såfremt der skabes de rette

rammevilkår. Det tager tid at realisere de muligheder, som en cirkulær økonomi giver,

men det anslås, at op til 20 % af den nettoværdi, der vil være skabt i 2035, allerede vil

kunne opnås i 2020.

Figur A: 10 muligheder i den cirkulære økonomi i case studiet af Danmark

POTENTIALE

(NETTOVÆRDI)

DKK MIA., 2035

Øget kaskadeudnyttelse i

bio-raffinaderier

Reduktion af

madspild

Industrialiseret

produktion og 3D print

bygningsmoduler

Genbrug og højværdi-

genanvendelse

komponenter og materialer

Deling

og multi-brug af

bygninger

Genfremstilling

og nye

forretningsmodeller

Øget

genanvendelse

plastikemballage

Bio-baseret

emballage

Servicebaserede modeller

for indkøb

Affaldsreduktion

genanvendelse

2,3 - 3,8

SEKTOR

MULIGHED

FØDEVARE-

INDUSTRIEN

1,1 - 1,9

BYGGE-

INDUSTRIEN OG

BYGNINGER

3,4 - 4,5

0,8 - 1,1

2,3 - 3,4

MASKIN-

INDUSTRIEN

PLAST-

EMBALLAGE

1,1 - 1,9

Ikke vurderet

HOSPITALER

0,5 - 0,7

Ikke vurderet

HVORDAN POLITIKERNE KAN SIKRE UDNYTTELSE AF MULIGHEDERNE

Selv om de fleste af de ti særlige muligheder i den cirkulære økonomi, som

er identificeret for Danmark, har en sund underliggende profitabilitet, så er

der dog ofte ikke-finansielle barrierer, som begrænser større udbredelse eller

bremser udviklingen. Både myndighederne og industrien kan spille en vigtig

rolle, når det drejer sig om at fjerne barriererne for virksomhederne. Der er

brug for et tæt samarbejde mellem forskellige offentlige myndigheder såvel

som virksomheder og andre interessenter i samfundet.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

De væsentligste barrierer omfatter utilsigtede konsekvenser af eksisterende

regulering (f.eks. definitioner af affald, som hindrer handel og transport af produkter

til genfremstilling), sociale faktorer, såsom mangel på erfaring blandt virksomheder

og myndigheder, når det drejer sig om at opdage og udnytte muligheder i en cirkulær

økonomi, samt markedsmæssige fejl, såsom ufuldstændig information (f.eks. til

virksomheder om at reparere, adskille og genfremstille produkter), og ikke medregnede

negative eksternaliteter (f.eks. drivhusgas-udledninger). Ud over at skabe de rette

rammevilkår, kan politikerne via målsætninger sætte retning henimod en overgang til en

cirkulær økonomi.

Da mange virksomheder allerede har påbegyndt omstillingen til en cirkulær økonomi,

er der gode muligheder for, at myndighederne kan samarbejde med erhvervslivet på

dette felt. En af de vigtige konklusioner fra det danske case studie er, at der er behov

for at samarbejde mellem de forskellige ministerier (erhvervs- og vækst, finans og miljø-

og fødevarer), så der ikke skabes nye utilsigtede barrierer, og således at styringsmidler

– ligesom de forretningsmæssige løsninger – udformes til at maksimere systemets

effektivitet. Andre samfundsaktører, såsom borgere og forbrugere, fagforeninger,

miljøorganisationer samt forskere og uddannelsessektoren, bør også involveres.

I flere tilfælde vil der være behov for, at fælles EU politik supplerer de

nationale virkemidler, da værdikæderne i mange sektorer går på tværs af

lande.

Produktpolitik og fremme af markedet for sekundære råvarer er blot to eksempler, som

kan koordineres på europæisk niveau for at forenkle og reducere omkostningerne ved at

gøre (cirkulære) forretninger.

FØDEVAREINDUSTRIEN

Øget kaskadeudnyttelse i bio-

raffinaderier, som udvinder en

række nutraceutiske og kemiske

produkter fra biprodukter og affald,

kan medføre en nettoværdi på DKK

2,3 - 3,8 mia. (400 – 600 mio.) pr.

år i 2035 (2020).

De væsentligste barrierer omfatter

•

adgang til kapital til at bygge og

opskalere kapacitet;

tilgængelighed af moden

teknologi;

utilsigtede konsekvenser af

nuværende regulering

Reduktion af madspild, ved at

opbygge bevidsthed og viden hos

forbrugerne, udbrede best practice

i virksomheder, anvende smart

teknologi, samt skabe markeder

for anden klasses fødevarer, kan

medføre en nettoværdi på DKK 1,1

– 1,9 mia. (200 – 300 mio.) pr. år i

2035 (2020).

De væsentligste barrierer omfatter:

•

forbrugernes vaner og adfærd;

erhvervslivets kapacitet og

færdigheder;

ufuldstændig information i

værdikæden

forskellige incitamenter blandt

aktørerne i værdikæden

Mulige politiske virkemidler omfatter:

•

fastsættelse af langsigtede,

strategiske mål for bio-

raffinaderier;

støtte til kapacitetsopbygning

for eksisterende teknologier og

skabelse af markeder;

støtte til teknologisk udvikling

•

Mulige politiske virkemidler

omfatter:

•

information og uddannelse af

forbrugerne;

fastsættelse af kvantitative mål

for madspild;

støtte til kapacitetsopbygning;

indførelse af økonomiske

incitamenter

•

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

BYGGEINDUSTRIEN & BYGNINGER

Industrialiseret produktion og 3D print af

bygningsmoduler, nedsættelse af tids- og

materialeomkostninger ved byggeri og

renovering, kan medføre en nettoværdi på

DKK 3,4 – 4,5 mia. (300 – 500 mio.) pr. år

i 2035 (2020).

De væsentligste barrierer omfatter:

•

en utilstrækkeligt defineret

lovgivningsmæssig ramme

umoden teknologi

vaner og adfærd samt industriens

kapacitet

evner og færdigheder.

•

vaner og adfærd samt kapacitet

evner og færdigheder.

Mulige politiske virkemidler omfatter:

•

videreudvikling af byggeregulativer

gennemførelse af

uddannelsesprogrammer i hele

branchen samt støtte til etablering

af materialeopgørelser (software og

databanker).

Mulige politiske virkemidler omfatter:

•

videreudvikling af byggeregulativer

som støtter udvikling af

modulproduktionsfaciliteter

samt fastlæggelse af en tydelig

lovgivningsmæssig ramme for brug af

materialer til 3D printning.

Deling og blandet brug af bygninger

for at øge anvendeligheden af den

nuværende bygningsmasse kan

medføre en nettoværdi på DKK 2,3 –

3,4 mia. (800 – 1.100 mio.) pr. år i 2035

(2020).

De væsentligste barrierer omfatter:

•

en utilstrækkeligt defineret

lovgivningsmæssig ramme samt

utilsigtede konsekvenser af

nuværende lovgivning.

Genbrug og højværdi-genanvendelse

af komponenter og materialer,

muliggjort f.eks. ved at designe med

henblik på senere adskillelse, samt nye

forretningsmodeller, kan medføre en

nettoværdi på DKK 0,8 - 1,1 mia. (80 – 90

mio.) pr. år i 2035 (2020).

De væsentligste barrierer omfatter:

•

forskellige incitamenter og mangel på

information på tværs af værdikæden i

byggeriet

Mulige politiske virkemidler omfatter:

•

tydeliggørelse af den nuværende

lovgivning

tilvejebringelse af økonomiske

incitamenter eller støtte til nye

forretningsmodeller samt etablering

af portaler over kapacitetsadgang til

offentlige bygninger.

MASKININDUSTRIEN

Genfremstilling og nye

forretningsmodeller baseret

på performance-kontrakter/

servicekontrakter og returlogistik kan

medføre en nettoværdi på DKK 1,1 – 1,9

mia. (400 – 800 mio.) pr. år i 2035

(2020). Ved ekstrapolering af disse

aktiviteter i tilsvarende sektorer kan

lignende muligheder give DKK 0,8 – 3,0

mia. (400 - 800 mio.) pr. år.

De væsentligste barrierer omfatter:

•

mangel på kapacitet og færdigheder

utilstrækkelig information om

nuværende muligheder samt

utilsigtede konsekvenser af

nuværende regulering.

Mulige politiske virkemidler omfatter:

•

støtte til pilotforsøg

med genfremstilling

samt gennemførelse af

informationskampagner og

ændring af de eksisterende

regelsæt samt vedtagelse af en

overordnet regeringsstrategi

for genfremstilling. strategy on

remanufacturing.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

EMBALLAGE

Øget genanvendelse af plastemballage

ved bedre emballagedesign, højere

indsamlingsprocenter og forbedret

sorteringsteknologi kan medføre

en reduktion i behovet for nyt

plastmateriale på 70–100 000 tons pr.

år i 2035.

De væsentligste barrierer omfatter:

•

lav indtjeningsevne i værdikæden

for genanvendelse (pga. af ikke

medregnede eksternaliteter samt

svingende priser)

indsamlings- og sorteringsteknologi

samt forskellige incitamenter for

aktører i værdikæden.

Biobaseret emballage, hvor

det er fordelagtigt, medfører

et innovationsdrevet omstilling fra

fossilbaseret plast til biobaserede

alternativer for udvalgte

emballageanvendelser.

De væsentligste barrierer omfatter:

•

teknologiens modenhed

indtjeningsevne (pga. af ikke

medregnede eksternaliteter) samt et

utilstrækkeligt defineret regelsæt.

•

Mulige politiske virkemidler omfatter:

•

finansiering af innovation og B2B-

samarbejde

investering i forbedrede

slutbrugsveje for biobaseret

emballage samt arbejde med

klarheden af EU’s regelsæt.

Mulige politiske virkemidler omfatter:

•

en forbedring af

indsamlingsinfrastrukturen

øgede nationale genanvendelsesmål

standardiserede indsamlings- og

sorteringssystemer samt øgede

afgifter på affaldsforbrænding.

HOSPITALER

Servicebaseret indkøb Fra indkøb

af produkter til serviceaftaler for

hospitalsudstyr, såsom avanceret

diagnostisk udstyr, IT eller

laboratorieudstyr, kan medføre en

nettoværdi på DKK 0,5 – 0,7 mia. (80 -

110 mio.) pr. år i 2035 (2020).

De væsentligste barrierer omfatter:

•

utilstrækkelig kapacitet og

færdigheder pga. manglende erfaring

ufuldkommen information i

værdikæden samt vaner og adfærd.

Affaldsreduktion og genanvendelse

på hospitaler gennem systematiske

og centralt styrede initiativer.

De væsentligste barrierer omfatter:

•

utilstrækkelige evner og

færdigheder grundet mangel på

erfaring

samt vaner og adfærd og

ufuldkommen information i

værdikæden

•

Mulige politiske midler omfatter:

•

pilotforsøg med affaldsreduktion og

genanvendelse som en integreret

del af personalets uddannelse

fastsættelse af mål for

affaldsminimering og

genanvendelse samt øgede

økonomiske incitamenter til at

undgå generering af affald.

Mulige politiske virkemidler omfatter:

•

udarbejdelse af retningslinjer

fastsættelse af mål

opbygning af kapacitet samt

definering af regler for indkøb.

•

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

INTRODUCTION

The Denmark case study focused on five sectors: food & beverage,

construction & real estate, machinery, plastic packaging and hospitals. This

report covers the core findings for these sectors, as well as an integrated

national perspective.

The findings for Denmark resulted from an intense analytical phase, going through all

steps of the methodology as laid out in the toolkit report. While these findings cannot be

directly transposed to other countries, they might serve as a source of inspiration for the

identification of opportunities, barriers and policy options. It was evident early on that

key stakeholder involvement is crucial for the success of a study such as this one. It has

included consultations with more than 25 businesses, a group of senior policymakers,

industry associations and other society stakeholders, and a series of international

experts. It was especially crucial to involve businesses throughout the project in order to:

(i)

get insights and knowledge to identify the most relevant circular economy

opportunities and barriers in each focus sector;

create early alignment on common direction for the country and the focus

sectors;

(ii)

(iii) further demonstrate circular economy benefits to businesses and build

capabilities for implementation.

As the circular economy is a new notion to both policymakers and (certain) companies,

business involvement is even more important than in other policy areas.

Thanks to the support and engagement of these stakeholders, the findings in this report

give a good directional view on circular economy opportunities for Denmark. However,

being the result of a pilot phase covering five major sectors in just a few months, the

findings below do not aim to be as detailed as a typical impact assessment for one

opportunity or policy. Similarly, the set of identified barriers would likely need to be

analysed further. The set of opportunities is not exhaustive – significant opportunities

may exist in addition to those identified here.

Each of the deep dives in chapters 2–6 covers the current state of the circular economy,

the key circular economy opportunities and related barriers, and potential policy options

to overcome these barriers.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

NATIONAL PERSPECTIVE

Even in a country with a starting position as advanced as Denmark, there are

significant opportunities to further transition towards the circular economy.

Ten circular economy opportunities in five focus sectors were identified as

most promising for Denmark. Modelling conducted in this study suggests

that, by 2035, these could unlock, relative to a ‘business as usual’ scenario:

•

an increase in GDP by 0.8–1.4%;

between 7,000 and 13,000 additional job equivalents;

a reduction of the country’s carbon footprint by 3–7%;

a reduction of consumption of selected resources

by 5–50%;

an increase in net exports by 3–6%.

Each of these opportunities is limited, to varying degrees, by a number of

barriers. Potential policy options to overcome these barriers have been

identified. To enable a systemic transition towards the circular economy,

Danish policymakers might also consider setting economy-wide direction

for the circular economy, broader changes to the fiscal system, and a wider

knowledge-building and education effort. These potential policy options

should not be considered as recommendations; Danish policymakers would

need to assess in the necessary detail their expected costs, benefits and

feasibility.

DENMARK TODAY

Leading Danish companies, including large multinationals as well as SMEs, are pioneering

circular economy solutions. The following are just three out of many inspiring examples.

•

Shipping company Maersk has introduced product passports for their container

ships, actively working with the Korean shipyard DSME and approximately 75

suppliers of parts. The passport, which will be updated throughout the life of the

ship, is a database listing the material composition of the main parts of the ship,

and documents approximately 95% (by weight) of the materials used to build the

ships. It will enable better recovery of parts and materials used in the construc-

tion and maintenance of the vessels.

Brewing company Carlsberg is using the Cradle-to-Cradle® (C2C) design frame-

work

to develop C2C-certified packaging, and has set up the Carlsberg Circular

Community, aiming to rethink the design and production of traditional packaging

material and develop materials which can be recycled and reused indefinitely

while keeping quality and value.

Baby clothing company Vigga offers a circular subscription model for baby

clothes. The baby clothes, made from organic fabrics, are returned to Vigga once

outgrown, where they are dry cleaned in an environmentally friendly way and

•

Employment impact modelled through conversion of labour bill to job equivalents via a wage curve approach

(elasticity = 0.2). Percentage change is computed vs. 2013 total full-time employment.

Measured as change in global carbon emissions divided by ‘business as usual’ Denmark carbon emissions.

For steel and plastic, in selected sectors in Denmark. Includes resources embedded in imported products/

components.

Maersk. www.maersk.com/en/hardware/triple-e/the-hard-facts/cradle-to-cradle

Created by William McDonough and Professor Michael Braungart. www.c2ccertified.org

Carlsberg. www.carlsberggroup.com/csr/ReportingonProgress/SustainablePackaging/Pages/default.aspx

Figure 1: Circularity baselining in the Denmark pilot

SCOPE

2.1

+8%

Resource productivity

GDP EUR / kg domestic material

consumption

1.9

INDICATOR

DENMARK

EU-28

RESOURCE

PRODUCTIVITY

60%

53%

CIRCULAR

ACTIVITIES

Recycling rate, excluding major mineral

waste & adjusted for trade

tonnes recycled/tonnes treated (percent)

136

100

+14%

Eco-innovation index

Index with 16 indicators (e.g. green

investments, employment, patents)

+36%

-42%

WASTE

GENERATION

Waste generated per GDP output,

excluding major mineral waste

tonnes / EUR million

747

481

+55%

Municipal waste generated per

capita

tonnes per capita

26%

14%

+84%

ENERGY AND

GREENHOUSE

GAS EMISSIONS

Share of renewable energy

Percent of gross final energy

consumption

GHG emissions per GDP output

tonnes CO2e/EUR million

225

343

-34%

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

1 2012 values if not stated otherwise

2 Comparability of this indicator is dependent on sector structure.

3 Recycling of domestically generated waste (incl. exported waste, excl. imported waste)

4 2013 data

SOURCE: Resource Efficiency Scoreboard 2014 Highlights, European commission (2014); Eurostat; Statistics Denmark, Danish EPA

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

made ready for another baby to optimise the use during the lifetime of the baby

clothes.

A circularity and policy baselining exercise conducted in the pilot reveals that Denmark

has an advanced starting position compared to other European countries (Figure 1

This is thanks to a long and rich tradition of innovating policies that stimulate resource

efficiency and the circular economy. It introduced the very first deposit-refund scheme

for beverage containers in the 1980s. It has incrementally increased landfill taxes since

they were introduced in 1987.

In 2011, it set the target to be fully independent from fossil

fuels by 2050. More recently, Denmark has laid out a comprehensive waste management

strategy in ‘Denmark Without Waste I/II’, focused on moving from incineration to

recycling and waste prevention, respectively. It has established the Task Force for

Resource Efficiency, the National Bioeconomy Panel, the Green Industrial Symbiosis

programme, and the Rethink Resources innovation centre. Denmark participates in

international initiatives such as the Ellen MacArthur Foundation’s CE100 programme. A

high-level description of the policy landscape in Denmark is given in Figure 2.

Denmark is internationally recognised as a front runner in the circular economy. A case

in point is the Danish Business Authority winning the 2015 ‘Ecolab Award for Circular

Economy Cities/Regions’ at the World Economic Forum in Davos.

In terms of opportunity identification, Figure 3 highlights that Denmark is already one

of the world leaders in the domains of energy efficiency and the adoption of renewable

energy, and has even more ambitious targets in place. Therefore, these areas were

deprioritised when assessing circular economy opportunities.

Yet even Denmark has significant opportunities to further transition towards the circular

economy. Across the economy, significant material value is left on the table as most

waste streams and by-products are used for relatively low-value applications. Of the 93%

waste diverted from landfill, only two thirds is recycled – the rest is incinerated.

In the construction sector, 87% of materials is recycled, but mainly for low-quality

applications,

and there is only an estimated <1% reuse of building components and

materials. In the machinery sector, >95% of its most important material (steel) is

recycled, yet there is an estimated <1% remanufacturing.

Nearly 100% of industrial

organic waste is being valorised, but mainly in low-value applications such as

incineration, direct fertilisation, or animal feed, while only ~3% of waste is used in biogas

production and there is <1% cascading bio-refining.

In addition, the headline figures quoted above hide pockets of opportunities. Municipal

waste per capita is the highest in the EU (~750 kg/capita vs. ~480 kg/capita EU28

average).

There is an estimated 80-90 kg annual avoidable food waste per household.

Only ~15% plastic packaging is collected for recycling from households, of which only

half actually gets recycled in new resin.

www.vigga.us

See section 2.1.1 in the toolkit report for more details.

Danish Environmental Protection Agency,

From land filling to recovery – Danish waste management from the

1970s until today

(2013).

https://thecirculars.org

Eurostat.

Statistics Denmark; interviews with the Danish Environmental Protection Agency and sector experts.

Statistics Denmark; interviews with sector experts.

L. Lange, A. Remmen,

Bioeconomy scoping analysis

(Aalborg University, 2014); interviews with sector ex-

perts; Danish Government,

Denmark Without Waste I. Recycle more – incinerate less

(2013); Danish Energy

Agency,

Biogas i Danmark – status, barrierer og perspektiver

(2014).

Eurostat. There are some discrepancies in how this metric is calculated in different member states.

Danish Environmental Protection Agency,

Kortlægning af dagsrenovation i Danmark – Med fokus på etage-

boliger og madspild

(2014).

Danish EPA; Statistics Denmark.

Figure 2: Policy landscape in the Denmark pilot

EXAMPLES OF EXISTING INTERVENTIONS

EXAMPLES OF POSSIBLE ADDITIONAL

INTERVENTIONS (AS OBSERVED AT START OF THE

PROJECT IN WINTER 2014-15 AND NOT TAKING

INTO ACCOUNT SUBSEQUENT ANALYSIS)

•

Systems thinking integrated in curricula

Further pilot projects to demonstrate circular economy

potential to businesses

POLICY

INTERVENTION TYPES

EDUCATION,

INFORMATION &

AWARENESS

•

Consumer information campaigns, e.g. ‘Use more, waste less’ and ‘Stop

Wasting Food’

•

‘Genbyg Skive’ pilot project to re-use building materials to create business

opportunities and reduce waste

Rethink Resources, an innovation centre to support resource efficiency in

companies

Four new partnerships (food, textile, construction and packaging) as part

of the Danish Waste Prevention Strategy

COLLABORATION

PLATFORMS

Green Industrial Symbiosis programme

BUSINESS SUPPORT

SCHEMES

•

Maabjerg Energy Concept (MEC) bio-refinery part funded by Innovation

Fund Denmark (EUR 40m)

Fund for Green Business Development (EUR 27m 2013–2018) to support

innovation and new business models

•

Dutch ‘Green Deal’ inspired programme to provide on-demand

support to companies in implementing circular economy

opportunities

•

Strategy on waste prevention also contains an initiative to develop

guidelines for circular public procurement

PUBLIC

PROCUREMENT &

INFRASTRUCTURE

Government Strategy on Intelligent Public Procurement contains

initiatives to support circular procurement practices

•

Guidelines on the circularity of materials and products

integrated into public procurement policy

REGULATORY

FRAMEWORKS

•

Ambitious energy efficiency and GHG emissions targets, e.g. 40% GHG

reduction by 2020 vs. 20% at EU level,

Ambitious targets for recycling/incineration/landfill, updated every 6

years, e.g. recycle 50% of household waste by 2022

Taskforce for increased resource efficiency to review existing regulations

affecting circular economy practices

•

New metrics introduced to measure economic performance, e.g.

complements to GDP such as natural capital

Engagement at EU level to adapt existing or introduce new

regulations relevant to the circular economy, e.g. product policy

FISCAL FRAMEWORKS

•

Taxes on extraction and import of raw materials, vehicle registration and

water supply

High and incrementally increased taxes on incineration / landfill to

promote recycling and waste prevention

Highest energy taxes in Europe (70% above EU27) and CO2 taxes

Tax cuts designed to promote use of low-carbon energy

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

•

Investigation into effects of tax shift from labour to resources

SOURCE: European Commission, Tax reforms in EU Member States 2013; IEA, Energy Policies of Denmark: 2011 review; Nordic Council of Ministers, The use of economic instruments in

Nordic environmental policy 2010-2013; Danish legislative council, Waste management policy in Denmark, 2014; The Ex’Tax project, New era. New plan. Fiscal reforms for an inclusive, circular

economy, 2014.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Figure 3: Results of sector prioritisation in Denmark pilot

CIRCULARITY POTENTIAL

Construction

Food and beverages

Basic metals and

fabricated products

Machinery

Electronic products

Hospitals

Water supply, sewerage

Electricity, gas

Packaging

(not sized)

Rubber and plastic

products

Agriculture, forestry

and fishing

Pharmaceuticals

Mining and quarrying

ROLE IN NATIONAL ECONOMY

Producing sectors

Prioritised sectors

Non-producing sector

Size = Gross value added

NOTE: Only producing sectors (24% of national GVA) and hospitals (3.5% of national GVA) considered

SOURCE: Statistics Denmark (2011 data); Danish Business Authority; Danish Environmental Protection Agency;

Ellen MacArthur Foundation

SECTOR SELECTION

To focus the analytical work to the areas in the Danish economy with the highest circular

economy potential, a structured sector selection approach was developed to select

five sectors. Two dimensions were used to prioritise sectors based on both their role

in the national economy and the circularity potential. The sectors were then assessed

according to a ‘score’ for each dimension, which was computed by scoring a number of

sub-dimensions:

•

Role in the national economy: size (and growth) measured by share of GVA

(gross value added), contribution to employment (and growth), international

competitiveness.

Circularity potential: material and energy intensity, volume of waste generated,

share of waste landfilled/incinerated, high-level estimate of scope for improved

circularity.

•

These sub-dimensions, and their relative weights in the scoring, are explained in further

detail in Appendix A.

Subsequently, one to two product categories or sub-sectors were selected in each focus

sector to drive the identification and quantification of circular economy opportunities.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

They were selected based on their importance for sector value creation in Denmark, as

well as the relevance for circular economy opportunities. The five selected focus sectors

and their product categories are:

•

Food & beverage, a producing sector. The analysis in this sector focused on the

pork and dairy processing industry, but also included a deep dive on the con-

sumer side.

Construction & real estate, a producing sector. The analysis in this sector focused

on the construction and renovation of buildings, but also included a deep dive on

real estate utilisation (sharing).

Machinery, a producing sector. The analysis in this sector focused on pumps and

wind turbines.

Packaging, a cross-cutting sector spanning consumer goods companies, whole-

salers, retailers, and consumers. The analysis in this sector focused on plastic

packaging.

Hospitals, a public, consuming, service sector. The analysis in this sector focused

on public procurement, and is important as a proxy to understand opportunities

in the large public sector in Denmark.

The energy sector, while critical for the transition to the circular economy, has

not been selected as a focus sector in this study, as Denmark is already working

towards a target to base all energy consumption, including the transport sector,

on renewables by 2050.

•

The fact that some sectors were deprioritised in this study does not mean that there

are no circular economy opportunities. But as in most projects, the scope of the

Denmark case study prohibited deep-dive analysis into all aspects of the economy. It

should also be noted that only producing sectors, as well as hospitals, were consid-

ered in the sector selection exercise. While most resource related circular economy

opportunities are arguably concentrated in these sectors, other opportunities may

also be interesting. Other public sectors (in total representing 26% of the national

economy) or the transport sector (one of the top energy consumers in any country)

could be interesting candidates for further analysis, despite being outside the scope

of this study.

CIRCULAR ECONOMY OPPORTUNITIES AND THEIR POTENTIAL IMPACT

To identify and prioritise opportunities within the five selected focus sectors, the

ReSOLVE framework

(shown in Figure 4 and described in detail in Appendix E)

was employed. This exercise led to a qualitative mapping of which type of activities

could have the largest impact in the respective sector (see Figure 5), and guided the

prioritisation of ten circular economy opportunities in each sector. These opportunities

are shown in Figure 6, and are detailed in Chapters 2–6, which each cover one sector.

The public sector represents 26% of the national economy. Data from Statistics Denmark.

The Danish Government,

The Danish Climate Policy Plan

(2013).

Ellen MacArthur Foundation, SUN and McKinsey Center for Business and Environment, Growth Within: A

Circular Economy Vision for a Competitive Europe (2015).

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Figure 4: The ReSOLVE framework: six action areas for businesses and countries

wanting to move towards the circular economy

•

Shift to renewable energy and materials

Reclaim, retain, and restore health of eco-

systems

Return recovered biological resources to

the biosphere

•

Share assets (e.g. cars, rooms, appliances)

Reuse/secondhand

Prolong life through maintenance, design

for durability, upgradability, etc.

•

Increase performance/efficiency of

product

Remove waste in production and supply

chain

Leverage big data, automation, remote

sensing and steering

Remanufacture products or components

Recycle materials

Digest anaerobically

Extract biochemicals from organic waste

•

Dematerialise directly (e.g. books, CDs,

DVDs, travel)

Dematerialise indirectly (e.g. online

shopping)

•

XCHANGE

Replace old with advanced non-renewable

materials

Apply new technologies (e.g. 3D printing)

Choose new product/service (e.g. multi-

modal transport)

•

SOURCE: Ellen MacArthur Foundation, SUN and McKinsey Center for Business and Environment,

Growth Within: A

Circular Economy Vision for a Competitive Europe

(2015). Based on S. Heck, M. Rogers, P. Carroll, Resource Revolution

(2015).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

Figure 5: Qualitative opportunity prioritisation of focus sectors in the Denmark pilot

Low potential

High potential

Prioritised for fur-

ther assessment

Indirectly included

or enabler of key

sector opportunities

QUALITATIVE ASSESSMENT OF POTENTIAL IN DENMARK PILOT

FOOD & BEV.

CONSTRUCTION

MACHINERY

PACKAGING

HOSPITALS

XCHANGE

1 Assessment based on focus subsector, product category or material stream in each sector. Food & beverage: Waste/by-products from

pork / dairy processing, residual biomass from agriculture, organic waste from households, retail & hospitality. Construction: New buildings.

Machinery: Manufacturing of pumps and wind turbines. Packaging: Plastic packaging. Hospitals: Purchasing of goods.

SOURCE: Ellen MacArthur Foundation

These ten identified opportunities are already being pursued to some extent today, inside

or outside Denmark. There is however significant potential to scale up. Doing so could bring

Denmark from the – dependent on the sector – early or advanced transitioning economy it is

today to an advanced transitioning and in some areas almost fully circular economy by 2035

(see Figure 7 on page 36-37).

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Figure 6: Ten circular economy opportunities in five focus sectors

FOOD AND

BEVERAGE

Value capture in cascading bio-refineries

Reduction of avoidable food waste

CONSTRUCTION

AND REAL

ESTATE

Industrialised production and 3D printing of

building modules

Reuse and high-value recycling of components and

materials

Sharing and multi-purposing of buildings

MACHINERY

Remanufacturing and new business models

PLASTIC

PACKAGING

Increased recycling of plastic packaging

Bio-based packaging where beneficial

HOSPITALS

Performance models in procurement

Waste reduction and recycling

SOURCE: Ellen MacArthur Foundation

The impact quantification of the identified opportunities was conducted by estimating

three key factors:

(i)

(ii)

The adoption rate of the opportunity relative to ‘business as usual’

The addressable value pool for the deep-dive sub-sector, e.g., ‘number of units

produced’ or ‘volume of waste’

(iii) The net value created per unit in the deep-dive sub-sector, considering impact

on both revenues and cost.

To ensure a consistent ambition level when detailing these opportunities and assessing

their impact, a short-term scenario of five years (2020) and a long-term scenario of 20

years (2035 were defined), each for which an adoption rate and the net value creation

were estimated, see Figure 8. The year 2035 was selected to illustrate as much of the

‘full’ potential as possible, without going so far into the future that businesses and

other stakeholders would find it hard to assess concrete opportunities. The scenario

description served offered a common backdrop to define and assess the different

identified opportunities, by articulating how the business environment and consumer

behaviour, as well as technology, could evolve going forward.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

Furthermore, a ‘conservative’ and an ‘ambitious’ version of these scenarios were

defined to illustrate the range of impact the circular economy development could have.

These two levels differentiate assumptions on the scalability of impact from the deep

dives into sector subcategories to the rest of the sector, and of the five focus sectors

to adjacent producing sectors. The impact estimated for pumps and windmills, for

example, is scaled up to the full machinery sector. The impact for the machinery sector

is then, in turn, scaled up to the adjacent sectors electronics, other manufacturing, basic

metals and fabricated metal products, and mining. In the conservative scenario, such

scale-up is significantly discounted – for example, when scaling up the results from the

construction of buildings to infrastructure construction, these results are reduced by

80%. In the ambitious scenario, higher scale-up rates are used. A detailed description of

the approach of quantifying deep-dive sub-sectors and scaling up to the full sector is all

its elements is given in Appendix B. A driver tree representation of the methodology can

be found in Figure B2.

Figure 8: Short-term and long-term scenarios used in the Denmark pilot

Short-term (2020)

BUSINESS &

CONSUMER

BEHAVIOUR

•

Increased acceptance of performance

based business models in businesses

and the public sector, but still for

niche product categories (e.g. ~10%

of imaging / radiation equipment in

hospitals, ~10% of machinery products)

Households are comfortable using

new separation systems introduced by

municipalities as part of the “Denmark

Without Waste” strategy (e.g. increase

in collection rate of household plastic

packaging waste by 15 percentage

points)

Significant remaining margins for

improvement in waste reduction

Rapidly increasing interest in

sharing business models (e.g. shared

residential and office space)

Long-term (2035)

•

Broad acceptance of access over

ownership business models in

businesses and public sector (e.g.

~30% of a broad range of products

in hospitals, ~30-70% of machinery

products)

Fully optimised waste collection and

separation infrastructure provided by

municipalities and waste managers

(collection of 70-80% of plastics for

recycling)

Avoidable food waste reduction

approaching theoretical limits due to

improved knowledge and use of best

practices among consumers, businesses

and public institutions (e.g. hospitals)

Sharing has become the new norm

for traditionally underutilised assets

(buildings, cars, and durables)

Key circular economy technologies

existing today at R&D or early

commercial stage have reached

maturity due to accelerated innovation

Increasing remanufacturing of

machinery components for use

in “as new” products enabled by

increasing importance of software for

performance

•

TECHNOLOGY

•

Key circular economy technologies (e.g.

cascading bio-refineries, bio-based

alternatives to plastics, 3D printing and

design for disassembly in construction,

remanufacturing techniques), existing

today at late R&D or early commercial

stage, have been successfully piloted

•

Source: Expert interviews; DBA; Danish EPA; Ellen MacArthur Foundation.

Overall, the underlying assumptions for both scenarios can be considered relatively

conservative. The scenarios rely, for example, only on technologies currently at

commercial stage or late R&D. In addition, the analysis focused on the producing

sectors and hospitals only, representing, in total, 25% of the Danish economy

. No

direct circularity effects have been modelled for the service sector (except hospitals),

which represents (excluding hospitals) over 70% of the Danish economy. The Danish

Based on 2011 gross value added provided by Statistics Denmark.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Figure 7: Illustrative status of circular economy in Denmark today and potential by 2035

2015

2035

LINEAR ECONOMY

•

Linear flows (landfill, incineration)

Efficiency; waste avoidance

Non-renewable energy

FOOD AND

BEVERAGE

•

Near 100% of industrial organic waste valorised, but mainly in

low-value applications (e.g. energy recovery, animal feed); ~3% of

waste used in advanced AD, <1% cascaded bio-refining

80–90 kg/capita avoidable food waste p.a.

•

BUILT

ENVIRONMENT

•

87% of construction & demolition waste recycled yet with low

quality; <1% reuse

10–15% materials wasted during construction

First sharing platforms (e.g. AirBnB)

MACHINERY

•

Very high recycling rates; <1% remanufacturing

Lifetimes already (being) optimised using e.g. predictive

maintenance

<1% performance contracts

PLASTIC

PACKAGING

•

~30% recycling (rest incinerated)

Plastic packaging largely petro-based

HOSPITALS

•

High levels of waste

15–30% recycling

Performance models only adopted for textiles

ENERGY (NOT

FOCUS IN PILOT)

•

>40% renewables in electricity

26% renewables in final energy consumption

DENMARK (BASED

ON SECTORS

ABOVE)

2015

2035

SOURCE: Statistics Denmark; Eurostat; Danish Climate Policy Plan; expert interviews; Ellen MacArthur Foundation

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

CIRCULAR ECONOMY

TRANSITION ECONOMY

•

Low-value circular flows (e.g.

recycling, AD)

Mix of renewable and non-re-

newable energy

•

High-value circular flows (e.g. reuse, reman,

cascaded value extraction for organics)

Circular business models (e.g. sharing, leasing)

Renewable energy

•

~90% of organic waste in advanced AD and cascaded bio-refining

40–50 kg/capita avoidable food waste p.a.

•

15% of building materials and components

reused; recycling with higher quality

<1% waste in construction process

Widespread building sharing

•

15–35% remanufacturing

10–15% performance contracts

•

~75% recycling

Bio-based materials

replacing petro-based

plastics in selected products

•

Avoidable waste designed out

>80% recycling (of non-toxic

waste)

40% performance models

adoption for addressable

equipment

•

100% renewables in electricity and heating

Oil for heating and coal phased out

Fossil fuels remain in e.g. transport

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

energy mix was assumed to be the same in the ‘business as usual’ and circular economy

scenarios – which limits the size of the potential CO

reduction. More details on key

macroeconomic model assumptions and data sources can be found in Appendix C.

In order to analyse the economy-wide impact, including potential knock-on effects

on other sectors of the Danish economy, the quantified impact of the sector-specific

circular economy opportunities was used as input to a computable general equilibrium

model (see Section 2.3.1 and Appendix C in the toolkit report for further details). As

seen in Figure 9, this analysis shows that relative to a ‘business as usual’ scenario, these

opportunities could produce significant positive economic and environmental results

by 2035. While such estimates by necessity rely on a number of assumptions and

recognising that the methodology used to estimate them will continue to be developed,

these findings support conclusions from a growing body of research (see Figure E3)

that the impact of a circular economy transition on economic growth, job creation and

carbon emissions is likely positive. For a detailed description of the impact assessment

methodology, see Appendix B.

Figure 9: Estimated potential impact of further transitioning to the circular economy

in Denmark

Economy-wide impact by 2035. Absolute and percentage change relative to the

‘business as usual’ scenario.

GDP

EUR billion (2015 prices)

Employment

Job equivalents

footprint

Million tonnes of CO2

1 Employment impact modelled through conversion of labour bill to job equivalents via a wage curve approach

(elasticity = 0.2). Percentage change is vs. 2013 total full-time employment (Source: Statistics Denmark)

2 Change in Global CO2 emissions vs. Denmark baseline 2035 emissions; other GHG emissions are not included.

SOURCE: Ellen MacArthur Foundation; NERA Economic Consulting

While such estimates by necessity rely on a number of assumptions and recognising that

the methodology used to estimate them will continue to be developed, these findings

support conclusions from a growing body of research (see Figure 4 in Chapter 1.1 of the

main report) that the impact of a circular economy transition on economic growth, job

creation and carbon emissions is likely positive.

CONSERVATIVE

AMBITIOUS

3.6

0.8%

7,300

0.4%

-0.8

-2.5%

6.2

1.4%

13,300

0.6%

-2.3

-6.9%

Percentage change 2035 vs.

‘business as usual’ scenario

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

Positive changes relative to the ‘business as usual’ scenario were identified in five key

areas:

Economic growth (measured as change in Gross Domestic Product):

Economic

modelling suggests that the identified circular economy opportunities could expand

Denmark’s GDP by between +0.8% (in the conservative scenario) and +1.4% (in

the ambitious scenario) by 2035. This increase in national economic growth would

be achieved mainly through a combination of increased revenues from emerging

circular activities and lower cost of production through more productive utilisation of

inputs. These changes in input and output of economic production activities affect

economy-wide supply, demand and prices, rippling through the other sectors of the

Danish economy and resulting in a series of indirect effects that add to the overall

growth. Such effects include changed activity levels in the supply chains, and greater

consumption and savings resulting from an increase in household income, in turn

resulting from greater remuneration to labour. Together, these effects add up to a

positive change in GDP (and contribute to other macro impacts described below).

Employment (measured as job equivalents estimated via a wage curve approach):

Total remuneration to labour increases both as a result of general expansion of economic

activity, and as a result of the increased labour intensity resulting from certain circular

economy opportunities (e.g. remanufacturing). Although the impact assessment model

used in the Denmark pilot does not explicitly calculate how this higher remuneration

is distributed between wage increases and new jobs, it is possible to estimate this

distribution using a ‘wage curve’ approach and an assumption on long-run labour supply

elasticity (elasticity = 0.2). Through such a calculation, it is estimated that the direct and

indirect effects of circularity could bring positive impacts to employment by adding

between 7,000 (in the conservative scenario) and 13,000 (in the ambitious scenario) full-

time job equivalents to the economy by 2035.

Carbon footprint (measured as change in global emissions as a result of Denmark’s

more circular economy):

Increased circularity and the associated reduction in resource

consumption would lower the carbon intensity of Denmark’s own producing sectors,

reduce Denmark’s imports of high-carbon-embodied goods, and increase Denmark’s

exports of lower-carbon-embodied goods. These changes would directly affect the

carbon emissions of Denmark and its trading partners, and indirectly also those of its

non-trading partners. This could reduce global carbon emissions in a magnitude equal

to between 3% (in the conservative scenario) and 7% (in the ambitious scenario) of

Denmark’s ‘business as usual’ carbon emissions by 2035. This reduction excludes the

effects resulting from a shift to renewable energy.

Resource use:

By 2035, increased remanufacturing in the machinery sector could

reduce demand for 60,000–90,000 tons of iron/steel annually (6–10% of total

consumption in that sector).

In plastic packaging, demand for virgin plastic could be

reduced by 80,000–100,000 tons annually due to increased recycling (40–50% of total

in that sector

International trade balance:

In a circular economy, Denmark’s use of goods and

services would be more productive than it would be otherwise. That is, Denmark would

be able to produce goods and services, primarily those in the focus sectors, at a lower

cost. This cost advantage from greater circularity would improve cost-competitiveness

internationally, which would result in higher exports and erode the attractiveness of

imports, reducing their volume. Such trade effects could ripple across to other countries,

resulting in a shift in Denmark’s trading patterns with the rest of the world. By 2035,

Employment impacts are computed assuming a wage curve and a long-run labour supply elasticity of 0.2.

This methodology is similar to the approach adopted by the Danish Economic Council (DØRS) when inter-

preting employment impacts within a CGE with full employment assumption. The chosen elasticity value is an

average for European countries.

Total steel demand provided by Statistics Denmark. Steel savings estimated based on the adoption rate of

component remanufacturing in the machinery sector (Chapter 3.4), informed by material composition pro-

vided by industry reports and sector experts.

Measured by annual plastic packaging waste generated. Danish Environmental Protection Agency,

Statistik

for emballageforsyning og indsamling af emballageaffald 2012

(2015 rev.).

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

net exports (i.e. exports minus imports) could expand, relative to the ‘business as usual’

scenario, by 3% (in the conservative scenario) and 6% (in the ambitious scenario).

Even though most of the identified circular economy opportunities by nature take

time to realise, there are benefits in the short term. By 2020, adoption of the identified

circular economy opportunities could increase GDP by EUR 400 million (0.1%), and

create 1,300–1,400 new jobs. The model estimates a slight rebound effect in CO2

emissions, with a 1.0%–2.0% increase by 2020. However, this should be understood in

relation to a baseline scenario that factors in a significant decline in the use of fossil

energy in Denmark, following the national target to reduce GHG emissions 40% by 2020

vs. 1990 levels

Figure 10 shows a breakdown of these results along the seven quantified circular

economy opportunities. Three circular economy opportunities have not been quantified.

The economic impacts of the two packaging opportunities and the opportunity related

to waste reduction and recycling in hospitals have not been quantified as it is expected

that their magnitude would be limited when compared to the full Danish economy.

Figure 10: Breakdown of potential economic impact by quantified opportunity

CIRCULAR ECONOMY

OPPORTUNITY

Industrialised production and 3D

printing of building modules

ESTIMATED ANNUAL VALUE CREATED BY 2035

33%

Value capture in cascading bio-

refineries

17%

Remanufacturing and new business

models

17%

Sharing and multi-purposing of

buildings

16%

Reuse and high-value recycling of

components and materials

Reduction of avoidable food waste

Performance models in

procurement

Total

100%

1 Average between conservative and ambitious scenario. This sector-specific impact does not include indirect

effects, e.g. on supply chains, that are captured in the economy-wide CGE modelling.

2 Including scaling from machinery sector (including pumps, wind turbines and other machinery products) to

adjacent manufacturing sectors (electronic products, basic metals and fabricated products, other manufacturing,

mining and quarrying)

SOURCE: Ellen MacArthur Foundation

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

BARRIERS AND POTENTIAL POLICY OPTIONS

While most circular economy opportunities identified in Denmark have sound underlying

profitability, there are often non-financial barriers limiting further scale-up or reducing

their pace. An overview of the barriers to each of the opportunities in the Denmark pilot

is provided in Figure 11.

The social factor barriers of capabilities and skills and custom and habit are widespread,

as the behavioural changes needed to realise many of the opportunities go against

ingrained patterns of behaviour and skill-sets on the part both of consumers and

businesses. Imperfect information was also often found to be a barrier: businesses can

be unaware of potentially profitable new opportunities, or the information necessary to

realise them is unevenly distributed.

Technology can be a critical barrier as well, especially for the more technology-

dependent opportunities such as cascading bio-refineries, 3D printing of building

components, and bio-based packaging.

Externalities feature as a barrier to many opportunities, though they do not threaten

the fundamental profitability of most, with the exception of packaging. In this sector,

without the additional factoring in of externalities, the profitability of both recycling

and bio-based packaging is highly dependent on the price of the alternative – petro-

based plastic, which is in turn determined by global oil prices. A similar reasoning

applies to bio-refineries, although cascading bio-refineries could alleviate this concern

by diversifying revenue streams beyond alternatives to petro-based fuels, chemicals and

plastics.

The barrier of unintended consequences from existing legislation limiting circular

economy opportunities is present for example in bio-refining where food safety

regulations prevent the use of certain animal products as feedstock. Such barriers can be

in the complexity and cost of adhering to regulations as well as in actual prohibition of

certain activities. The devil is in the detail here, and more detailed analysis of unintended

consequences would be required to determine the exact magnitude of this barrier for

the different opportunities in Denmark.

Potential policy options that could overcome the barriers for each of these opportunities

have been identified. These options cover a broad range of policy intervention types,

and are detailed in the sector deep dive chapters below. They should not be considered

as recommendations, rather as an input to Danish policymakers’ discussions about if

and how to shift to a circular economy. Policymakers would need to assess in detail their

expected costs, benefits and feasibility.

To enable a systemic transition towards the circular economy, Danish policymakers

could also reflect on setting an economy-wide direction for the circular economy,

broader changes to the fiscal system, and a wider knowledge-building and education

effort. While many circular economy opportunities already have a sound underlying

profitability, a number of international organisations, such as the European Commission,

the OECD, the IMF, and the International Labour Organization, have suggested further

opportunities could be unlocked by shifting fiscal incentives towards labour from

resources. However, the effects of such a shift would need to be carefully analysed,

especially considering Denmark is a small and export-oriented country. Complementing

today’s flow-based metrics such as GDP as a measure of economic success with

measures of a country’s stock of assets could be an instrument for policymakers to

account for the restoration and regeneration of natural capital.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Figure 11: Barrier matrix for the ten prioritised

opportunities in Denmark

Critical barrier (‘make or break’)

Very important barrier (to scale-up / acceleration of lever)

Important barrier (to scale-up / acceleration of lever)

Limited or no barrier

CIRCULAR ECONOMY OPPORTUNITIES

BARRIERS

ECONOMICS

MARKET FAILURES

REGULATORY

FAILURES

SOCIAL

FACTORS

Value capture

in cascading

bio-refineries

Reduction

of avoidable

food waste

Industrialised

production

and 3D

printing of

building

modules

Not profitable for businesses

even if other

barriers are overcome

Capital intensive and/or uncertain payback

times

Technology not yet fully available at scale

Externalities (true costs) not fully refletcted in

market prices

Insufficient public goods / infrastructure

provided by the market or the state

Insufficient competition / markets leading to

lower quantity and higher prices than is socially

desirable

Imperfect information that negatively

affects market decisions, such as asymmetric

information

Split incentives (agency problem) when two

parties to a transaction have different goals

Transaction costs such as the costs of finding

and bargaining with customers or suppliers

Inadequately defined legal frameworks

that govern areas such as the use of new

technologies

Poorly defined targets and objectives which

provide either insufficient or skewed direction

to industry

Implementation and enforcement failures

leading to the effects of regulations being

diluted or altered

Unintended consequences of existing

regulations that hamper circular practices

Capabilities and skills lacking either in-house or

in the market at reasonable cost

Custom and habit: ingrained patterns of

behaviour by consumers and businesses

1 At market prices excluding the full pricing of externalities such as greenhouse gas emissions, ecosystem degradation and resource depletion

2 Infrastructure defined as fundamental physical and organisational structures and facilities, such as transportation, communication, water and

energy supplies and waste treatment

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

Reuse and

high value

recycling of

components

and materials

Sharing

and multi-

purposing of

buildings

Remanufac-

turing and

new business

models

Increased

recycling

of plastic

packaging

Bio-based

packaging

where

beneficial

Performance

models in

procurement

Waste

reduction and

recycling in

hospitals

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

2 FOOD & BEVERAGE

The Danish food and beverage industry has developed a track record

of minimising processing waste and finding productive use for its by-

products and remaining waste streams – but mostly in relatively low-value

applications. It therefore has a significant opportunity to increase the value

extraction from its by-products and waste streams by using cascading

bio-refineries. While anaerobic digestion and other basic bio-refining

technologies exist today, the technology to derive – in cascaded applications

– high-value compounds is still an estimated five years away. If technological

development continues and plant capacity is built up, modelling suggest that

these cascading bio-refineries could yield, by 2035, a potential net value of

EUR 300–500 million annually. In parallel, reducing the levels of avoidable

food waste from 80–90 kg/capita to 40–50 kg/capita, enabled through

building awareness and capabilities among households and businesses and

improving technologies across the value chain, could save Danish households

and businesses an estimated EUR 150–250 million annually by 2035.

Operating in a highly competitive international context, the Danish food and beverage

industry has developed a track record of minimising processing waste and finding

productive use for its by-products and remaining waste streams. However, most of these

applications are relatively low-value, such as the production of animal feed or energy

extraction. The Danish food and beverage processing industry therefore has a significant

opportunity to increase the value extraction from its by-products and waste streams in

cascading bio-refineries.

The retail and hospitality sectors and households, on the other hand, generate large

quantities of avoidable food waste. Considering that Danish households spent over EUR

23 billion on food and beverages in 2013, or 20% of their total consumption,

significant

value could be captured by reducing avoidable food waste.

2.1 Value capture in cascading bio-refineries

Opportunity:

Develop cascading bio-refineries that capture the full value of by-

product and waste streams by extracting several different products.

EUR 300–500 (50-80) million p.a.

2035 (2020)

economic

potential:

Key barriers:

Capital to build and scale up capacity; technology; unintended

consequences of existing regulation.

Long-term strategic targets for bio-refineries; support capacity for

current technologies and create markets; support technological

development.

Sample policy

options:

Home to international players such as Carlsberg, Danish Crown, and Arla, the Danish

food and beverage sector is a cornerstone of Danish industry, representing 25% of

the total product exports, and 7.7% of the gross value added by the Danish producing

sectors.

The Danish food-processing industry is already a leader in resource productivity, both in

terms of minimising waste and valorising by-products:

Eurostat,

Final consumption expenditure of households by consumption purpose

(2013).

Based on gross value added in 2011, reported by Statistics Denmark. Producing sectors include agriculture,

forestry and fishing; mining and quarrying; construction; electricity and gas; manufacturing.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

•

At Carlsberg, ~95% of brewery by-products are sold as fodder supplements, and

the company is currently looking into biogas generation for additional value ex-

traction.

Danish Crown ‘does not think in terms of waste at all’ according to environmental

manager Charlotte Thy. ‘It’s in our DNA to find applications for all our by-prod-

ucts’. Slaughterhouses today have a multitude of ways to valorise all parts of the

animal. For example, bones, trotters and excess blood can be sold as animal feed,

and even manure left in the intestines is collected and used for biogas genera-

tion.

Arla has used whey, a by-product of cheese making, to produce high-protein

products since the 1980s.

•

Other organic waste, such as wastewater from industries and households, and food

waste, is used to extract energy using anaerobic digestion (biogas), combined heat and

power, or direct district heating. Denmark had an estimated 1.2 GWh biogas capacity

in 2012. The biogas plants treat 3% of Denmark’s organic waste as well as wastewater

and manure. Most of the capacity was built before 2000, but in 2012 Denmark adopted

a new support model and subsidy scheme for the production and use of biogas. The

Danish Energy Agency now estimates that biogas capacity will increase to 2.8 GWh by

2020.

THE OPPORTUNITY FOR DENMARK

There is still a large opportunity to capture as most of the abovementioned applications

extract only a fraction of the value residing in the various organic by-products and waste

streams. According to an Aalborg University report, Denmark has a strong position in

bioeconomy R&D, but it is insufficiently leveraged since new valorisation technologies

have not yet been piloted to the extent required to accelerate them to commercial

scale.

It has been argued for some years that advanced, cascading ‘bio-refineries’

could

unlock this value by deriving valuable products from organic waste and by-products,

in many ways emulating the conventional petroleum refinery.

The core principle is

to cascade waste/by-product streams through a series of value-creating steps. The

cascade could consecutively produce, for example, high-value biochemicals and

nutraceuticals, followed by bulk biochemicals, and still be able to produce biofuels and/

or biogas with the remaining biomass. The extraction of nitrogen, phosphorus and

potassium (NPK)

and the return of digestate to soils (restoration) ensures that the

process also helps preserve natural capital.

To ensure viability of full value capture through a set of cascaded operations,

development of the more advanced technologies that extract complementary products

from the by-products or waste needs to accelerate. There are many promising examples

of this group of technologies developed today. The following are selected examples; see

also Notes 129 and 131):

•

Use newly engineered enzymes to convert keratin-rich parts such as hairs, bris-

tles or feathers to high-protein feed ingredients.

Extract proteins and other food ingredients from under-utilised residues from

plants (press cake from oil seed, potato peelings, brewers’ spent grain) or ani-

•

Danish Energy Agency,

Biogas i Danmark – status, barrierer og perspektiver

(2014).

Lange, L., Remmen, A., Aalborg University,

Bioeconomy scoping analysis

(2014).

A bio-refinery can be defined as a plant that is designed to convert an organic feedstock into several value

streams by cascading the material through a series of extraction and/or conversion operations. This is not to

be confused with pure-play biofuel or combined heat and power plants that also use an organic feedstock.

For more details, please see Ellen MacArthur Foundation,

Towards the Circular Economy I

(2012), p.52.

For example, the EU-led P-REX project seeks to demonstrate phosphorous recovery from municipal waste-

water at scale. www.p-rex.eu

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

mals (by-catch and side streams from fisheries).

•

Extract or synthesise nutraceuticals from pig blood and similar chemically rich

by-products.

Use microbes to synthesise bioplastics from sewage sludge or wastewater, such

as in the Danish multi-stakeholder project at special ingredient manufacturer

KMC’s water treatment plant.

•

Aside from developing the technologies needed, it is challenging to make them all come

together in an integrated way, and also make them work in concert with more basic

technologies like anaerobic digestion. One of the few plants today operating in line with

the definition of an advanced, cascading bio-refinery (see Note 130) is the Borregaard

plant in Norway.

The plant, which used to make paper and cellulose, now produces

a variety of fine chemicals for both food and chemical industries, cellulose-derived

materials and biofuels, mostly based on feedstock from the forest industry. While

Borregaard is not directly comparable to a bio-refinery based on organic waste, such

developments are underway: for example, Veolia has launched a project in collaboration

with UK-based Bakkavor Group to transform a wastewater treatment plant in Belgium

to a fully cascading bio-refinery that produces pharma-grade chemicals, bioplastics,

fertilisers, energy and clean water.

With the necessary investments in technology and capacity available, Denmark could

become a leader in cascading bio-refining:

•

By 2020, Danish businesses could have set up the first new bio-refineries to max-

imise the valorisation of existing waste streams using mature technologies (e.g.

enzymatic protein extraction from animal by-products and chemical extraction

from wastewater). Continuing extension of biogas and biofuel capacity could

serve as platforms for emerging, more advanced technologies. Recognising

that such technologies take time to develop at scale, it is estimated that 20% of

the organic waste and by-products are available for additional value creation in

the short term, and that 60% of the added value would come from extending

and improving biofuel and biogas production with 40% provided by extracting

bio(chemicals).

By 2035, Danish businesses could become technology frontrunners in by-prod-

uct (waste) valorisation in cascading bio-refineries, using by then mature ad-

vanced technologies for high-value extraction of biochemicals and nutraceuti-

cals. By this time an estimated 90% of the waste streams could be processed in

new applications, and 60% of the total value added could come from extracting

bio(chemicals), with 40% coming from producing biofuel and biogas (either di-

rectly or by the cascading of material streams from higher-value applications).

•

By assuming a relatively conservative estimate of additional value extraction from

existing waste and by-product streams, the impact assessment suggests that cascading

bio-refineries could create an annual value of EUR 300–500 (50-80) million

in Denmark

by 2035 (2020). This estimate builds on the work of The Netherlands Organisation for

Applied Scientific Research (TNO), which has mapped the potential value increase of 34

organic waste and by-product streams that could be achieved by up-cycling to higher-

State of Green,

Producing more with less. Danish strongholds in bioeconomy & resource-efficient production

(2015).

www.borregaard.com

Veolia and Bakkavor presentation at The Water Event, 2013. www.thewaterevent.com/files/collaboration_

and_partnership_delivering_sustainable_solutions_to_water.pdf

This

sector-specific

impact does not include indirect effects, e.g. on supply chains, captured in the econo-

my-wide CGE modelling.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

value applications, and estimated that up to 25–30% additional value.

These estimates

have been applied to the Danish context with input from industry experts and Denmark-

specific data. The findings give a directional view of the magnitude of this opportunity

for Denmark. They rely by necessity on a number of assumptions, the most important of

which are detailed in Appendix B.

DENMARK IS WELL POSITIONED TO CAPTURE THE OPPORTUNITY

Denmark would be well positioned to develop and expand to such next-generation

cascading bio-refineries. With a large agriculture and food processing industry, it has

significant access to feedstock. Denmark has a leading position in biotechnological

research and innovation, both in academia and in companies such as Novozymes,

Chr. Hansen and Daka. It was pointed out in interviews with academics and industry

representatives that the biochemical technologies needed to unlock significantly larger

value are only about five years from maturity, but investments are needed to take them

from the lab to the market: numerous technologies are also already available, but due to

a fragmented market nobody has yet connected the dots to create more integrated bio-

refining systems.

There is already a focus on this new ‘bioeconomy’ in Denmark, and the government

has appointed The National Bioeconomy Panel, which consists of experts from

academia, industry and public bodies, to evaluate strategic options. In March 2015, the

panel published a recommendation to support second-generation biofuel generation

by introducing a 2.5% mixing requirement in petrol, and to support the use of

yellow biomass

to produce biochemicals, biomaterials and biofuels through public

procurement, increased research funding or other economic support.

The construction

of a second-generation bioethanol plant in Maabjerg (The ‘Maabjerg Energy Concept’ or

MEC plant), projected to come online in January 2016, further illustrates that there is a

willingness to invest from both private and public stakeholders.

While the increased valorisation of existing waste and by-products is the focus of this

analysis, there are several other ways to derive additional value in the bioeconomy. As

highlighted during an interview by Mads Helleberg Dorff Christiansen from the Danish

Agriculture & Food Council, there is large potential to continue the optimisation of input

factors, such as crops with higher resilience and yield, improved livestock breeding,

elimination of fertiliser leakage, and better feed. Another option is to deliberately modify

plants to produce more auxiliary biomass to be used in bio-refineries. According to a

study from the University of Copenhagen, it would be possible to produce an additional

10 million tonnes of biomass without significantly altering regular land use or output

from agriculture and forestry sectors.

The report claims that products worth between

EUR 1.9 and 3.5 billion could be generated from processing this biomass (mainly for

fuel), while generating 12,000 to 21,000 new jobs.

BARRIERS AND POTENTIAL POLICY OPTIONS

The following paragraphs provide an initial perspective on the barriers limiting the

‘value capture in cascading bio-refineries’ opportunity (see Figure 11; also Section

2.2.4 of the toolkit report for the barriers framework). Although there were some

variations in emphasis from the sector experts interviewed in the course of this study,

The Netherlands Organisation for Applied Research,

Opportunities for a circular economy in the Netherlands

(2013). It was estimated that new valorisation technologies could generate an additional EUR 1 billion annual-

ly in the Netherlands, compared to the current value of waste streams of EUR 3.5 billion.

Yellow biomass includes straw, haulm and dry crop residues.

The National Bioeconomy Panel,

Anbefalinger: Det gule guld – halmressourcens uudnyttede potentiale

(2015).

Adding to the existing 800,000–900,000 tonnes capacity to convert biomass into biogas, the new plant is

expected to convert 300,000 tonnes of yellow biomass to 80 million litres of bioethanol. The total invest-

ment of ~EUR 300 million comes from key industrial stakeholders such as DONG and Novozymes, but also

from the EU (EUR 39 million) and Innovation Fund Denmark (EUR 40 million).

Gylling, M. et al., Department of Food and Resource Economics, University of Copenhagen,

The + 10 million

tonnes study: increasing the sustainable production of biomass for biorefineries

(2013). The potential also

includes better collection of biomass from farmland, road verges, waterweed and cover crops.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

the central message was clear: the largest barriers preventing an acceleration of next-

generation bio-refineries are technology and capital. The full value of organic waste

and by-products cannot be extracted unless emerging technologies are supported

to reach beyond R&D stage to commercial deployment. This study did not encounter

any bio-refineries that use microbial or enzymatic processes to produce bio-based

materials such as plastics at industrial scale, indicating that such technology is still

at the development stage. Building an efficient bio-refinery operation is also capital

intensive. The financing of the MEC plant at EUR 300 million would – if they were to take

it on alone – represent 9–12% of the balance sheet of leading companies in the sector.

Payback depends partially on the ability to use current technologies (such as bioethanol

and biogas) as platforms, and then add to the biochemical cascade more advanced

technologies when they become commercially viable. While the revenue streams from

the high-value, low-volume products such as nutraceuticals combined with bulk biofuels

or other chemicals could ensure profitability, the competitiveness of the products would

be increased if the prices of alternatives derived from petro-based resources reflected

their true costs (externalities).

Unintended consequences of existing regulations also stand in the way of the bio-

refinery opportunity. It is important to keep in mind the complex and internationalised

regulatory landscape for the food & beverage sector. Denmark, like other European

member states, has only limited control over legislation governing raw material and

product handling, as well as waste treatment, which is set at EU level. The most

prominent example is the more extensive restrictions on animal by-products being

rendered into animal feed, following the breakout of bovine spongiform encephalopathy

(BSE) in the 1990s. This animal by-product legislation restricts some animal parts from

being used in bio-refining. Several sector experts indicate that sometimes Denmark has

chosen to implement this legislation more strictly than its peers.

While parts of the legislation governing food safety and waste treatment may have the

unintended consequence of preventing advancement of new bio-refining operations,

interviews indicate that in many cases it is more the complexity of the regulatory

framework than the restrictions themselves that act as a barrier. The complexity creates

uncertainty and imposes the significant administrative costs of understanding how

to comply and going through the process of acquiring the required permits. It should

therefore be noted that the regulatory situation in the case of each potential bio-refining

value-generation opportunity needs to be investigated closely.

To address these barriers, the following policy options could be further investigated.

They are the result of an initial assessment of how cost-effectively different policy

options might overcome the identified barriers (see Section 2.3.4 in the main report and

Appendix D):

•

As a starting point, including bio-refineries in the government’s long term

strategic plans.

This could guide and reassure investors—even more so if ac-

companied by a policy package to deliver the strategy.

In the short term, providing capital to deploy commercial-scale versions of

mature

bio-refinery technologies.

Promising policies include providing low-cost

loans or loan guarantees for the deployment of mature bio-refining technologies

for example through existing Danish business support schemes, and financing at

market rates that is better tailored to investors’ needs (as provided for example

by the UK Green Investment Bank in municipal energy efficiency). Public-private

•

In the G7 Germany, the USA and Japan have specific national bioeconomy strategies with targets. While

France, the UK, Italy and Canada do not have a dedicated strategies they provide support for the biobased

economy on the ground. Though some of these strategies and other programmes provide specific support

to biorefineries, none places cascading bio-refining at their core. For more detail, see German Bioeconomy

Council, Bioeconomy Policy: Synopsis and Analysis of Strategies in the G7 (2012).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

partnerships to finance the deployment of mature bio-refining technologies also

hold promise. An interesting example is the Closed Looped Fund NY that pro-

vides zero- or low-interest loans to municipalities or companies, albeit more ac-

tive in developing recycling infrastructure.

•

In addition, creating markets

for bio-refinery output. Pricing externalities, set-

ting targets (e.g. a minimum target for second-generation fuels within the EU’s

biofuels target) could contribute to such market development.

In the longer term, stimulating development of advanced, high-value bio-re-

fining technologies.

The government could set up or fund cross-institutional

R&D clusters to accelerate the move into high-value chemicals, nutraceuticals,

pharmaceuticals etc. These could take on various forms, like the UK Catapults,

a powerful example of public private partnerships in R&D, or the German Fraun-

hofer Institute, which plays an important role in European innovation with its

long-term perspective and clearly defined mission to support application orient-

ed research

Complementing these measures with a business advice service.

The primary

goal would be to help bio-refinery entrepreneurs navigate a relatively complex

regulatory and policy environment, but it might also help the bio-refinery com-

munity shape this environment.

Identifying and communicating necessary changes to EU policy

(or its na-

tional implementation) to address the unintended consequences of some safe-

ty-focused regulations that unnecessarily restrict the trade in bio-refinery feed-

stock or products.

•

2.2 Reduction of avoidable food waste

Opportunity:

Reduce avoidable food waste by building awareness and knowledge

for consumers, leveraging technology and best practices for

businesses, and creating markets for second-tier (refused) food.

EUR 150-250 (30-40) million p.a.

2035 (2020)

economic

potential:

Key barriers:

Consumer custom and habit; business capabilities and skills;

imperfect information; split incentives.

Consumer information and education; quantitative food waste

targets; capability building; fiscal incentives.

Sample policy

options:

A significant opportunity lies in preventing the very generation of organic waste.

On average, 35% of food output is wasted along the value chain, and while developed

economies like Denmark are comparatively good at reducing waste in food processing,

there is a high waste volume generated by end consumers (see Figure 12). Denmark

generates an estimated 80–90 kg/capita of avoidable food waste per year.

www.closedloopfund.com/about/

UK Catapults: See e.g. www.catapult.org.uk/; Fraunhofer Institute: See e.g. www.fraunhofer.de/en/publica-

tions/fraunhofer-annual-report.html

Known as the ‘Lansink’s ladder’, the principle – to avoid waste over reuse, reuse over recycle, recycle over

energy recovery, and energy recovery over disposal – has been part of the European Waste Framework Di-

rective since 2008.

Danish Environmental Protection Agency,

Kortlægning af dagsrenovation i Danmark – Med fokus på etage-

boliger og madspild

(2014).

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Figure 12: Main sources of food waste in global food value chain – production and

consumption

Focus of Denmark Pilot

Material waste

Per cent of total production

Developed

countries

Agriculture

Processing

Retail

2803

0006

Consumer

SOURCE: FAO ‘Global Food Losses and Food Waste – Extent, causes and prevention’, Rome 2011; adapted from

Ellen MacArthur Foundation, Towards the circular economy II (2013)

For this reason, the opportunity assessment for avoiding waste in the food and beverage

sector focuses on the end-consumer-facing part of the value chain (including retail

and hospitality).

The awareness of this issue has increased rapidly over the past five

years, and waste minimisation is now an integral part of the government’s ‘Denmark

Without Waste’ strategy.

There have already been multiple information and awareness

campaigns to reduce food waste among consumers, but much remains to be done.

The Danish EPA has estimated that 56% of the food waste generated by households, and

79% on average in the retail and hospitality sectors, is avoidable.

Danish households

generate approximately 55% of the avoidable food waste,

and even if the value lost

from discarded food is significant,

customers have a tendency to choose convenient

solutions. While businesses have spent a long time minimising food waste, there is still

large potential for improvement.

THE OPPORTUNITY FOR DENMARK

Consumers and businesses could save significant value by minimising avoidable food

waste. A study by SITRA in Finland found that the savings from reducing food waste

would be in the range of EUR 150–200 million annually.

Translated to the size of the

While Danish food processing companies are generally regarded as proficient in preventing waste, the Danish

Environmental Protection Agency notes that there are still losses from agriculture. Waste prevention in the

agricultural sector was not however in the scope of the Denmark pilot.

Danish Government,

Danmark uden affald II. Strategi for affaldsforebygglese

(2015).

Danish Environmental Protection Agency, Kortlægning af dagsrenovation i Danmark –

Med fokus på etage-

bol- iger og madspild (2014); Danish Environmental Protection Agency, Kortlægning af madaffald i servicese-

ktor- en: Detaljhandel, restauranter og storkøkkener

(2014).

Around 25% is generated by the retail sector and around 20% from the hospitality sector, based on data from

Note 149.

A UK study estimated that the value of unconsumed food and drink amounted to USD 770 per household a

year. WRAP,

Waste arising in the supply of food and drink to households

(2011).

SITRA,

Assessing the circular economy potential for Finland

(2015).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

Danish economy, this corresponds to a prevention of roughly 30–50% (30–40 kg/capita)

of total avoidable food waste,

and an estimated saving of EUR 150–250 million annually

by 2035.

These findings give a directional view of the magnitude of this opportunity

for Denmark. They rely by necessity on a number of assumptions, the most important

of which are detailed in Appendix B. The savings would be achieved by a number of

activities, including:

•

Right-sizing the shopping basket.

Consumers could prevent waste by pur-

chasing less unnecessary ‘big packs’ or ‘3 for 2’ deals, which would seem to save

money upfront but could create more waste. A related issue is the practice of

paying per unit for fresh produce (the current practice in Denmark, as opposed

to paying by weight), which incentivises the consumer to buy the largest item

– generating waste both on the consumer side (consumers buy a larger item

than they need), and further back in the value chain, as smaller items could get

deselected or even wasted without being sold

. Restaurants could avoid excess

purchases by relentless data tracking and planning, which would require invest-

ing in capability building but would not necessarily make procurement more time

consuming.

Better knowledge about food preservation.

Despite not seeing themselves as

‘food wasters’

, consumers often throw away useful food, either because they

prepare too much for a meal, or because they believe the food is spoiled. Date

labelling is required on packaged food to protect consumers, but many people

throw away food that has passed the date even though it has been well refriger-

ated or appropriately stored and remains fresh, due to lack of knowledge of what

the labelling actually means. This behaviour also affects food retailers, as they

are forced to remove products approaching the ‘best before’ date. The EU has

encouraged the discounted sale of such products since 2012 but market accep-

tance is low. Better knowledge about the preservation of food and when it can

be safely used could lead to significant waste volumes being avoided.

Leveraging best practices.

A range of methods exists to reduce the significant

volume of food waste occurring in the grocery store and along the value chain.

Best practices include using data-driven optimisation of ordering and pricing,

and increasing shelf life by improving packaging techniques.

In the hospitality

sector, preventing leftover waste could be achieved by using data to optimise the

size of servings and avoiding unnecessary volumes on buffets.

Smart technology.

‘Intelligent packaging’, able to transmit information about

the food contained within, is a packaging improvement that has been anticipat-

ed for some time, and is now beginning to enter the market. In 2012 TetraPak

launched a milk carton able to record the time spent at room temperature and

change colour when too much exposure has been recorded. While indicators of

time and temperature are only a proxy for real identification of changes in the

content, packaging manufacturers are increasing by using chemical indicators for

oxygen or carbon dioxide levels, as well as microbial activity.

•

In comparison, WRAP has estimated that directed efforts in the UK have reduced consumer food waste by

15–80%. WRAP,

Strategies to achieve economic and environmental gains by reducing food waste

(2015).

This

sector-specific

impact does not include indirect effects, e.g. on supply chains, that are captured in the

economy-wide CGE modelling. By 2020, the savings could amount to EUR 30–40 million annually.

Halloran, A. et al., Food Policy 49,

Addressing food waste reduction in Denmark

(2014).

Beck C. et al., FDB, Vallensbæk,

Forbrugere: Vi smider ikke mad ud!

(2011).

International retailers like Tesco and CO-OP are already using big data to forecast local demand and adapt

replenishment of fresh food. Planet Retail,

The Challenge of Food Waste: Retailers step up to the next level of

inventory management

(September 2011).

For a more extensive analysis of waste prevention technologies in the food value chain, see Ellen MacArthur

Foundation,

Towards the Circular Economy II

(2013). These activities have not been central to the circular

economy opportunities assessed for Denmark as they are already advanced and assumed to continue devel-

oping even without policy interventions.

Swedish National Food Agency, www.livsmedelsverket.se

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

•

Create markets for second-tier food.

Grocers in developed economies such as

Denmark are expected to present produce that is always fresh, plentiful and at-

tractive, when in reality the size and appearance of produce always varies within

a production batch. Although it is only a second-tier solution, supporting a mar-

ket for this food, rather than discarding it, could significantly reduce waste pro-

duced along the value chain. In addition, products going off the shelf when they

approach their ‘best before’ date could be sold at a discount, donated, or used to

produce cheap, ready-made meals.

BARRIERS AND POTENTIAL POLICY OPTIONS

The following paragraphs provide an initial perspective on the barriers limiting the

‘reduction in avoidable food waste’ opportunity (see Figure 8; also see Section 2.2.4 of

the toolkit report for the barriers framework). Custom and habit is the largest barrier

limiting the reduction of avoidable food waste in Denmark. Interviews with retail store

managers confirm that consumers often reject food in stores with shorter use dates if

longer dates are available, often reject ‘odd-looking’ produce, and are usually unaware of

the level and impact/consequences of the food waste they generate. Food waste experts

at the Danish Environmental Protection Agency indicate that a lack of capabilities and

skills is also very important; there is insufficient knowledge and experience among the

general public about how to buy, store, evaluate the freshness of, and prepare food in

such a way that minimise waste and left-overs.

There are also market failures: consumers face imperfect information on the true

freshness of food since they are often unaware of the difference between ‘best before’

and ‘use by’ dates and also underestimate the tolerances that producers/retailers

put around these dates. There are also split incentives: retailers have an incentive

to sell more food and use, for example, ‘3 for 2’ offers on fresh produce. Producers

have an incentive to shorten ‘best before’ dates to reduce liability and encourage the

consumption or disposal of their product as early as possible to increase turnover.

The final market failure is of externalities: if the full environmental cost of agriculture

and food production was reflected in food prices, the incentive to reduce waste would

increase.

Any potential solution to this barrier would of course need to take into

account distributional effects. There is finally the regulatory failure of poorly defined

targets and objectives; for example, the ‘Denmark Without Waste’ strategy covers

avoidable food waste, but does not contain quantified targets to reduce it.

To address these barriers, the following policy options could be further investigated.

These options are the result of an initial assessment of how cost-effectively different

policy options might overcome the identified barriers (see Section 2.3.4 of the main

report and Appendix D):

•

Informing and educating consumers

using information campaigns on the im-

portance of avoiding food waste; a communication campaign to educate con-

sumers about best-before and use-by labelling; and augmenting the national

school curriculum with knowledge about nutrition, food preservation, judging the

freshness of food, seasonality, and appropriate ingredient and portion sizing.

Creating the right framing conditions to avoid food waste in retail.

This

could include adjusting regulations so as not to discourage the donation of food

due to liability concerns; encouraging such donations, as was recently voted into

law in France or by setting up brokering platforms to facilitate matching donors

and beneficiaries, and clarifying the information on best before dates for food

and beverages to further facilitate such donations (as has happened in Belgium

)

•

See for example, Nordic Council,

Initiatives on prevention of food waste in the retail and wholesale trades

(2011).

Danish Government,

Denmark Without Waste I. Recycle more – incinerate less

(2013), p.12.

Agence fédérale pour la Sécurité de la Chaîne alimentaire,

Circulaire relative aux dispositions applicables aux

banques alimentaires et associations caritatives

(2013).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

•

Stimulating the capability building through training programmes

to ensure

that procurement, retail and kitchen staff possesses the necessary skills and tools

to minimize food waste.

Introducing fiscal incentives

such as variable charging schemes for house-

hold waste. A small number of small- and mid-size Danish municipalities have

implemented weight-based charging. Experiences in other countries show that

fee-differentiated collection schemes are also feasible in larger cities with more

multi-family buildings, and Switzerland has made such schemes mandatory in all

municipalities.

Setting national or EU-level quantitative food waste targets.

This would pro-

vide overarching guidance to consumers and businesses on the government’s

objectives, and would likely be a very useful complement to some of the other

policies.

Influencing other levels of policy-making, such as

Informing and shaping EU marketing standards to avoid food waste

arising as an unintended consequence of such regulations.

Motivating supermarkets to reduce waste (e.g. shifting more fresh

produce sales to weight-based models). League tables at local authority

level have proven their value in shifting practices regarding other

environmental/social challenges and could work here as long as it does

not require sharing confidential data.

•

3 CONSTRUCTION & REAL ESTATE

Identified as one of the sectors with the highest potential for circular

economy at an early stage of the Denmark pilot, there are three main

opportunities for the construction and real estate sector to become more

circular. Industrialised production processes, modularisation and 3D

printing could reduce both building times and structural waste if technology

development continues and traditional industry habits are overcome. Reuse

and high-quality recycling of building components and materials could

reduce the need for new materials and decrease construction and demolition

waste, if the split incentives created by a fragmented market are addressed.

Sharing, multi-purposing and repurposing of buildings furthermore could

reduce the demand for new buildings through better utilisation of existing

floor space. Modelling suggests that the annual potential value unlocked by

2035 if these three opportunities are realised could amount to EUR 450–600

million, 100–150 million, and 300–450 million, respectively.

The European construction sector is fragmented, with many small firms, low labour

productivity, and limited vertical integration along the value chain – especially in

Denmark. There are different incentive structures for different players, and no systematic

application of operational best practices, significant material waste and limited reuse

of building components and materials.

In addition, utilisation of existing floor space is

low; only 35–40% of office space is utilised during working hours in Europe.

The Danish

Ecotec,

Financing and Incentive Schemes for Municipal Waste Management Case Studies – Final Report to

Directorate General Environment, European Commission

(2002).

Josephson, P.-E. & Saukkoriipi, L., Chalmers University of Technology,

Waste in construction projects: call for a

new approach

(2007)

Norm Miller, Workplace Trends in Office Space: Implications for Future Office Demand, University of San

Diego, 2014; GSA Office of Governmentwide Policy, Workspace Utilization and Allocation Benchmark (2011);

Flexibility.co.uk, Shrinking the office.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

construction sector has experienced slower productivity growth than leading peers

(1% p.a. vs. 2% p.a. for e.g. Belgium and Austria between 1993 and 2007), and is also

very fragmented.

The Danish Productivity Commission has pointed out that there is a

need to increase productivity, especially in the construction sector, in order to maintain

competitiveness.

The Danish government highlighted similar points in their building

policy strategy, announced in November 2014.

While none of these issues can be fixed with one silver bullet, the Danish construction

and real estate industries could apply a few different approaches that together could

transform the built environment:

•

Applying

industrial production

processes to reduce waste during construction

and renovation, including

modular

construction of building components or, go-

ing even one step further,

3D printing

building modules.

Expanding the

reuse and high-quality recycling of building components and

materials

by applying design for disassembly techniques, material passports,

innovative business models, and setting up a reverse logistics ecosystem.

Increasing the utility of existing assets by unleashing the

sharing economy

(peer-to-peer renting, better urban planning),

multi-purposing

buildings such

as schools, and

repurposing

buildings through the modular design of interior

building components.

•

There are several other circular economy opportunities that could both unlock value and

save resources in the construction sector. They were deprioritised in the present study

primarily because in Denmark they are already the way to being realised (as for energy

According to Statistics Denmark, there were more than 2,000 enterprises with <50 employees in the con-

struction sector in 2012, and fewer than 200 enterprises with 50+ employees.

Danish Productivity Commission,

Slutrapport: Det handler om velstand og velfærd

(2014).

Danish Ministry of Climate, Energy and Building,

Towards a stronger construction sector in Denmark

(2014).

The opportunity assessment builds on the ‘built environment’ deep dive in Ellen MacArthur Foundation,

Stiftungsfonds für Umweltökonomie und Nachhaltigkeit (SUN) and McKinsey Center for Business and Envi-

ronment,

Growth Within: A Circular Economy Vision for a Competitive Europe

(2015).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

use optimisation), or because the level of detail required for a meaningful analysis was

beyond the scope of this study (as for substitution of materials

). Below follows a (non-

exhaustive) overview:

•

Energy use optimisation.

New buildings could be designed and constructed as

low-energy houses that consume up to 90% less energy than existing building

stock.

Retrofitting old buildings could reduce their energy consumption by 20–

30%.

This opportunity has gained high priority in the EU: the European Energy

Performance of Buildings Directive (EPBD) requires new buildings to be ‘nearly

zero-energy’ by 2020. In Denmark this requirement is implemented through the

building class 2020 in the building regulation. The class will be mandatory by

2020 at the latest.

The Danish Energy Agency recently released a tool to calcu-

late the total cost of buildings including their energy use, creating transparency

and a clearer incentive for construction companies to build for optimisation of

total cost of ownership (TCO) across the whole life cycle, not only construction

costs.

Substituting materials,

or facilitated separation of hazardous components.

Substituting materials that are difficult to reuse and recycle, or make it difficult

to reuse or recycle other materials, with non-toxic, renewable alternatives is an

important part of making buildings more circular. Buildings traditionally contain

a complex mixture of compounds that are often difficult to separate, making

material reuse and recycling difficult. Working to reduce hazardous materials or

additives, for example toxic additives in PVC

– or at least making them easier to

separate – is therefore crucial to enable better material recovery at a building’s

end of use. Furthermore it would improve indoor air quality with improved pro-

ductivity and health benefits for the users of the building.

•

3.1 Industrialised production and 3D printing of building

modules

Opportunity:

Use industrial manufacturing methods, modularisation and 3D

printing to reduce time and cost of construction and renovation.

EUR 450-600 (40-60) million p.a.

2035 (2020)

economic

potential:

Key barriers:

Inadequately defined legal frameworks; immature technology;

custom and habit and capabilities and skills in the industry.

Augmented building codes; support for module production facilities;

legal framework for 3D printing materials.

Sample policy

options:

Countries with high-performing material science or engineering programs may of course choose to draw

upon relevant insights around material substitution into its visioning or assessment work.

The houses are low energy consumers because they use, for example, natural air circulation, better exposi-

tion, and reinforced insulation to reduce energy requirements for space heating or cooling. Note that, from

an LCA perspective, so called ‘passive houses’ could be more energy intense than conventional low-energy

houses, and that the total embedded energy should be taken into account when optimising the energy use

during construction and usage. See for example www.passivehouseacademy.com/index.php/news-blogs/

what-is-passive-house; www.ecobuildingpulse.com/awards/ehda-grand-award-volkshouse_o

A case that has received much attention is the retrofit of the Empire State Building in New York. The project,

guided by the Rocky Mountain Institute, saved the Empire State Building USD 17.3 million and reduced energy

consumption by 38%. See www.rmi.org/retrofit_depot_get_connected_true_retrofit_stories##empire

Danish Government,

Strategy for energy renovation of buildings: The route to energy-efficient buildings in

tomorrow’s Denmark

(2014).

Ulrik Andersen, Ingeniøren,

Ny vejledning kan dræbe den faste anlægspris

(14 April 2015).

See for example www.vinylplus.eu/; www.naturalstep.org/en/pvc#PVC:_An_Evaluation_using_The_Natu-

ral_Step_Framework

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

THE OPPORTUNITY FOR DENMARK

Almost 75% of the average cost of a new house comes from the construction process.

Importantly from a circular economy perspective, fragmented construction, maintenance

and renovation processes – with multiple stakeholders, lack of full project oversight,

and use of traditional on-site techniques – also lead to two sizable types of resource

inefficiency:

•

Large reliance on virgin, finite materials that are assembled manually on-site.

10–15% of materials are wasted on-site

(through e.g. over-ordering, inadequate

storage, theft and poor coordination between stakeholders).

There is an increasing number of cases to show that industrial, off-site production of

modules for on-site assembly, coupled with increased coordination of all stakeholders

in the construction value chain, might greatly reduce today’s construction waste and

speed up the construction process considerably. As an example of this new approach,

the Chinese builder Broad Group took only 6.5 months to build a 30-story hotel, of

which only 15 days were spent actually erecting the building on-site. This was enabled

by building each floor in 16x4 m modules, which were then assembled by ~200 workers.

Total savings amounted to 10–30% vs. conventional construction.

Building interiors

could also be modularised at high net savings, as shown by Canadian manufacturer

DIRTT (‘Doing It Right This Time’). DIRTT provides customisable, modular architectural

interiors with standardised dimensions, which can be fitted in new buildings or within the

envelopes of old buildings.

Players with similar offerings in Europe are Alho, Huf Haus,

Baühu, and Caledonian Modular.

A more extreme, but according to many industry experts viable, approach to

industrialising and modularising building component manufacturing is 3D printing. Given

its exponential technological growth curve over the past years, it is likely that 3D printing

of building components will be technically and economically feasible in the near future.

Chinese construction company WinSun has demonstrated the revolution 3D printing

could bring to the construction sector by building full-size houses made out of only

3D-printed components. WinSun has claimed 80% labour savings and 30–60% material

savings.

Obviously, the material choice for 3D printing needs to be managed well to

ensure positive environmental impact. WinSun has taken a promising approach by using

a mixture of dry cement and construction waste, but it still needs to be verified that the

long-term indoor quality of using this mixture can be secured, and that the construction

waste does not contain hazardous materials that could leak into the environment. Before

3D printing of entire buildings is feasible at scale, the viability of producing smaller 3D

construction modules for interior and exterior use is rapidly increasing. In a similar vein,

Danish innovator Eentileen’s automated process cuts sustainably sourced plywood

based on a digital blueprint and significantly reduces waste and emissions.

By being an early adopter of these new building practices and techniques, Denmark

could become a leader in making a step change in construction material productivity:

Josephson, P.-E. & Saukkoriipi, L., Chalmers University of Technology,

Waste in construction projects: call for a

new approach

(2007).

Estimate, compiled from interviews with sector experts.

Ellen MacArthur Foundation, Stiftungsfonds für Umweltökonomie und Nachhaltigkeit (SUN) and McKinsey

Center for Business and Environment,

Growth Within: A Circular Economy Vision for a Competitive Europe

(2015). See also www.archdaily.com/289496/

www.dirtt.net/

Ellen MacArthur Foundation, Stiftungsfonds für Umweltökonomie und Nachhaltigkeit (SUN) and McKinsey

Center for Business and Environment,

Growth Within: A Circular Economy Vision for a Competitive Europe

(2015). See also www.yhbm.com/index.php?m=content&c=index&a=lists&catid=67

eentileen.dk/print

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

•

By 2020,

the construction sector could have adopted industrialised production

processes for up to 5% of new buildings and major renovations, reducing waste

and generating up to 10% net material savings. While 3D printing is likely to re-

main at a conceptual stage, it is reasonable to assume that approximately 2% of

new building components could be 3D printed, for which around 25% material

and 40% labour savings could be achieved.

By 2035,

industrialised (non-3D printing) production of modular building com-

ponents could have taken as much as 50% of the total market, leading to 15%

material savings. 3D printing could grow to a sizable share of the market, ad-

dressing up to 25% of all building components.

•

If these opportunities are captured, modelling suggests that industrialised production

and 3D printing of modules could create an estimated annual value of EUR 450–600

(40–60) million by 2035 (2020).

These findings give a directional view of the

magnitude of this opportunity for Denmark. They rely by necessity on a number of

assumptions, the most important of which are detailed in Appendix B.

BARRIERS AND POTENTIAL POLICY OPTIONS

The following paragraphs provide an initial perspective on the barriers limiting the

‘industrialised production and 3D printing of building modules’ opportunity (see Figure

8; also see Section 2.2.4 in the main report for the barriers framework). The critical

barriers to unlocking this opportunity lie in the technology and legal framework around

3D printing. As discussed above, while the application of 3D-printing technology in

construction has progressed significantly in recent years, it is still at the early commercial

stage and would need further development to be economic at large scale, able to

compete with more standard methods. The WinSun 3D-printed houses referred to above

were completed in spring 2014 (ten individual houses) and in early 2015 (a five-storey

house and a villa).

Equally important is the lack of a strong legal framework to ensure

that the technology has a positive impact, both in terms of environmental and technical

performance and the health of occupants. According to industry and policy experts, it

cannot become a widely trusted approach while it is still open to the use of any material,

however non-circular or hazardous to the health of building occupants.

Experts in the industry were also of the opinion that important social barriers exist for

both industrial production of modules and 3D printing. Many players in the construction

industry are unwilling to change long-established operational practices, such as

rigid business models and extensive subcontracting, resulting in fragmented (over-

specialised) knowledge and capabilities. While this factor will to some extent be relevant

in any industry, consultation with experts indicated that the construction industry is

particularly bound by more traditional practices. On the consumer side homebuyers may

also be unwilling to trust non-traditional building approaches. The capital intensity of the

industrial facilities in which to produce modules would be a challenge for the industry in

Denmark, as it is made up by a large number of SMEs.

To address these barriers, the following policy options could be further investigated.

These options are the result of an initial assessment of how cost-effectively different

policy options might overcome the identified barriers (see Section 2.3.4 of the toolkit

report and Appendix D):

•

Complementing building codes with circularity ratings and targets:

Ratings indicating the circularity potential of materials and construction

techniques.

Estimated by taking half of WinSun’s reported savings, since there is still very little data to exemplify cost

savings. Actual savings will vary on a case-by-case basis and be dependent on the size and complexity of

components being 3D printed.

This

sector-specific

impact does not include indirect effects, e.g. on supply chains, that are captured in the

economy-wide CGE modelling.

Michelle Starr in CNET,

World’s first 3D-printed apartment building constructed in China

(20 January 2015).

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Circular economy targets that set minimum requirements using a

scoring mechanism. Denmark and the UK have already introduced

energy efficiency and carbon ratings. This could be deployed to

stimulate circularity, for example with energy standards that incorporate

carbon/kWh scores for both the energy embedded in the materials

and that used during operations—with recycled materials scoring

considerably better than virgin ones.

If targets are set, it is important that technology neutrality is maintained

and the government is not prescribing the technologies, materials, or

techniques to be used. In general, interventions along these lines would

be expected to be most effective if introduced gradually, for example

with gradually increasing standards as has been the case for energy

efficiency within the Danish building regulations. In addition, these

interventions would likely have impact across the three circular economy

opportunities in the sector.

•

Supporting module production facilities.

The government might choose to

play a role in motivating the financial industry to move into this area as such pro-

duction facilities can yield good returns. If this is not an option or does not yield

results at the desired scale or speed, low-cost government loans could also start

addressing the access to capital barrier. If concessionary financing is undesirable,

government agencies might provide loans at market rates that have been de-

signed to meet the complex financing needs of nascent industries. For example,

the UK Green Investment Bank has recently developed innovative loan products

that are tailored to the specific needs of companies and local authorities wishing

to make investment in energy efficiency improvements, which is a similarly im-

mature market.

Creating legal framework for 3D printing materials.

Regulating input materi-

als for 3D printing is necessary to realise the full potential of the technology. The

timing is right to work on this, as the 3D printing industry is still young and sup-

ply chains are not yet mature and locked in. Given its complexity, developing this

internationally—at the EU level or beyond—would make most sense. Along with

material policies there is also a need for safety, quality, and environmental stan-

dards for the processes and technologies themselves.

Bringing together all stakeholders

in the construction value chain to work on

systemic solutions to address the lack of skills and established norms that stand

in the way of industrialising production. This could take the form of an indus-

try-wide partnership focused on knowledge sharing and collaboration, a project

with specific short-term objectives, or a private public partnership.

Supporting R&D.

Funding programmes to develop and bring to commercial

scale new techniques in the 3D printing of building components and explore

technological synergies between component printing and the on-going digitisa-

tion of construction. A technology challenge prize (as for example promoted by

Nesta in the UK

) could also be considered.

Launching public procurement pilots.

Such pilots could serve a triple purpose:

demonstrate the viability and benefits of existing circular materials and construc-

tion techniques, stimulate the development of new materials and techniques

(design competitions offer an alternative), and develop the necessary guidance

and procedures for procurement teams to be able to accommodate such new or

unfamiliar elements (e.g. adjustments to the typical pre-construction dialogues).

Funding for industry training programmes

tailored to the various actors along

the construction value chain (architects, engineers, entrepreneurs, construction

workers, etc.) covering off-site production and on-site assembly of components

as well as 3D printing techniques.

•

www.nesta.org.uk/project/big-green-challenge

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

3.2 Reuse and high-value recycling of components and

materials

Opportunity:

Tighter ‘looping’ of building components through either reuse or

high-quality recycling, enabled by, e.g. design for disassembly and

new business models.

EUR 100-150 (10-12) million p.a.

2035 (2020)

economic

potential:

Key barriers:

Split incentives and lack of information across the construction value

chain; custom and habit; capabilities and skills.

Augmented building codes; industry-wide training programmes;

support for material inventory software.

Sample policy

options:

THE OPPORTUNITY FOR DENMARK

As in other Danish industrial sectors, the construction industry has achieved very

high industrial recycling rates, especially of valuable materials such as steel and other

metals. The overall recycling rate is 87%, but like in most markets the reuse of building

components (such as wall or floor segments) and lower-value materials (such as bricks)

is very limited. Three characteristics of the construction sector could help explain this

situation:

•

Strong safety concerns and a tightly regulated sector, leading to uncertainties

about both performance and health issues of reused or recycled materials and

components.

A fragmented value chain, with different incentives for initial investors, archi-

tects/engineers, (sub)contractors, owners and tenants, leading to limited uptake

of circular design. The fragmentation also makes it hard for new practices to gain

traction, such as deconstruction rather than demolition, which would salvage

more useful components and materials for reuse and high-value recycling.

Long-lived construction objects, meaning that those facing demolition or renova-

tion today were not designed with reuse of materials or components in mind.

•

Fortunately, there are a number of innovative design and operations examples on how to

enable increased looping of components:

•

Design for disassembly and reuse of components and materials.

The ‘tight-

est’ loop for building components would be to design for non-destructive dis-

assembly and full reuse of building components in new projects.

Although not

a new idea – the British Pavilion in the 1992 Seville Expo being one example

– there are still few buildings designed for disassembly (and reuse). Turntoo, the

Dutch company founded by architect Thomas Rau, has led the work of retrofit-

ting the Brummen Town Hall in the Netherlands, where the architects worked

together with the material suppliers to establish performance contracts where

the suppliers retained ownership of the materials.

The renovated town hall,

completed in 2013, is designed for disassembly and has an attached materi-

als passport to fully track the building’s material assets. In the same vein, the

Cl:aire, Subr:im Bulletin 05,

Avoiding Future Brownfield Sites through Design for Deconstruction and the

Reuse of Building Components

(November 2007).

www.steelconstruction.info/Recycling_and_reuse#What_is_recycling_and_reuse.3F

turntoo.com/en/projecten/town-hall-brummen/

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

C2C-designed Park 20/20 office complex, developed in the Netherlands by Delta

Development, is being built for disassembly and incorporates asset tracking for

future reuse.

Design for disassembly could also include design regular review

and upgrade, which would enable the use of some materials with a lower envi-

ronmental footprint, e.g. glulam beams as load-bearing construction elements.

•

Use of recycled materials.

Even though few buildings today have been con-

structed with deconstruction and reuse in mind, it is possible to recover signif-

icant quantities construction materials and use them for new buildings. The US

EPA’s buildings One and Two Potomac Yard in Arlington, VA, were built using

27% recycled content – including slag concrete aggregate, fly ash, and gypsum

wallboard.

Examples of companies including recycled industrial materials in

their products are insulation manufacturer Rockwool

as well as DIRTT

(see

above). A relevant case example from Denmark is the ‘Upcycle house’, built us-

ing processed recycled materials and reducing the overall CO

emissions by 86%

compared to the building of a benchmark house.

As the reuse of components

and recycling of materials proliferates and a new reverse cycle ecosystem emerg-

es, a market will emerge for material ‘brokers’ connecting suppliers with buyers,

as with the Scottish Material Brokearge Service.

There are two challenges to

be overcome when reusing/recycling materials from existing buildings: the chal-

lenge of hazardous chemicals (including those no longer permitted in building

materials today); and the technical performance of components/materials not

designed for reuse/recycling.

New business models.

The examples above introduce the concept of perfor-

mance contracts in the real estate sector: the property owner does not neces-

sarily own all materials and systems in the building and might instead buy utility

(e.g. lux-hours instead of light fixtures).

Deconstruction.

In Japan, Taisei Corporation has demonstrated that deconstruc-

tion is possible even for tall buildings such as The Grand Prince Hotel Akasaka.

A Taisei-developed approach deconstructed the 141-meter building from the top

down, reducing carbon emissions of the deconstruction process by 85%.

•

Employing these best practices in the construction and real estate sector, Denmark

could increasingly use recovered building components and materials in more valuable

cycles than downgrading recycling. Examples of value retention already exist; Skive

municipality runs a project to improve the reuse of old construction components by

incorporating new targets in the municipality’s 2015–24 waste management strategy and

creating an environment for new business models centred on material looping,

and

The Fund for Green Business Development has funded a partnership where innovative

public procurement is used to increase the reuse of building components and materials

See www.park2020.com/; urbanland.uli.org/sustainability/park-2020-amsterdam-born-recycled/. The office

park is expected to be completed by 2017.

US Environmental Protection Agency,

Using Recycled Industrial Materials in Buildings

(2008).

sustainability.rockwool.com/environment/recycling/

www.dirtt.net/leed/_docs/DIRTT-MaterialsAndProduction_v1-2.pdf. DIRTT pledges to add more recycled

content into their materials every year.

The Upcycle House was built In collaboration between Realdania Byg and Lendager Architects. www.archdai-

ly.com/458245/upcycle-house-lendager-arkitekter/

The Scottish Material Brokerage Service began operating in January 2015. Its aims are twofold: (i) to deliver

collaborative contracts for waste and recyclable materials from Scottish local authorities and other public

bodies of sufficient scale to help them achieve better value for money, and reduce risk from price volatility;

(ii) to create the business conditions for investment in domestic reprocessing by providing certainty in the

volume and duration of supply of valuable materials. See www.zerowastescotland.org.uk/brokerage

These challenges are currently investigated under the Danish Government’s strategy for construction. Danish

Ministry of Climate, Energy and Building,

Towards a stronger construction sector in Denmark

(2014).

See for example www.wired.co.uk/news/archive/2013-01/15/japan-eco-demolition; www.taisei.co.jp/english/

csr/hinsitu/jirei_hinsitu.html. No information was found on the potential for reuse of the deconstructed build-

ing components.

Skive municipality,

Afslutningsrapport Projekt Genbyg Skive

(2015).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

in new public building projects.

In addition, the Danish Eco-Innovation Program funds a

number of project around, among others, using more reusable and recyclable materials

in buildings.

Designing for disassembly could be enabled by better coordination and alignment

of incentives across the value chain. Digital material passports (already introduced

in Denmark by Maersk as described in Chapter 1) and leasing could become the new

norm, driven by a change in business models and emergence of material brokers who

link material supply and demand in the reverse supply chain. By 2035 (2020), looping

of materials could be increased to 15% (5%) by weight, resulting in 30% material cost

savings (adding 5% additional labour cost). At this adoption rate, modelling suggests

the construction sector could save EUR 100–150 (10-12) million annually.

These findings

give a directional view of the magnitude of this opportunity for Denmark. They rely

by necessity on a number of assumptions, the most important of which are detailed

in Appendix B.

BARRIERS AND POTENTIAL POLICY OPTIONS

The following paragraphs provide an initial perspective on the barriers limiting the ‘re-

use and high-value recycling of components and materials’ opportunity (see Figure 8;

also see Section 2.2.4 in the toolkit report for the barriers framework). A wide range of

barriers prevent increasing rates of component and material reuse in the construction

sector. Chief among them is the structure of the industry itself, which leads to split

incentives along the value chain. There is limited vertical integration and each player

– including the investor, architect, developer, engineer, (sub)contractor, owner and

tenant – naturally maximizes their own profits at the expense of the others. Since

designing for circularity requires some alignment of incentives to close the loop in the

value chain, not having such incentives makes the economic case for reuse difficult

to make. The fragmentation of the industry also leads to the barriers of transaction

costs and imperfect information: the flow of information and resources necessary to

provide a system of design for disassembly and reverse logistics is difficult to achieve.

Digital information on the materials used in component production that would be very

helpful at the point of refurbishment or demolition is lacking or unevenly distributed:

while Building Information Modelling approaches are developing, they are not yet in

widespread use.

100

While buildings can already be designed for disassembly, additional technological

progress in the production of circular, separable materials and components could

accelerate the concept’s applicability. Acceptance of such technological advances in

the industry could be aided by demonstration that new materials/components meet

required technical specifications and are as practical to work with as those that they

replace. It would also be helpful if the true environmental costs of using virgin, finite

materials were reflected in their market prices. Finally there are inertia factors – pointed

out by a range of industry experts – in the construction industry in the form of customs

and habits and a lack of the requisite capabilities and skills that make reuse difficult to

implement.

To address these barriers, the following policy options could be further investigated.

These options are the result of an initial assessment of how cost-effectively different

policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit

report and Appendix D):

•

Complementing building codes with ratings and targets

as laid out in Section

3.1.

groenomstilling.erhvervsstyrelsen.dk/cases/962460

ecoinnovation.dk/mudp-indsats-og-tilskud/miljoetemaer-udfordringer-og-teknologiske-muligheder/%C3%B-

8kologisk-og-baeredygtigt-byggeri/tilskudsprojekter/

This

sector-specific

impact does not include indirect effects, e.g. on supply chains, that are captured in the

economy-wide CGE modelling.

100 UK Government, Building Information Modelling (2012).

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

•

Funding industry-wide training programmes

how to develop loops in con-

struction, such as minimising and sorting construction waste targeting actors

along the entire value chain (i.e. everybody from architects to sub-contractors

working on the ground).

Supporting the creation of material inventory software

to keep track of the

materials used in construction, maintenance, and renovation projects from start

to finish and provide information on their lifetime impacts and opportunities for

looping. Such support could come in the form of a publicly funded design com-

petition.

Creating a ‘positive materials list’.

A comprehensive database of construction

materials that are favourable for circular design could help inform, educate, and

inspire developers, architects, and clients alike. The initiative could define the

criteria a material has to meet to get on the list and create an initial set of ma-

terials. It could also be expanded with commercially available branded products

– it would require the initiative to define a simple application process through

which companies can submit their products, and set up a review board. Such a

list could then be taken over at the EU level, so as to inform other member states

and create more consistency for companies in the industry.

Adjusting public procurement practices.

This would allow for more public con-

struction projects with higher resource efficiency by encouraging technological

standards that facilitate later repair, remanufacturing, or reuse (e.g. in lighting

or heating, ventilation and air conditioning); use of recycled or reused materials

and components; procurement of decommissioning services that focus on value

preservation; or mandating the inclusion of performance models or Total Cost

of Ownership (TCO) metrics. As a first step, an advisory mechanism on circular

public procurement practices could be set up. This could be complemented with

training programmes for public procurement teams. At a later stage the actual

procurement rules themselves might be adjusted.

•

3.3 Sharing and multi-purposing of buildings

Opportunity:

Increase utility of existing buildings through sharing, multi-

purposing and repurposing.

EUR 300-450 (100-140) million p.a.

2035 (2020)

economic

potential:

Key barriers:

Inadequately defined legal frameworks; unintended consequences of

existing regulations.

Clarifying the legislation; financial incentives or support; municipal

access portals.

Sample policy

options:

THE OPPORTUNITY FOR DENMARK

There is an increasing awareness that most buildings are under-utilised – 60–65% of

European office space is under-utilised even during working hours. Similarly, roughly half

of owner-occupied homes are ‘under-occupied’, with at least two bedrooms more than

needed.

101

These figures suggest a massive structural waste that could be reduced by

increasing the ‘utility’ of the floor space.

Airbnb has done just that. Launching its peer-to-peer platform for housing space

in 2008, Airbnb’s booking rates has grown by 80–90% in the last few years and is

101

No data available for Denmark; UK survey taken as proxy. UK Department for Communities and Local Gov-

ernments,

English Housing study. Headline report 2012–13

(2014).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

expected to overtake worldwide hotel listings in four to five years.

102

In May 2015,

Airbnb had approximately 15,000 listings in Denmark. Meanwhile, a number of not-for-

profit communities for sharing living space are growing rapidly, such as Hoffice

103

and

Couchsurfing.

104

In a time of rapid digitisation, it is not difficult to imagine a more virtualised and shared

office environment. Since office spaces are already under-utilised, business could

rethink the role of the office as central but temporary place for colleagues to meet while

spending a significant share of their time working remotely. This would entail increased

desk sharing and reduced need for floor space. Another option is to temporarily rent out

unused space, an idea Liquidspace capitalises on by connecting people in need of desks

or conference rooms with nearby suppliers, much like an Airbnb for office space.

105

Businesses are very aware of the potential cost savings from reducing office space. In a

2012 survey, over 70% of 500 corporate executives indicated that the gross square foot

per person in their organisations would drop to a point that is more than 55% below

the current industry average.

106

Two major technology companies, IBM and Cisco, have

gradually increased the staff-to-desk ratio by encouraging teleworking, saving EUR 100–

250 million a year.

107

A Scandinavian example is Microsoft Sweden, who reduced their

office space by 27%, while still adding 1,500 additional seats.

108

Increased repurposing of existing floor space would make it possible to better utilise old

buildings and change the use of freed-up office space to, e.g. residential housing, in a

cost-efficient way and reduce the need for demolition and renovation. This is particularly

relevant since ~80% of Europeans live in buildings that are at least 30 years old, which

risk slipping into costly obsolescence as changing lifestyles and shifting demographics

and age distribution drive construction of new buildings.

109

The repurposing concept

of companies like DIRTT – with interior building components that are modular and

standardised – allows for maximum efficiency in changing the use of a building.

Complementary to repurposing, which changes the

sequential

use of a building, public

buildings could be multi-purposed for

parallel

use of the floor space, meaning that

different activities can take place during a short and repetitive time cycle. Making

better use of schools or libraries for evening activities (e.g. classes and cultural events)

is probably the most accessible example – such multi-purposing is indeed extensively

implemented in Denmark. A more advanced practice would be to design more multi-

purposed buildings. This is already common practice for sports, cultural and conference

venues, but could in principle be implemented for smaller buildings as well. Public

spaces could be designed for both multi-purpose use

and

gradual repurposing to

optimise their economic value; an interesting example is the Boston Convention

& Exhibition Center whose parking structure has been designed to be gradually

transformed into retail and residential space.

110

So could office spaces; an example is the

Park 20/20 mentioned in Section 3.3.2, designed with shared and multi-purposed spaces

for meetings, videoconference and other functions.

By 2035, Danish companies could be expected to reduce their need for office space due

to shared desk policies and increased teleworking, which together with multi-purposing

102 www.airbnb.com; www.venturebeat.com

103 www.bloomberg.com/news/articles/2015-02-19/hoffice-co-working-puts-freelancers-in-each-other-s-homes;

hoffice.nu/en/. The concept can be seen as a hybrid in floor-space sharing, where higher utilisation of living

space leads to a reduced demand for office space.

104 www.couchsurfing.com/.

105 liquidspace.com/. Liquidspace has also partnered with Marriott to provide conference rooms and other func-

tions, thereby increasing traffic to the hotels.

106 Cushman & Wakefield,

Office space across the world

(2013).

107 GSA Office of Government-wide Policy,

Workspace utilisation and allocation benchmark

(2011).

108 vasakronan.se/artikel/det-digitala-arbetslivet-ar-har

109 architecturemps.com/seville

110 Franconi, E. & Bridgeland, B. Rocky Mountain Institute, presentation at Re:Thinking progress conference,

Circular Business Opportunities for the Built Environment

(14 April 2015).

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

of public buildings, repurposing of old buildings and freed-up office space, and the

accelerating sharing of residential floor space could increase the overall utilisation

of buildings by 60% (20%) by 2035 (2020). This could lead to a reduced demand

for new buildings by 9–10% (3–4%) by 2035 (2020), saving the Danish economy an

estimated EUR 300–400 (100-140) million.

111

These findings give a directional view of

the magnitude of this opportunity for Denmark. They rely by necessity on a number of

assumptions, the most important of which are detailed in Appendix B.

BARRIERS AND POTENTIAL POLICY OPTIONS

The following paragraphs provide an initial perspective on the barriers limiting the

‘sharing and multi-purposing of buildings’ opportunity (see Figure 8; see also Section

2.2.4 of the toolkit report for the barriers framework). The principal barriers to increasing

the sharing and multi-purposing of buildings are regulatory. There are the inadequately

defined legal frameworks, as well as unintended consequences of existing regulations,

for example:

•

Contractual restrictions on tenants/owners to their sub-letting of houses or flats

for short periods; for example in New York State it is illegal to rent out an apart-

ment for a period shorter than 30 days if a permanent resident of the apartment

is not present.

112

Uncertain compliance with other regulations; for example in Chicago, Airbnb has

begun to collect city hotel taxes from its hosts, but hotel associations still claim

they are not paying all taxes that hotels are obliged to pay.

113

When sharing is allowed it might be under-regulated; there is for example con-

cern in Los Angeles that Airbnb is starting to turn residential areas into ‘hotel

areas’, potentially competing with local residents for accommodation.

114

•

Denmark has partially addressed the lack of clear legal frameworks – it is currently

possible to sub-let apartments on Airbnb or similar sites for six weeks per year before

asking the local municipality for a permit. There are however several uncertainties

to address;

sector expert notes that the housing and office rental sector is highly

regulated, but that this existing legislation has not yet been fully adapted to account for

the concepts of sharing.

When it comes to market failures it is often not cost effective for building owners and

tenants to spend the time finding other individuals or organisations with which to

share their buildings. Factors exacerbating these transaction costs are the efforts and

costs involved in changing building insurance, handling security issues and the need for

changes to the building (e.g. locks). Furthermore, while some sharing platforms have

been successful, there might still be an inherent resistance in the public to changing

habits around the sharing of their own homes, and some businesses have deeply rooted

norms and traditions around the use of offices. Recent research

115

has confirmed the

results of a study made by The Industrial Society’s research from 2002

116

: that there are

limits to the attractiveness of shared office space to employees and that individual space

such as a desk or a workstation is still highly valued.

To address these barriers, the following policy options could be further investigated.

These options are the result of an initial assessment of how cost-effectively different

111

112

113

114

115

116

This

sector-specific

impact does not include indirect effects, e.g. on supply chains, that are captured in the

economy-wide CGE modelling.

James Surowiecki in The New Yorker,

Airbnb’s New York Problem

(8 October 2013).

Crain’s Chicago Business,

Hotels to Airbnb hosts: Pay up

(14 February 2015).

LA Times,

Airbnb and other short-term rentals worsen housing shortage, critics say

(11 March 2015)

Naomi Shragai, Financial Times,

Why building psychological walls has become a key skill at work,

(29 April

2015).

The Industrial Society,

The state of the office: The politics and geography of working space

(2002).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit

report and Appendix D):

•

Clarifying the legislation

governing (participants in) sub-letting residential and

office space, and sharing business platforms (like Airbnb and Liquidspace) by de-

fining unambiguously who is entitled to practice it (private tenants, commercial

players) and which regulation they need to follow. Doing so could lower the risks

perceived by individuals and companies wanting to engage in such transactions.

Creating financial incentives or financial support

to local, regional and na-

tional public-sector entities such as schools and other public infrastructure could

help overcome hesitance towards renting out their properties when not in use

(without distorting competition), and possibly remove some practical barriers

such as locks that need to be added or changed. This could also have demon-

stration effects for private owners, facility managers in industrial and commercial

real estate, and landlords.

Setting up municipal access portals

that provide information on public build-

ing availability and matches users with providers. This could start out with public

buildings; private spaces could be added later, for instance in case a territory is

too small or not sufficiently densely populated to warrant a commercial interme-

diary.

•

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

4 MACHINERY

The potential for Danish businesses to engage in remanufacturing and

refurbishment is significant. Since this opportunity requires the development

of new capabilities, business models and technologies, capturing it could

take time, but by 2035, modelling suggests these practices could create an

estimated potential net value of EUR 150–250 million annually.

Opportunity:

Remanufacturing of components and new business models based on

performance contracts and reverse logistics.

EUR 150-200 (50-100) million p.a. (plus additional potential in

adjacent sectors).

2035 (2020)

economic

potential:

Key barriers:

Lack of capabilities and skills; imperfect information of existing

opportunities; unintended consequences of existing regulations

Remanufacturing pilots and information campaigns; amendment

of existing regulatory frameworks; adoption of an overarching

government strategy.

Sample policy

options:

The Danish machinery sector is characterised by the presence of several large

manufacturers of long-lived industrial products, such as Grundfos (pumps), Vestas (wind

turbines), and Danfoss (thermostats, heating and power solutions) and >1,000 parts

manufacturers and service providers supporting these industries.

117

Across the board,

these companies have adopted the most common efficiency measures, such as waste

reduction in production processes, light-weighting components and products, and waste

reduction and energy efficiency in production processes.

Danish machine manufacturers are also proficient in recycling and are increasingly

looking into designing for recyclability. Grundfos, for example, notes that around 90%

of the components inside pumps are recyclable. In the wind turbine industry, almost

all parts are recycled. The last remaining challenge is the rotor blades, which consist of

epoxy-covered composites. A number of possible uses for old blades are currently being

pursued, guided for example by the Genvind project.

118

By contrast, discussions with sector experts revealed that there is only a limited number

of remanufacturing or refurbishment activities. Remanufacturing and refurbishment (Box

1) leads to higher value retention than materials recycling since a large part of the added

value of a product or component is maintained, and more steps along the value chain

are bypassed (c.f. Figure E1). Danish companies could thus exploit the largely untapped

potential in remanufacturing and refurbishment. In parallel, recycling and efficiency

optimisation is likely to continue to improve in the sector, as part of the trajectory

Denmark is already on.

117

118

According to Statistics Denmark, there were 26 companies with 250-plus employees in the machinery sector

in 2012, and just over 1,000 with fewer than 250 employees, of which half had 0–9 employees.

www.genvind.net

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

Box 1: Remanufacturing and refurbishment

119

Component remanufacturing is defined as a process of disassembly and recovery

at the subassembly or component level. Functioning, reusable parts are taken

out of a used product and rebuilt into another. This process includes quality

assurance and potential enhancements or changes to the components. By

definition, the performance of the remanufactured component is equal to or

better than ‘as new’.

120

Product refurbishment involves returning a product to good working condition

by replacing or repairing major components that are faulty or close to failure

– and making ‘cosmetic changes’ to update the appearance of a product. The

replacement components could themselves be remanufactured. Any subsequent

warranty is generally less than issued for a new or remanufactured product, but

the warranty is likely to cover the whole product. Accordingly, the performance

may be less than ‘as new’.

REMANUFACTURING IS ALREADY A VIABLE BUSINESS CASE

There are numerous examples to show that there is a strong business case for

remanufacturing. The consultancy Levery-Pennell has calculated that for a case with

remanufactured items selling for 20% less than new items, and increased labour costs

for the remanufacturing process, the gross profit could still be up to 50% higher due

to the large reduction in input costs, and that the earnings could be even higher with a

performance-based business model.

121

Indeed, several large companies have already run

successful remanufacturing operations for quite some time:

•

Renault’s remanufacturing plant in Choisy-le-Roi, France, re-engineers different

mechanical sub-assemblies, from water pumps to engines, to be sold at 50% to

70% of their original price with a one-year warranty. The remanufacturing opera-

tion generates revenues of USD 270 million annually. Renault also redesigns com-

ponents (such as gearboxes) to increase the reuse ratio and make sorting easier

by standardising components. While more labour is required for remanufacturing

than making new parts, there is still a net profit because no capital expenses are

required for machinery, and much less cutting and machining to remanufacture

the components, resulting in waste minimisation and a better materials yield.

Renault has achieved reductions of 80% for energy, 88% for water and 77% for

waste from remanufacturing rather than making new components.

122

Caterpillar founded its CatReman business line in 1973. It now has global op-

erations with over 4,200 employees, and fully remanufactures a large range of

heavy-duty equipment to as-new state, including long-term warranties. Caterpil-

lar has reported that remanufactured components reduce resource consumption

by 60–85%.

123

Ricoh’s ‘comet circle’ is a well-known and established business model, including

remanufacturing and refurbishment of components, and recycling of materials.

124

•

119

For more details, see for example Ellen MacArthur Foundation,

Towards the circular economy I

(2012).

120 Nasr, N., Rochester Institute of Technology, presentation at Re:Thinking progress conference, Circular

Econo-

my and Remanufacturing

(14 April 2015).

121

Lavery, G., Pennell, N., Brown, S., Evans, S.,

The Next Manufacturing Revolution: Non-Labour Resource Produc-

tivity and its Potential for UK Manufacturing

(2013).

122 Ellen MacArthur Foundation,

The Circular Economy Applied to the Automotive Industry

(2013); group.renault.

com/en/commitments/environment/competitive-circular-economy/

123 Caterpillar Sustainability Report (2006).

124 https://www.ricoh.com/environment/management/concept.html

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

As ~70% of components in a printer or copier can be remanufactured,

125

these

products are well placed to be provided on an access-based contract. Ricoh al-

ready sells 60% of their products through service contracts, and remanufacturing

is an important lever to reach its ambitious target of reducing resource consump-

tion by 2050 to 12.5% of the 2000 levels.

Remanufacturing and refurbishment have been predicted to have a net positive

effect on GDP and employment, as well as boosting innovation.

126

The UK All-Party

Parliamentary Sustainable Resource Group has reported that remanufacturing could

contribute GBP 2.4 billion to the UK economy and create thousands of skilled jobs.

127

Zero Waste Scotland estimates that increased remanufacturing alone could add

0.1–0.4% to Scotland’s GDP and provide up to 5,700 new jobs by 2020.

128

However,

remanufacturing does pose a significant challenge to product design and is especially

difficult for manufacturers of long-lived products and/or in industries where the largest

efficiency gains are still driven by hardware improvements. Manufacturers often design

for optimised in-use efficiency rather than designing for remanufacturing.

129

Products

from companies like Grundfos and Vestas have anticipated lifetimes of 20 years or

more, during which time hardware technology can improve significantly. Few would

want to remanufacture equipment put on the market 20 years ago, as performance of

the hardware has increased manifold since then, and in the case of wind turbines the

size has increased significantly. Another consideration is that the content of hazardous

substances that have been phased out in new products could make a component or

product unwanted for remanufacturing.

But even when the hardware development is still significant, remanufactured or

refurbished equipment could be sold to secondary markets. There is already a growing

market for used and refurbished wind turbines,

130

and pump manufacturer KSB is looking

at selling refurbished products to secondary markets. As hardware technology matures

and efficiency improvements become increasingly driven by software it will become

increasingly viable to integrate remanufactured components into the next generation of

products. An industry expert notes that efforts to increase pump efficiency are likely to

shift gradually towards software upgrades over the next five years.

THE OPPORTUNITY FOR DENMARK

In brief, this analysis suggests a large potential for Danish businesses. Even if not all

machinery components are addressable for remanufacturing or refurbishment today,

applying these practices to a selection of durable components becomes increasingly

feasible but requires adaptations in the business model, product design, and the reverse

supply chain. Done right, remanufacturing or refurbishment could unlock significant

value.

As described in Section 2.2.1 in the toolkit report there are four principal building

blocks that a business can adopt to pursue a circular economy opportunity: product

design (and technology), business models, reverse cycle skills, and cross-sectoral

collaborations.

131

Figure 13 summarises the main transitions in the first three dimensions

to enable remanufacturing for liquid pumps, a hallmark product in the Danish machinery

125 N. Nasr, Rochester Institute of Technology,

Circular Economy and Remanufacturing,

presentation at Re:Think-

ing progress conference (14 April 2015).

126 See Ellen MacArthur Foundation,

Towards the Circular Economy I–III.

127 All-Party Parliamentary Sustainable Resource Group,

Remanufacturing. Towards a resource efficient economy

(2015).

128 Zero Waste Scotland,

Circular Economy Evidence Building Programme: Remanufacturing study

(2015).

129 It could indeed be more rational to design primarily to increase in-use energy efficiency. At the same time,

a life cycle assessment report by PE International on a Vestas V112 3.0 MW turbine showed that the ma-

jor life-cycle impact comes from the manufacturing stage, indicating significant potential to capture value

through remanufacturing. PE International,

Life Cycle Assessment of Electricity Production from a V112 Tur-

bine Wind Plant

(2011).

130 See for example hitwind.com/; www.windforprosperity.com/

131

Ellen MacArthur Foundation

Towards a Circular Economy I

(2012); p.61. Note that the need for cross-sectoral

collaborations, such as a focus on the circular economy in education and R&D, and wider acceptance for

alternative ownership models, is also highly relevant to capture the remanufacturing opportunity.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

sector. In the same vein as reverse logistics for remanufacturing, Grundfos is currently

piloting a take-back program for circulator pumps in Denmark, in order to support

the recyclability of components and materials. For wind turbines, it was pointed out

by a sector expert that there are typically over 2,000 parts that are already fairly

standardised, not subject to steep performance improvements and need replacement

before the end-of-use of the turbine itself; there are thus interesting opportunities to

shape both business model and product for gradually replacing and remanufacturing

such components.

Figure 13: Examples of what remanufacturing and new business models could look like

for pumps in Denmark

FROM

PRODUCT

DESIGN (AND

TECHNOLOGY)

•

Design focused

•

Standardised and

on performance in

one lifecycle

improvements

through hardware

upgrades

•

Most product

modular design to

simplify disassembly,

remanufacturing and

lifetime extension

improvements through

software upgrades

•

Most product

BUSINESS

MODEL

•

Traditional

product sales with

service warranties

•

More focus on complete

solutions including

system optimisation

•

Sales of ‘pumping as a

service’ with repair and

product upgrade scheme

included

retention drive increased

efficiency improvement

during lifecycle

incentivised to return old

products for commission

remanufacturing

facilities with high

degree of automation

•

Manufacturer ownership

REVERSE

CYCLE SKILLS

•

Difficulty to

return dispersed

products

remanufacturing

skills and facilities

•

Third-party installers

•

Lack of

•

Large-scale

1 As for example in Grundfos collaboration with Heerlev University Hospital water-cleaning facility, http://www.

theguardian.com/sustainable-business/grundfos-partner-zone/2014/nov/11/new-water-treatment-technology-

reduces-risks-from-hospital-wastewater

SOURCE: Industry expert interviews; Ellen MacArthur Foundation

There are two categories of remanufacturing opportunities for Danish companies.

•

Remanufacture or refurbish components or whole products and sell to sec-

ondary markets.

This could be a developing market but might also be a local

secondary market. Remanufactured equipment could become new product line,

as in the case of CatReman.

Remanufacture components and use them in new products.

Since remanu-

facturing by definition restores a component to an ‘as new’ condition, it would

be viable to use components again in new products, provided the dimensionality

•

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

and design is consistent over product generations. This would save significant

costs as both the raw material value and most value added from manufacturing

the components are retained. This opportunity resembles Ricoh’s business model

for office printers.

By leveraging the circular economy building blocks and utilising both these

opportunities, the Danish machinery sector could gradually adopt remanufacturing and

refurbishment. A conservative estimate is that half of all product components could be

addressed for remanufacturing. Until 2020, they would likely focus on sales to secondary

markets, while by 2035, 15–50% of remanufactured components could be used in new

products rather than sold to a secondary market. Figure 14 gives an overview of the

estimated potential adoption rates and value creation estimated on a component level

for two machinery products, wind turbines and pumps. Overall, this would contribute to

net value creations of 1–3% as share of overall product costs by 2020, increasing to 4–9%

by 2035. These findings give a directional view of the magnitude of this opportunity for

Denmark. They rely by necessity on a number of assumptions, the most important of

which are detailed in Appendix B. It should be emphasised that the estimates take into

account the significant challenges of remanufacturing and refurbishment of long-lived

equipment, such as liquid pumps and wind turbines.

Figure 14: Estimated potential adoption rates and value creation in wind turbines and

pumps in the Denmark pilot

Ranges, adoption rates and value estimated on a per component basis

2020

Adoption rate per

addressable component

2-15% (0%)

2035

10-70% (2-15%)

Additional value created

per component

20-50%

25-50%

64% of components

addressable for

remanufacturing

(by value)

Net value created per

component

1-7%

2-25%

Adopotion rate per

addressable component1

5-10% (0%)

30-50% (10-15%)

Additional value created

per component

15-35%

25-40%

65% of components

addressable for

remanufacturing

(by value)

Net value created per

component

1-4%

5-15%

1 Adoption rates in brackets indicate ‘business as usual’ scenario

SOURCE: Expert interviews; Ellen MacArthur Foundation

Scaling up this value creation to the full machinery sector including pumps, wind turbine

and other machinery, it is estimated that businesses could create a net value of EUR 150–

250 million annually

132

by increased adoption of remanufacturing and/or refurbishment

and new business models. But they need to be prepared to challenge their perception

132 This

sector-specific

impact does not include indirect effects, e.g. on supply chains, that are captured in the

economy-wide CGE modelling.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

of both their business models and design to capture the opportunity. For example,

the product design requires taking into account resource use and costs over several

life cycles, and identifying sub-components that could be more standardised and

modularised. There are also large logistical challenges to bring widely dispersed, large

products back to a remanufacturing facility, and to bring heavily worn parts back to an

‘as new’ state.

Finding solutions to overcome all these challenges will require further investigation, but

it can be noted that there are a number of methods to restore worn metal components

to ‘as new’ condition, for example cold spraying and other additive processes.

133

The US defence industry performs significant remanufacturing of aircraft, ships and

ground systems, of which many have been over 20 years in operation. It is also widely

anticipated that increased digitisation is an important enabler, both to drive the

continued efficiency improvement and to automate the remanufacturing process, for

example through fault detection software.

BARRIERS AND POTENTIAL POLICY OPTIONS

The following paragraphs provide an initial perspective on the barriers limiting the

‘remanufacturing and new business models’ opportunity (see Figure 8; also see Section

2.2.4 in the toolkit report for the barriers framework). The critical barrier limiting the

industry from taking the remanufacturing opportunity is a lack of capabilities and skills:

industrial designers and engineers in the machinery sector often lack the knowledge and

experience necessary to run successful remanufacturing operations, which require the

ability to design for disassembly and set up reverse logistics systems. An industry player

highlighted the challenge to establish efficient and effective partnerships along the value

chain in order to ensure a reversed flow of products and components. While getting

the products into the market is a capability that has been developed for decades, the

capabilities for getting the products back are still in an immature state and also highly

dependent on the national market conditions.

The most important market failures are the transaction costs related to finding and

negotiating with new suppliers, since remanufacturing could significantly disrupt

material flows across the value chain; and the uneven distribution of knowledge among

manufacturers about the economic potential of remanufacturing and new business

models.

There is a steep technological development of hardware in many machinery categories,

which makes remanufacturing unfeasible in the short term, e.g. the size of wind turbines

is increasing rapidly, making the remanufacture of old parts for use in new products

unfeasible.

Even when they are fundamentally economic, some international remanufacturing

operations face a high administrative burden to comply with the regulations relevant

to being able to move remanufactured components across borders. The exact impact

in Denmark of such regulatory barriers would need to be further investigated for each

product type.

To address these barriers, the following policy options could be further investigated.

These options are the result of an initial assessment of how cost-effectively different

policy options might overcome the identified barriers (see Section 2.3.4 in the main

report and Appendix D):

•

Stimulating remanufacturing pilots

that allow businesses (in particular SMEs)

to gain experience with remanufacturing and make the benefits more tangible to

them. In this context, it is worth investigating the scope for funding such pilots

through the Danish Fund for Green Business Development.

Using these pilots in industry information campaigns

that highlight best

•

133 For example, the Golisano Institute for Sustainability at the Rochester Institute of Technology develops meth-

ods such as cold spraying and collaborates with companies to improve these technologies.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

practices in remanufacturing and refurbishing and also draw on international

case studies (such as Caterpillar’s CatReman business unit). The aim would be to

build business awareness of the benefits of remanufacturing (especially among

SMEs) and to accelerate the transition to performance models.

•

Encouraging the establishment of a training programme

to ensure that man-

ufacturing and procurement staff in key industries possesses the necessary skills

for businesses to fully benefit from the potential of remanufacturing.

Create a level playing field

between remanufactured and new products by

identifying unintended consequences of national, European and international

regulation that put remanufactured products at a disadvantage.

134

Potential ex-

amples are health and safety regulations and regulation prohibiting the sale of

remanufactured products as ‘new’.

In addition to reviewing existing regulation,

informing the development of new

tools at the EU level

that help to provide detailed information on the compo-

sition of products and how to dismantle them. Examples include guidance on

how to develop product passports and bills of material, product standards (e.g.

expansion of existing eco-design rules), or quality-standards and labels on the

reliability of remanufactured products.

Adopting an overarching government strategy for remanufacturing

and by

giving it a clear space in the overall industry/manufacturing strategy (and hence

with associated targets and milestones), to galvanise the industry and give it

clarity on the direction of future policy development.

Supporting the development of remanufacturing technology and design

through strategic funding and investigate the scope for further leveraging the

Eco-Innovation Program administered by the Danish Ministry of the Environment

for this purpose. The new Scottish Institute of Remanufacture is an example,

which is funded by the Scottish Funding Council, Zero Waste Scotland and a

range of business interests. Its focus is on delivering industry led research and

development projects in collaboration with academia.

•

134 In May 2015, the Basel convention adopted new technical guidelines on an interim basis to amend its regu-

lation on transboundary shipment of hazardous waste. While the main focus is on EEE, formulations such as

exempting materials ‘destined for failure analysis, and for repair and refurbishment’ from being classified as

waste signals an ambition to address unintended consequences.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

5 PACKAGING

Plastic packaging is a central challenge to the circular economy. Although

some of the potential solutions require multi-stakeholder alignment at

international level, two opportunities stand out in Denmark at the national

level: increased recycling and introduction of bio-based materials. By

addressing the need for improved collection systems and working together

with stakeholders on ways to increase standardisation, Denmark could

increase the recycling of packaging to 75% by 2035, saving both embedded

energy and carbon. In addition, Danish companies could develop a

competitive advantage in bio-based materials, if the need for accelerated

technological development and creating functional end-of-use pathways is

addressed.

In terms of value, consumer packaging is forecasted to have an annual growth of

~3–5% globally for the next few years.

135

The use of plastics for packaging applications

is forecasted to continue to grow at the expense of other materials.

136

Because of their

short period of use, packaging materials become waste relatively quickly after they have

entered the market. Recirculating plastic packaging is particularly challenging since it is

not only very dispersed and therefore relatively hard to collect – which is generally the

case for consumer packaging – but it also has a diverse make-up in comparison to, for

instance, board-based packaging; plastics also have low material value compared with

aluminium or tin-plated steel.

The plastic packaging value chain comprises firstly the design and production of

plastic material and packaging, and secondly the after-use phase of collection, waste

segregation, and reprocessing. The challenge with influencing the production elements

is that they are typically international, so potential regulations or standardisations

concerning materials or additives must be decided on an international level. The after-

use phase is more localised, and so is an easier area of direct influence for an individual

national policymaker. But after-use measures cannot be optimised in isolation; they

need to be made in concert with design and production standards. While the outcome

of applying this toolkit provides a set of options for national or regional policymakers,

another project - the Global Plastic Packaging Roadmap (GPPR, see Box 2) addresses

the systemic issues of the current linear plastics economy at a global level, by bringing

together international stakeholders involved in plastics and packaging design as well as

national stakeholders responsible for collection and recovery systems.

Thus, the Denmark pilot takes a national perspective on opportunities to increase

recycling by focusing on improving the after-use treatment (Section 5.1). The

opportunity to develop bio-based packaging (Section 5.2) should meanwhile be seen in

the context of driving technology and innovation rather than setting national regulations

for bio-based materials.

135 Annual growth over the 2013–2018 period, with constant 2012 prices and exchange rates. Forecast compiled

from Freedonia, Euromonitor, and Smithers PIRA.

136 Smithers PIRA (2014).

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Box 2: The Global Plastic Packaging Roadmap

Mobilized in 2014, as part of the MainStream Project, the Global Plastic Packaging

Roadmap (GPPR) initiative leverages the convening power of the World Economic

Forum, the analytical capabilities of McKinsey & Company, and the circular economy

innovation capabilities of the Ellen MacArthur Foundation. The vision of the Global

Plastic Packaging Roadmap (GPPR) is of an economy where plastic packaging

never becomes waste but re-enters the economy as defined, valuable, biological or

technical nutrients – a ‘new plastics economy’.

The GPPR provides an action plan towards this new plastics economy as an

economically and environmentally attractive alternative to the linear model.

The project is driven by a steering committee composed of nine global leading

company CEOs and more than 30 participant organizations across the entire

plastics value chain ranging from plastics manufacturers to brand owners and

retailers in FMCG to municipal waste collection and after-use treatment systems.

This integrative project setup allows for accelerating systemic change through

innovation and collaboration. The GPPR works collaboratively with a number of

existing initiatives focused on ocean plastics waste including the Global Oceans

Commission, Ocean Conservancy, the Prince’s Trust International Sustainability

Unit, governmental institutions and policymakers. The project’s unique focus on

systemic change will complement and inform these other initiatives.

Besides fostering innovation and collaboration across the value chain, the GPPR

project will also inform and influence policy on a corporate and governmental

level, by highlighting interventions that either hinder or accelerate the transition

towards the new plastics economy. First results from the GPPR will be published

in January 2016 at the World Economic Forum in Davos.

5.1 Increased recycling of plastic packaging

Opportunity:

Increased recycling of plastic packaging driven by better packaging

design, higher collection rates, and improved separation technology.

Not quantified.

2035 (2020)

economic

potential:

Key barriers:

Profitability, driven by unpriced externalities and price volatility;

collection and separation technology; split incentives.

Mandated improvement of collection infrastructure; increased

national recycling targets; standardised collection / separation

systems; increased incineration taxes.

Sample policy

options:

In Denmark, the volume of plastic packaging waste grew 2% p.a. over 10 years, to

184,000 tonnes in 2012, while the volume of other packaging waste, such as glass

and paper, declined at a rate of 1.3% p.a. over the same period.

137

While Denmark has

spearheaded many recycling initiatives, such as one of the first successful deposit-refund

systems for bottles, recycling rates are still low for plastic packaging (Figure 15). One

root cause may be the large waste incineration capacity in Denmark, using combined

heat and power plants to generate electricity and provide district heating. Since low

utilisation undermines incinerator economics, the incentive to switch packaging volumes

over to recycling has been limited. In the ‘Denmark Without Waste’ resource strategy,

137 By tonne. Danish Environmental Protection Agency,

Statistik for emballageforsyning og indsamling af embal-

lageaffald 2012

(2015 rev.).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

the Danish government expresses a goal to gradually move from incinerating valuable

materials – such as plastics – to recycling. Consequently, the estimated projected

incinerator capacity is flat.

138

Figure 15: Share of plastic packaging collected for recycling in Denmark

Percent, 2012

GLASS

97.7

PAPER AND

CARDBOARD

METAL

76.5

51.8

WOOD

40.4

PLASTICS

Businesses: 40-45%

29.4

Households: 14-15%

1 Indicates share of waste collected for recycling – actual recycling rates vary depending on material quality.

2 Danish EPA estimates that this is on the low side. Volumes are based on sales of beer and soft drinks, and

main uncertainty comes from extensive border trade with Germany. Main leakage point from households is

mixed garbage, which gets incinerated. Metal salvaged from incineration ashes is not included in this number.

3 Large share of wood incinerated in incinerators and some parts in household stoves.

4 Including PET bottle recycling in deposit-refund scheme.

SOURCE: Danish EPA; Statistics Denmark; Ellen MacArthur Foundation

THE OPPORTUNITY FOR DENMARK

Given this starting point, there is significant potential for Denmark to increase recycling

of plastic packaging.

•

2020,

Denmark could increase the amount of plastic packaging collected for

recycling to up to 40% (20% for households and 60% for businesses). This means

an overall improvement with 10 percentage points compared to current recycling

rate (5 percentage points for households and 20 percentage points for business-

es).

2035,

a ~75% recycling rate (65% for households and 85% for businesses) and

improved valorisation of the collected plastic waste could become feasible.

•

A transition towards increased recycling would centre on three key levers – design,

collection and sorting – each with a few different enabling mechanisms:

•

Higher collection rates for recycling.

This could mean more convenient collec-

tion schemes such as the kerbside collection of plastics or mixed recycling in-

stead of requiring drop-off at recycling centres, or finding better ways to collect

plastics that have been in contact with food.

139

Much could be achieved through

138 Danish Government,

Denmark Without Waste I. Recycle more – incinerate less

(2013); Danish Environmental

Protection Agency,

Danmark uden affald. Vejledning fra Miljøstyrelsen nr. 4

(2014).

139 One waste management expert notes that consumers typically dispose of plastic packaging that is ‘sticky’

from contact with food since there is no convenient, hygienic way of storing it with recyclables, and that

collecting this ‘sticky’ packaging is essential to increase collection rates significantly above current levels.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

better incentives for households to sort recyclables from mixed waste. Depos-

it schemes could be applied for a larger number of container types – if made

cost-efficient and associated with carefully implemented reverse vending supply

chains. On a regional level, higher collection rates could be achieved through

standardised collection systems that provide scale effects.

•

Improved sorting technology.

Better combinations of existing technologies

(mid- and near-range IR, colour, x-rays, electrostatic, and visual spectrometry)

lead to larger resin volumes extracted from the mixed waste or mixed recyclables

stream, at higher qualities.

140

In the absence of such equipment the burden rests

fully on households and businesses to deliver such volume and quality through

their own choices and actions (for example, carefully separating resins).

Design for recycling.

Plastics and packaging manufacturers could use purer

materials, for example without unnecessary coloration, to enable production of

recycled plastics with qualities comparable to those of virgin sources.

141

Well-con-

sidered chemical compositions may also facilitate the sorting of materials. For

example, black-coloured trays, popular for ready-made meals and other food ap-

plications, have been difficult to sort: the carbon black typically used to provide

the black colour cannot be detected by commonly used near-range IR sensors.

142

A multi-stakeholder effort led by WRAP and including Danish Faerch Plast has

now identified alternative, detectable colorants for PET and polypropylene food

trays. In a wider perspective, standardisation is instrumental for being able to

create broad alignment on elimination of structural plastic waste (such as too

many compounds or contamination of additives; also see Note 242).

•

By 2020, increased recycling could reduce demand of virgin plastic material by 20,000—

25,000 tonnes; by 2035 this could be 70,000–100,000 tonnes.

143

Compared to using the

same amount of virgin plastic material, recycled plastics require approximately 70% less

energy to produce: One tonne of recycled plastics saves roughly 10,000–12,000 kWh

of energy. By 2035, Denmark could therefore also save as much as 700–1,200 GWh of

energy p.a.

144

These findings give a directional view of the magnitude of this opportunity

for Denmark. They rely by necessity on a number of assumptions, of the most important

of which are detailed in Appendix B. In addition to energy savings, Denmark’s carbon

footprint would be reduced – but by how much would depend on what source of energy

is used to replace the heat and electricity generated from incineration.

BARRIERS AND POTENTIAL POLICY OPTIONS

The following paragraphs provide an initial perspective on the barriers limiting the

‘increased recycling of plastics packaging’ opportunity (see Figure 8; also see Section

2.2.4 of the toolkit report for the barriers framework). The main barrier to increased

plastic packaging recycling is the price pressure the relatively small plastics recycling

industry faces from producers of virgin or primary plastics whose large market share

grants them bargaining power. While the barrier at its core is one of unpriced negative

externalities of petro-based packaging, this market failure manifests itself in a lack of

profitability and capital. Plastics recyclers face volatile profit margins due to a largely

fixed cost structure and revenues that are highly dependent on oil prices. This makes

raising capital more difficult due to uncertain payback periods. A recent example of this

economic pressure is Closed Loop Recycling, Britain’s biggest recycler of plastic milk

140 See for example the pilot study conducted by the Plastic ZERO project.

Plastic ZERO. Public private collabo-

rations for avoiding plastic as a waste

(2014). www.plastic-zero.com/publications/publications-of-plastic-ze-

ro-(1).aspx

141

As noted above, this enabler is difficult to drive solely on a national level, and is best addressed through an

integrative approach engaging stakeholders at a multi-national level and across the entire value chain, such

as in the GPPR project.

142 WRAP,

Development of NIR Detectable Black Plastic Packaging

(2011).

143 Acknowledging that the recycling business is international, this assumes that the corresponding volume of

recycled plastic material replaces virgin plastic material in Denmark.

144 www.factsonpet.com/

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

bottles with 80% market share, which in March 2015 warned of potential bankruptcy

citing the slump in global oil prices as a major reason. Since the price of recycled

plastics shadows that of petro-based plastics, the slump has caused prices for recycled

plastics to fall nearly 40% in the second half of 2014 and first quarter of 2015 (another

contributing factor is that milk is one of the main battlegrounds in the price war

currently being fought between major supermarkets, leaving no margin to pay slightly

more for recycled plastics).

145

Compounding these economic challenges is the lack of rollout in Denmark of two

types of technology: packaging designs that reduce the cost of recycling, and plastics

separation technologies at the recycling plant. Improving design (such as the detectable

colorant mentioned above) and deploying more advanced separation technology would

allow recyclers to separate plastics fractions more cost efficiently. Split incentives are

also present: producers of plastics lack the incentive to design for recycling since third

parties capture the value; and there is a well-documented overcapacity of municipal

incinerators in Denmark that reduces municipalities’ incentive to recycle plastics.

To address these barriers, the following policy options could be further investigated.

These options are the result of an initial assessment of how cost-effectively different

policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit

report and Appendix D):

•

Mandating the improvement of the collection infrastructure for household

plastic waste in municipalities.

Nordic country experience suggests that kerb-

side collection generates less contamination than the ‘bring’ approach.

Increasing the national target for the plastics recycling rate from 22.5% to

up to 60%.

This would move Denmark from the minimum level under current EU

law to the levels envisaged in the 2014 EC review of waste policy and legislation

presented as part of the EC’s circular economy proposals. This could also help

insure targets and objectives are well defined.

Standardising collection and separation systems across municipalities

pave the way for economies of scale and stronger sorting and treatment capa-

bilities at the national level. This could lead to a higher profitability of domestic

recycling operations.

Reviewing fiscal incentives around incineration of plastics.

This could both

tackle the externality barrier and accelerate the shift towards the complete recy-

cling of plastic waste. In Denmark the taxation rate is already high in comparison

with other European countries,

146

so policymakers might consider differentiating

the tax rate based on whether or not plastics are separated out before incinera-

tion. Catalonia has such a differentiated incineration tax rate for organics collec-

tion programmes.

147

Bringing together all stakeholders

in the plastics supply chain to work on sys-

temic solutions to address split incentives that affect plastic recycling. This could

take the form of a project with specific short term objectives, or a network, or a

private public partnership.

Working towards EU-wide rules and standards

on the plastics used in retail packaging solutions to better ensure

•

145 The Guardian,

UK’s biggest plastic milk bottle recycler on brink of collapse,

(26 March 2015).

146 D. Hogg, DG Environment , European Commission,

Incineration taxes : Green certificates—Seminar on use of

economic instruments and waste management

(2011).

147 Ibid.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

recyclability. Ultimately this could result in a EU-wide positive list of

material/format combinations for which recycling performance is

superior.

for waste recovery and management procedures so as to create more

standardized outputs and allow better trade opportunities for the waste

processors.

on minimum shares of recycled material in plastic products (as in

California) in order to increase and stabilise market revenues for plastic

recycling.

•

Setting up league tables ranking neighbourhoods based on their recycling

performance.

In the UK for example the Department for Environment, Food and

Rural Affairs maintains such a league table and provides information to house-

holds on how their communities’ recycling rates compare to others. A study

made by the University of Guildford concluded that this type of feedback en-

couraged households to recycle more.

148

5.2 Bio-based packaging where beneficial

Opportunity:

Innovation-driven shift to bio-based alternatives for selected plastic

packaging applications.

Not quantified.

2035 (2020)

economic

potential:

Key barriers:

Technology; profitability driven by unpriced externalities;

inadequately defined legal frameworks.

Funding of innovation and B2B collaboration; investment in

improved end-of-use pathways; working to clarify the EU regulatory

framework.

Sample policy

options:

Bioplastics could potentially replace many applications of petroleum-based plastics.

Broadly they may meet one or both of the following definitions: (i) bio-based

149

materials, which have a biological source (in a renewable and sustainable form) and (ii)

biodegradable

150

materials, which have a biological fate, returning to the biosphere as

nutrients. In the context of the Denmark pilot, discussion centres mainly on bio-based

materials that could replace petro-based plastics. If they are used in applications most

likely to end up as uncontrolled waste in the environment – such as films, bags, or

closures – these materials should preferably be biodegradable.

The prevalence of bio-based plastics is still limited,

151

but growing. Nova-Institute

determined the tonnage-based share of bio-based structural polymers at 2% in 2013, up

from 1.5% a year earlier.

152

European Bioplastics, a trade association, even expects global

capacity to quadruple by 2018, mainly driven by rigid packaging applications.

153

148 See, for example www.letsrecycle.com/news/latest-news/localised-feedback-boosts-recycling-participation/

149 ‘Bio-based’ is defined here as any fibre or polymeric material derived from organic feedstock, e.g. paper or

polymers from cellulose, plastics such as PHBV, polyesters or PLA.

150 According to the EU packaging directive it is only allowed to market/state that a packaging is biodegradable

if it complies with the CEN-standard EN 13432. For the purposes of this report, it is assumed that the material

can be readily decomposed under composting or anaerobic digester conditions in a short, defined period of

time.

151

According to analysis based on SRI, FO Licht, Frost and Sullivan, and press clippings (2011), in 2010-11 less

than 2% of the chemical industry’s sales worldwide consisted of biopolymers and other bulk biomaterials

such as natural rubber and bio-based polyols.

152 Nova-Institute,

Bio-based Building Blocks and Polymers in the World

(2015).

153 European Bioplastics,

Bioplastics – facts and figures

(2013).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

There are two principal pathways for companies and regions to shift from a petro-based

plastic to a bio-based material, both facing a set of critical challenges.

•

Using a bio-based feedstock to make ‘drop-in’ monomers to produce the same

polymers as from a petroleum source, using the existing plastic value chain – this

is the market segment that is globally seeing the strongest growth, spearheaded

by partly bio-based PET which is forecasted to grow from ~600 000 tonnes in

2013 to ~7 million tonnes in 2020

.154

Drop-in bio-based resins or resin-precursors

(for example ethylene glycol monomers for PET) are functionally indistinguish-

able from their petro-based counterpart, but are difficult to produce cost-com-

petitively compared to petro-based counterparts at current prices (similar to the

challenges for biofuels).

Replacing the material altogether, either with a new plastic or an alternative

material with the same or similar properties. These materials face difficulties

matching the performance of petro-based plastics and have been largely limited

to very specific applications where new characteristics are desired, such as with

Ecovative’s mycelium-based and compostable packaging materials,

155

or dispos-

able tableware (which can both be composted or anaerobically digested).

•

Another challenge for bio-based alternatives is the considerable apparatus that is

already in place to produce and use petroleum-based plastic packaging. Accelerating

a switchover beyond the conventional investment cycle is therefore expensive and

complex. Consider, for example, one large fast-moving consumer goods (FMCG)

company that noted that it might take five to eight years to get a new product from

concept to shelf – a large share of which is packaging design.

There are nevertheless two strong arguments for making the shift towards bio-based

materials.

•

Responding to increasing material demand and price volatility.

The antici-

pated addition of 1.8 billion more middle-class consumers worldwide between

2010 and 2025 would lead to a 47% increase in demand for packaging. As long

as the plastic is sourced from a fossil feedstock, there will eventually be issues of

supply and cost unless resource extraction increases at the same pace – leading

to increasing risk from price volatility.

156

Bio-based materials would be less sen-

sitive to price volatility and contribute to securing the rising demand from con-

sumers.

Ensuring unavoidable leakage is bio-sourced.

The highly dispersed nature of

plastic packaging means that leakage to the biosphere is always likely – even

with excellent recycling – and leakage of petro-based plastic creates either a

net addition of CO

to the atmosphere or slow degrading waste in the landfill or

oceans. In Denmark, 10-11% of plastic bottles do not end up in the deposit-refund

system, while this number is 0–2% for refillable glass bottles.

157

But even low

leakage rates are problematic for a high turnover item like food and beverage

packaging.

158

Another example is the large variety of plastic packaging that is

disposed of as mixed garbage, thus having near 100% leakage. If there is (un-

avoidable) leakage, it is preferable that this material comes from a bio-based

feedstock so that the net carbon addition to the atmosphere is minimised upon

incineration, or is biodegradable if it is likely to leak into the biosphere without

incineration.

•

154 Nova-Institute,

Bio-based Building Blocks and Polymers in the World

(2015).

155 www.ecovativedesign.com/mushroom-materials/. Also see Ellen MacArthur Foundation,

Towards the Circular

Economy II

(2013), p.71.

156 World Bank; Ellen MacArthur Foundation,

Towards the Circular Economy III

(2014), p.25.

157 Danish Return System.

158 Take aluminium beverage cans for example, which have a 60-day life from can to (recycled) can. Even at a

70% recycling rate, all the original material would disappear from the economy after only one year.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

THE OPPORTUNITY FOR DENMARK

Denmark businesses could leverage both the drop-in and replacement pathways

described above to shift from petro-based plastics to bio-based materials. Some

international companies have shown that there are business cases for both options:

•

The Coca Cola Company launched its PlantBottle™ concept in 2012, where up to

30% of the plastic is made from drop-in, bio-based chemicals. Coca Cola now

also collaborates with, among others, renewable chemicals producer Gevo, which

intends to supply bio-based paraxylene for making PET. Going further, Coca Cola

aims at producing bottles from 100% residual biomass.

159

DSM has a number of bio-based plastics for non-packaging applications on the

market, for example Arnitel®, partially made using rapeseed oil and used for mak-

ing temperature-resistant pan liners; and EcoPaXX®, an engineering plastic made

from 70% biological feedstock, used for engine covers in cars.

160

In Denmark, ecoXpac is developing a cellulose fibre-based material that can be

moulded like plastics and is biodegradable. In a partnership with Carlsberg, In-

novation Fund Denmark and the Technical University of Denmark, they are using

the Cradle-2-Cradle® design principles, in the development of the the first bio-

based, biodegradablebeer bottle.

161

•

Bio-based materials have been controversial because of their potential impact on land

use and waste recovery systems, and indeed should be introduced where they are

beneficial from a

system perspective,

and aligned with design criteria that include:

Minimise overall waste:

New materials should not increase other waste streams (i.e.

reduced gas/liquid barriers of bio-based materials may lead to higher food spillage,

biodegradable materials may cause reduced recycling rates and be too slow to

decompose).

Do not increase land use:

bio-based packaging materials should, where possible,

be derived from secondary organic material streams (e.g. fibre from residual

biomass, microorganisms growing on organic waste) in order not to compete with

food supply or further increase land use (although the biomass need for plastics

substitution is small – currently at 0.01% of the area globally under agricultural

cultivation;

162

given the current share of biopolymer at ~2% of total polymer volume

(see above), even a fully bio-sourced supply would occupy around 0.5%).

Do not leak nutrients from the bio-cycle to the technical cycle.

Since bio-based

materials are essentially taken from the bio-cycle to be used in the technical cycle,

it is important to avoid leakage of essential biological nutrients. This is typically

avoided by ensuring that produced materials are pure,

163

and that they are returned

to the biosphere either directly through composting or digestion, or indirectly

through incineration.

Consider existing end-of-use infrastructure:

If a new bio-based material is

introduced, it should not disrupt existing end-of-use treatment systems so that

overall costs increase. If a biodegradable alternative is introduced, there should

already be an end-of-use pathway for it, such as an operational collection system for

organic waste.

Avoid leakage of non-circular materials:

Product-by-product evaluation is

necessary to assess best end-of-use option. There is a fundamental question around

159 www.coca-cola.com/content-store/en_US/SC/PlantBottle/; www.gevo.com/?post_type=casestudy

160 www.dsm.com/products/arnitel/en_US/home.html; www.dsm.com/products/ecopaxx/en_US/home.html

161

www.ecoxpac.com

162 Food and Agriculture Organization of the United Nations (FAO); Institute for Bioplastics and Biocomposites

(IfBB), University of Applied Sciences and Arts, Hannover.

163

Polymers typically contain only carbon, hydrogen, oxygen and nitrogen.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

whether the packaging material should be looped within the technical cycle or

returned to the biological cycle (c.f. Figure E1).

•

Technical cycle.

Beverage containers that are relatively clean and easy to recog-

nise and could participate in deposit refund schemes with high recycling rates

may benefit from further focusing on recyclability, which could mean a petro-

leum feedstock is still preferable even if there is the option to use bio-based

drop-in chemicals.

Biological cycle.

Packaging typically incinerated as mixed waste (such as film

and sticky food containers) may benefit from being bio-based – or potentially

also biodegradable such that it can be disposed of together with food waste in

the organics bin (and be recovered in composters or anaerobic digesters).

•

Based on these design criteria, Denmark could start the shift to bio-based alternatives,

first for selected disposable packaging with high tendency of being incinerated as mixed

waste, and subsequently start introducing bio-based feedstock for plastic packaging

applications with high degree of recycling. The materials could be sourced from non-

food organic feedstock, for example residual wood fibre or plant biomass, or organic

waste. Apart from making Denmark more resource resilient, this innovation-driven

development could create a competitive advantage and opportunities to export new

products and technologies.

•

2020,

Denmark might seek to launch the first successful at-scale examples of

replacing petro-based plastics by new, advanced bio-based materials (as already

conceptualised by Carlsberg/ecoXpac). While little replacement of plastics pro-

tecting food is anticipated, Denmark could investigate pockets of opportunity

where petro-based plastics properties are overspecified and replace these with

a bio-based material with lower barriers. Due to the lead time required to build

capacity for production of drop-in monomers, e.g. in bio-refineries (see Section

2.1), the estimated increase in bio-based feedstock for existing plastic materials is

limited.

2035,

Denmark might seek to introduce bio-based drop-in chemicals at scale

for the production of recyclable plastic packaging (e.g. PET), leveraging an antic-

ipated bio-refining capacity (see Section 2.1). At the same time, Denmark could

introduce biodegradable alternatives to replace, in particular, petro-based food

packaging with low recycling rates, as well as creating a differentiated packaging

offering for exported FMCGs to prioritise biodegradable versions for developing

markets with low recycling rates.

•

BARRIERS AND POTENTIAL POLICY OPTIONS

The following paragraphs provide an initial perspective on the barriers limiting the

‘bio-based packaging where beneficial’ opportunity (see Figure 8; see also Section

2.2.4 of the toolkit report for the barriers framework). To enable bio-based materials to

successfully contribute to the new plastics economy (see Box 2), it is critical to ensure

that working pathways exist for them to be produced, to fulfil their role, to be accurately

separated, and to reach their intended fate at end-of-use. At this point there is still a

large need for technological innovation in all segments of such pathways. For example,

advanced bio-based materials with the right properties

164

to replace petro-based plastic

packaging and with limited negative effects, e.g. without competition with food crops,

are still mostly at the advanced R&D or early commercial stage.

The incentive to innovate further is lowered by the actual and potential low cost of

petro-based plastics, which are determined by global oil prices. Low prices of petro-

164 For example, good gas and liquid barrier properties are crucial for food packaging.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

based plastics neither reflect the true environmental costs of their production

165

nor the

cost of recycling them. This suppresses the potential prices that competing bio-based

alternatives can command, meaning that margins remain low except in cases of high-

price, low-volume products for specific applications. It gives rise to challenges to the

profitability of producing bio-based plastics, which is highly dependent on the oil price.

In addition, several stakeholders in the packaging value chain point out that moving

towards using bio-based materials could complicate the supply chain from the point of

view of packaging users because it adds more suppliers and types of material, thereby

increasing transaction costs.

Finally, many stakeholders suggest that legal frameworks need to be better defined. For

instance, ecoXpac indicated the benefits of a more transparent and speedy approval

process for innovative new materials for food packaging. In another example, the field of

bio-based materials could benefit from a Danish Act on excise duties that distinguishes

better between petro-based and bio-based materials, in line with its aim of promoting

environmentally benign types of packaging.

To address these barriers, the following policy options could be further investigated.

These options are the result of an initial assessment of how cost-effectively different

policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit

report and Appendix D):

•

Fund collaboration in the R&D and design phases.

With sufficient budget

available this could take the form of funding R&D platforms—the further devel-

opment of bio-based materials in collaboration with large CPG companies could

follow international best-practice models for public-private innovation (for exam-

ple the Fraunhofer Institute in Germany and UK’s Catapults). More modest col-

laboration support could bring together designers and engineers in formats that

draw inspiration from the packaging eco-design advisory services that Eco-Em-

ballages offers in France.

166

Investing in improving end-of-use pathways

for bio-based and biodegradable

materials (including plastics and food waste) in the collection/separation sys-

tems.

Working to clarify the EU regulatory framework for approving new materi-

als

for food packaging so as to minimise unintended consequences that could

hamper innovation and growth in the bioplastics industry.

Considering contributing to an EU-wide debate on taxation

of petroleum-de-

rived materials.

•

165 Whereas the emissions from producing ethylene from Brazilian sugarcane amount to 0.1 tonnes CO

e/tonne

of product (assuming no forest was cleared to cultivate the sugarcane), this rises to 2.1 tonnes for the same

product derived from Chinese naphtha.

166 See for example: www.ecoemballages.fr/; ec.europa.eu/environment/waste/prevention/pdf/Eco_Emballag-

es_Factsheet.pdf

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

6 HOSPITALS

Hospitals constitute a large, public service in Denmark and as such procure

and consume large amounts of resources. The two key circular economy

opportunities identified are to adopt performance models in procurement,

and to become leaders in recycling and waste reduction. Modelling suggests

that performance models in procurement could save hospitals EUR 70-90

million by 2035. With a systematic effort Danish hospitals could become

leaders in recycling and minimisation of avoidable waste. For these

opportunities to be realised, it is important that necessary capabilities

are developed and existing custom and habits are addressed, for example

by supporting pilots and training programmes, and by creating national

guidelines and/or targets.

The healthcare sector in developed economies face a tremendous challenge over

the next decades. Healthcare costs are increasing, for example driven by an ageing

population, technological development and increased expectations from patients.

Although Denmark is the country with the lowest projected cost increase, its public

spend on healthcare is expected to rise from ~7% of GDP in 2008 to ~10% GDP by

2050.

167

Such projections obviously motivate investigations for cost reductions and

productivity improvement.

Hospitals are different from the ‘producing’ sectors discussed in Chapters 2–4 in that

their output is a service. Hospitals do, however, procure, use, and discard vast quantities

of goods and materials. For this sector this report therefore focuses on how hospitals

could use their scale and centralised management to maximise resource efficiency

through performance models, and minimise their waste through best practices in

prevention and recycling.

In 2013, Danish hospitals spent EUR ~2.4 billion on physical goods.

168

Based on what

types of products are already offered in the form of performance models, an estimated

38% of the total purchases could be addressable (Figure 16). This includes a range of

advanced equipment (e.g. MRI scanners, radiation treatment equipment, and laboratory

instruments) and also (semi-)durable goods (e.g. scalpels, cuffs, and surgical apparel). It

does not include the long tail of smaller product categories in ‘other medical equipment’,

so the estimate is likely on the conservative side.

There are also large quantities of structural waste in healthcare that could be addressed

using circular principles. Though these were not explicitly analysed in the Denmark pilot,

a few deserve mentioning:

•

Virtualisation.

Although the technology is not yet mature beyond the level of

isolated trials, it is anticipated that the efficiency of part of the healthcare system

could be significantly improved by leveraging connectivity and technology-driv-

en cost reduction of diagnosis. Two existing examples are the blood glucose

monitor for diabetic patients and the various ‘e-health’ applications; a plausible

development is that patients take a variety of samples at home using a connect-

ed table-top device, send the diagnostic outcome electronically, and consult phy-

sicians remotely using a videoconference application.

Preventive healthcare.

Increasing healthcare costs have prompted the idea of

governments reducing the need for costly healthcare interventions by increas-

ing the overall health of the population. Shifting the focus to disease prevention

could offer a tremendous opportunity, not only in terms of avoided investment

in hospital beds (and the materials associated with construction and usage/

management) but also in terms of reduced productivity loss in the society. The

•

167 The King’s Fund,

Spending on health and social care over the next 50 years. Why think long term?,

(2013).

168 Expenses for Denmark’s 5 major regions, data from Danish regions. Purchase of goods represents ~15% of

total hospital budgets; hospitals purchase services for an additional EUR 2,400 million.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Alzira model from Valencia offers an early example: driven by the nature of the

public-private partnerships in the model, healthcare providers are incentivised

to focus on health promotion and in the long-term reduce the patients’ need for

healthcare.

169

It is also highly relevant to address the increasing caloric intake

that has been growing steadily in Europe other developed economics, and could

drive exceedingly high healthcare costs.

170

Figure 16: Share of purchased goods in Danish hospitals that could be covered by performance models

COST BREAKDOWN OF

PURCHASED GOODS

PERCENT

Diagnostic imaging and radiation equipment

Surgical equipment

Patient care and wound treatment

Medical apparel and textiles

Other medical equipment

Medical equipment and accessories

Laboratory, observation and test equipment

Food and beverage

IT equipment

Other

Total

Addressable for access over ownership models

Readily addressable / high potential

Addressable long-term/low-mid potential

Not addressable

ADDRESSABLE

FOR ACCESS

OVER OWNERSHIP

MODELS

100

1 Semi-durable equipment (e.g. scalpels, cuffs, sterile drapes) addressable in the longer term

2 Clothing and linen already widely addressed in Denmark

3 Not assessed; long tail of small product categories, although access over ownership models should be feasible in many cases

SOURCE: Statistics Denmark, Danish Regions

169 NHS European Office,

The search for low-cost integrated healthcare. The Alzira model – from the region of

Valencia

(2011).

170 Today, the average caloric intake exceeds 3,500 kcal per day, 40% above the recommended daily intake. In

addition, the diet has become more fatty, salty, and sweet over the past 40 years. EEA, 2008; Food Stand-

ards Agency; European Food Safety Authority; J. Schmidhuber,

The EU Diet – Evolution, Evaluation and

Impacts of the CAP

(FAO, Rome, 2008).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

6.1 Performance models in procurement

Opportunity:

Shift towards performance models in procurement of advanced and

(semi)durable equipment.

EUR 70–90 (10-15) million p.a.

2035 (2020)

economic

potential:

Key barriers:

Insufficient capabilities and skills due to lack of experience;

imperfect information; custom and habit.

Guidelines and targets; capability building; procurement rules.

Sample policy

options:

The central idea in ‘performance’

171

models is a contract in which the customer pays for

the use, or the performance, of a product rather than the product itself. The rationale is

that there is no inherent benefit in owning the product. On the contrary, ownership can

entail additional costs (upfront investment), risk (unpredicted repair, maintenance or

obsolescence), and end-of-use treatment costs.

THE OPPORTUNITY FOR DENMARK

Performance models are relevant for many of Danish hospitals’ purchasing categories,

whether it is leasing clothing and bed linens or contracting the full management of

scanning and radiation equipment. At the heart of each such model lies a mutual benefit

for suppliers and customers to reduce the total cost of ownership. While the customer is

able to reduce purchasing and maintenance costs, as well as maximise performance and

uptime, the supplier is able to secure sustainable revenue streams, maximise resource

utilisation, and drive efficiency during the use phase.

172

Importantly, performance models

also incentivise manufacturers to design more durable products that are easier to

maintain, repair and refurbish or remanufacture (see Chapter 4).

There are already multiple examples of suppliers providing performance that are relevant

to, or directed exclusively towards, hospitals. In the healthcare sector, suppliers like

Siemens, Philips and GE are already rolling out performance models for their equipment,

in addition to having existing refurbishment operations.

173

Some of the most well-known

examples outside the healthcare sector include Ricoh’s and Xerox’ service contracts for

high-volume printers, Desso’s carpet tile concept,

174

and Philips’ lighting services (selling

‘lux’ instead of lighting fixtures

175

The partnership between Stockholm County Council and Philips Healthcare for the Nya

Karolinska hospital has received a great deal of attention.

176

The 20-year comprehensive,

function-based delivery and service agreement covers the delivery, installation,

maintenance, updating and replacement of medical imaging equipment such as MRI

and ultrasound equipment, where the cost risk is carried by Philips and the upside

potential (e.g. future lowered prices) is shared. This coincides with Philips opening a

new, dedicated refurbishment and remanufacturing facility in Best, the Netherlands in

171

Performance models used to collectively denote performance contracts, leasing, asset centralisation con-

tracts and other models designed for supplier to help customer minimise total cost of ownership.

172 For a more in-depth discussion on performance-based business models, see Stahel, W. R., Palgrave McMillan,

The Performance Economy

(2006).

173 www.healthcare.siemens.com/refurbished-systems-medical-imaging-and-therapy; www.healthcare.philips.

com/main/products/refurbished_systems/; www3.gehealthcare.com/en/products/categories/goldseal_-_re-

furbished_systems/

174 www.desso-businesscarpets.com/corporate-responsibility/cradle-to-cradler/

175 By owning the energy bill, Philips is able to significantly reduce energy consumption and cost. www.ellen-

macarthurfoundation.org/case_studies/philips-and-turntoo.

176 Katharine Earley in The Guardian,

Hospital innovation partnership set to deliver high quality, sustainable pa-

tient care

(13 November 2014).

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

2014, announced as ‘the next step in our circular economy journey’.

177

Allowing suppliers

to retain control over their equipment and making full use of parts and components

throughout their entire life cycle could generate substantial savings for the hospitals.

Jens Ole Pedersen at Philips Healthcare Nordics notes that hospitals could save

approximately 25% on TCO of the provided equipment.

Performance-based contractual models could cover more than technically advanced

equipment or installations. Uniforms, bed and bathroom linens are commonly procured

on a leasing contract. And even semi-durables, which are often used as one-way

disposable equipment, are addressable for performance models. In Catalonia, which

like Denmark focuses increasingly on the circular economy, Axioma Solucions provides

sterilised surgical clothing as a service, while Matachana Group provides sterilisation

solutions for equipment at hospitals’ facilities. Axioma Solucions notes that according

to an independent study, their ‘Steripak’ can be cycled 75 times and consequently has a

resource footprint one eighth that of corresponding one-way clothing, while being up to

15% more cost efficient.

178

Danish hospitals have not yet adopted performance models to a large extent. The only

category where there is a large penetration is in textiles; laundry services and leasing

are already widely adopted.

179

There is therefore a large opportunity to initiate such a

shift, and the timing to do so appears very good. There are currently 16 large hospital

projects in Denmark, seven greenfield projects and nine that are major renovations

or expansions.

180

Similar to the Nya Karolinska example, they could take a holistic,

performance-based approach to procurement of equipment. These new hospitals

will open within the next five to ten years, sufficient time to build a new procurement

organisation and culture, with less concern for legacy equipment or old habits.

Given the current starting point, Denmark could gradually shift purchasing of goods

towards performance models for the addressable share of the purchasing budget

(Figure 13):

•

2020,

hospitals could seek to adopt performance contracts for up to 10% of

selected product categories (diagnostic imaging and radiation equipment, IT

equipment, and laboratory, observation and test equipment).

2035,

overall adoption of performance models could have increased to as

much as 40%. In addition to product categories already addressed in the short

term, similar procurement models could also have begun to penetrate other du-

rable and semi-durable goods, such as selected surgical tools and apparel, where

the safety/hygiene issues with looping materials can be properly addressed.

•

With total estimated savings of 15–30%

181

compared to traditional procurement, applied

to an addressable cost base of 38% of total hospital procurement (see Figure 13),

modelling suggests Danish hospitals and equipment suppliers could by 2035 (2020)

save EUR 70–90 (10–15) million annually.

182

These findings give a directional view of

the magnitude of this opportunity for Denmark. They rely by necessity on a number of

assumptions, the most important of which are detailed in Appendix B. The estimate has

not included more ‘generic’ products, such as lighting, flooring or printers.

177 philips.exposure.co/behind-the-factory-doors

178 The resource efficiency study was conducted by the Autonomous University of Barcelona.

179 Interview with De Forenede Dampvaskerier. Global players like Berendsen plc are also active in this field;

www.berendsen.dk/hospital

180 Information provided by Danish Regions.

181

Savings rate depends on product category. Based on expert interviews with healthcare equipment providers

and case studies from performance contracts in other industries (e.g. white goods, automotive, printers).

182 Based on current procurement volumes. This

sector-specific

impact does not include indirect effects, e.g. on

supply chains, that are captured in the economy-wide CGE modelling. In addition, the distribution of savings

between hospitals and suppliers has not been modelled. It could be argued that it is skewed towards hospi-

tals in the short term since suppliers want to create incentives for hospitals to set up performance contracts,

but could equilibrate at a more even split in the long-term as the model gets established and consolidated.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

BARRIERS AND POTENTIAL POLICY OPTIONS

The following paragraphs provide an initial perspective on the barriers limiting the

‘performance models in hospital procurement’ opportunity (see Figure 8; see also

Section 2.2.4 of the toolkit report for the barriers framework). Sector experts from both

suppliers and hospitals have noted that the critical barrier to hospitals increasing their

use of performance models is that hospital procurement staff are not trained and have

limited experience of other forms of tenders such as performance contracts or assessing

offerings based on total cost of ownership (TCO) – as well as limited time to change

practices. Another social factor mentioned in interviews is the customary perception

that leasing is often more expensive than buying and the uneasiness that performance

contracts could allow increased private sector influence in public healthcare.

Furthermore, hospital management and procurement departments in many cases lack

information compared to equipment providers on the economic case for access over

ownership. These barriers combine to provide a powerful force of inertia in procurement

departments.

To address these barriers, the following policy options could be further investigated.

These options are the result of an initial assessment of how cost-effectively different

policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit

report and Appendix D):

•

Guidelines and targets.

Creating guidelines

for regions or hospitals for the procurement of

solutions rather than products, and how to work with target setting on

different levels. International examples may serve as ‘blueprints’, such as

the Philips–Nya Karolinska contract in Sweden. Through an innovative

contract structure, the hospital secures access to a pre-defined level of

functionality rather than the availability of specific equipment. Target

setting also occurs in regional procurement partnerships in Denmark,

e.g. the partnership for green procurement.

Stimulating shared/centralised procurement amongst hospitals

where appropriate, to reap economies of scale and leverage purchasing

power. This could take the shape of a centrally negotiated performance-

based contract across all regional hospitals, e.g. for lighting. The

resulting additional cost savings could further accelerate a large-scale

move towards such access-based contractual models.

Supporting measures to optimise equipment utilisation

such as

equipment loan programmes between hospitals could round out the

benefits from reshaping procurement procedures and skillsets.

•

Capability building.

Developing skillsets for circular economy-oriented procurement,

e.g.

Training staff

in optimal procurement design for access over

ownership (e.g. the hospital could provide specialist training

courses based on a nationally developed curriculum).

Initiating a performance model pilot to develop and apply

the total cost of ownership (TCO) concept

to allow a more

holistic view of cost in hospital procurement – thereby creating

a mindset as well as bidding rules that are more conducive

towards performance contracts.

Building a repository of case studies

from national and

international examples to build confidence around issues such

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

as e.g. cost efficiency, long-term benefits, contractual flexibility,

and dependence on fewer suppliers.

Establishing a government advisory body

with the explicit mission

of promoting performance-based contractual models in hospital

procurement. Hospitals could be given the option to seek such advice

for all or specific procurement projects. This could take the form of a

partnership, task force, or network to facilitate knowledge sharing.

•

Procurement rules

Adjusting budget rules

to enable joint budgets and closer working

between procurement and technical teams (“breaking down siloes”).

This could enable more performance-based contracts (with more

procurement staff and fewer technical maintenance staff). Removing

regulatory or governance barriers that impede interaction of hospital

teams and supplier teams could also help.

Adjusting procurement rules and procedures.

Augmenting the procedures for assessing the quality

competing bids with tightly defined ‘circularity’ criteria or KPIs.

Such criteria could be part of the (non-binding) guidelines for

public procurement and could include promotion, piloting, and

knowledge sharing of purchasing criteria). Examples include

length of lifetime, reparability, presence of chemicals that hinder

recycling, design for disassembling features.

Incorporating accounting for externalities

(e.g. the life cycle

carbon/water/virgin materials footprint) into the guidelines or

rules for all public procurement to create full cost transparency.

6.2 Waste reduction and recycling in hospitals

Opportunity:

Centrally managed and systematic initiative to reduce waste and

increase recycling.

Not quantified.

2035 (2020)

economic

potential:

Key barriers:

Insufficient capabilities and skills due to lack of experience; custom

and habit; imperfect information.

Pilot of waste reduction and recycling management integrated into

staff training; waste minimisation and recycling targets; increased

fiscal incentives to avoid waste generation.

Sample policy

options:

Large hospitals are like miniature cities, with many sizable and complex flows of

materials and information. And, similar to cities, they produce large quantities of waste.

Hospitals are run by a central management that coordinates staff and sets a strategic

direction for the whole organisation, and thus might have the potential to holistically

optimise their waste management. Therefore, as is the case for other centrally and

tightly controlled systems such as airports, it is reasonable to envision hospitals as

champions in both waste prevention and recycling.

THE OPPORTUNITY FOR DENMARK

The largest source of (non-hazardous) waste in hospitals is the purchasing and

preparation of food and beverage. As explained by one sector expert, it is common for

departments to order too many meals from the kitchen to add a safety margin, which

risks being magnified by the kitchen’s safety margins. As a result hospital kitchens may

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

end up purchasing more food and ingredients than needed, which ultimately produces

avoidable food waste.

The approach to prevent avoidable food waste for large institutions such as hospitals

differs from the alternatives laid out for the consumer-facing market (Section 2.2) in

that it is more centred on right-sizing procured volumes. One way of incentivising this

planning challenge is to set standards on sustainable procurement of the food and

catering services, such as introduced by the NHS in the UK.

183

Given its scale, hospitals could systemise and improve recycling beyond the already

ambitious targets of the Danish society set by the ‘Denmark Without Waste’ strategy.

Hospitals are part of the service sector where the target for recycling packaging waste

in 2018 is 70% (paper, glass, metal and plastic) and 60% for recycling of organic waste

in 2018.

184

In comparison, Danish hospitals today note recycling rates of 15–30%, with an

average below 20%.

185

Danish hospitals therefore have an opportunity to make a systematic effort with strong

management commitment to improve recycling, while at the same time reducing

waste generation. While this effort needs to be driven primarily by a well-informed and

committed staff, it could be guided by, for example, working with waste management

suppliers that increasingly provide waste minimisation services apart from operating the

logistics and treatment. While the potential has not been fully quantified in this case, it

should be feasible to achieve overall recycling rates above of approximately 85% (70%)

by 2035 (2020). This corresponds to being aligned with the ‘Denmark Without Waste’

target by 2020 and then gradually outpacing it.

BARRIERS AND POTENTIAL POLICY OPTIONS

The following paragraphs provide an initial perspective on the barriers limiting the

‘waste reduction and recycling in hospitals’ opportunity (see Figure 8; see also Section

2.2.4 of the toolkit report for the barriers framework). Hospitals face similar social factor

and information barriers when aiming to reduce waste generation and increase recycling

as when trying to increase the use of performance models in procurement. There is

limited capacity within hospital administrations to consider waste prevention and waste

handling and, while procurement departments are already highly professional, hospitals

lack expertise in waste prevention and management. Furthermore, hospital targets are

centred on quality of healthcare; expert interviews indicate that there is resistance to the

idea of adding to or diluting such targets with targets relating to waste. Furthermore,

there is limited information on the economic benefits of reducing waste and increasing

recycling due to a lack of analysis of procured and disposed materials in hospitals. As

in the food and packaging sectors, the incentive to reduce waste and increase recycling

would rise if the market prices of packaging, food and other consumables reflected their

true environmental costs.

As before, at the level of individual hospitals, the main short-term challenge is improving

capabilities and skills as well as changing mindsets. Over a longer time horizon,

policymakers might choose to play a role by creating supporting guidelines (non-

binding) and rules (binding) as well as appropriate incentives. Central government

might also also take on the externalities barrier by internalising more externalities in the

production of food, packaging and other products that may end up being disposed of

by hospitals as waste. Doing so would likely increase hospitals’ monetary incentive for

waste avoidance and recycling.

To address these barriers, the following policy options could be further investigated.

These options are the result of an initial assessment of how cost-effectively different

policy options might overcome the identified barriers (see Section 2.3.4 in the toolkit

report and Appendix D):

183 UK Department of Health,

The Hospital Food Standards Panel’s report on standards for food and drink in NHS

hospitals

(2014).

184 Danish Government,

Denmark Without Waste. Recycle more – incinerate less

(2013).

185 Excluding construction and garden waste. Based on interviews and correspondence with representatives

from hospital environmental managers and Danish Regions.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS

•

Piloting the integration of waste reduction and recycling management into

staff training

across all hospital functions in new or leading hospitals, and syndi-

cating the results into case studies for wider knowledge building.

Setting waste minimisation and recycling targets

for hospitals in line with

overall national targets but taking into account its different, challenging) charac-

ter, and include associated circular economy metrics in the performance criteria

for hospital management.

Investigate fiscal incentives to avoid non-hazardous waste streams to level

the playing field for recycling initiatives

as part of a national initiative for all

sectors. A complementary measure would be the publication of waste avoid-

ance/management performance league tables for hospitals.

Creating or supporting a platform for Danish hospitals

to share information,

exchange best practices and develop a joint strategy for reducing waste and in-

creasing recycling rates with a view to establishing the country as a frontrunner.

Initiating a discussion on pricing in of externalities

(but balancing with

distributional effects) so that the market prices of food, packaging and other

consumables reflect the full social and environmental costs of their production,

consumption and disposal—and ultimately inform better procurement and opera-

tional decisions.

•

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS •

APPENDIX

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

APPENDIX

A detailed overview of sector selection in the Denmark

pilot

This appendix summarises the details underlying the sector selection ‘matrix’ developed

for the Denmark case study and shown in Figure 1: the selection of sub-dimensions,

the data collection and the calculations. The list of sub-dimensions does not aim to be

exhaustive and is not necessarily the optimal one for other regions, but could serve as

an inspiration when conducting the sector selection elsewhere. See section 2.1.3 in the

toolkit report for a more extensive discussion about the approach used.

Figure A1 provides an overview of the sub-dimensions used in the Denmark pilot for the

dimensions ‘Role in national economy’ (A) and ‘Circularity potential’ (B). It displays the

type of assessment (quantitative vs. qualitative), an indication of how the calculations

were performed and the relative weight of quantities within each sub-dimension. When

the assessment was qualitative, a scoring-based assessment was performed to yield

a ‘semi-quantitative’ result. The sources behind the data and analyses are reported.

Figures A2 and A3 provide an overview of the relative scoring of each sub-dimension in

the Denmark pilot.

A brief description of the sub-dimensions follows below.

Dimension A. Role in national economy.

A.1.

Contribution to the national economy in terms of gross value added.

Both

the relative size of each sector’s gross value added and the relative growth

rate were taken into account, in order to reflect shifting long-term trends as

well as current contributions.

A.2.

Contribution to national employment and job creation.

Employment

is obviously a key priority for any policymaker and was thus included in

dimension A. Both the relative importance of each sector in terms of full time

equivalents and the relative growth rate were taken into account, in order to

reflect shifting long-term trends as well as current contributions.

A.3.

Competitiveness – trade openness and security of supply.

Export and

import volumes were included to reflect each sector’s competitiveness on the

international market.

A.4.

Competitiveness – strategic dimensions.

This sub-dimension is the

sum

of four qualitatively or quantitatively evaluated quantities illustrating the

strategic importance of each sector for Denmark’s competitiveness in terms

of technology, productivity and sensitivity to global trends. The

sum

synthesis

was selected to reflect that all quantities are important but not necessarily

interdependent. The qualitative evaluation was done by assigning a score of

‘high’, ‘medium’ or ‘low’ to each quantity, associated with scores of 10, 5 and 1

respectively.

•

Patent activity –

Danish patent activity in relation to other countries in the

EU, by technology area mapped on Danish sectors.

Export specialisation

– Classification based on whether each sector’s share of

Danish exports is significantly above, similar to, or below the average share of

exports within the OECD.

Productivity advantage –

Reflects how productive Danish sectors are in com-

parison with the same sectors in international peers.

Energy price sensitivity

– Energy expenditure as share of output value, in-

cluded to reflect each sector’s sensitivity to changes in energy prices.

•

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Dimension B. Circularity potential.

B.1.

Material intensity –

Purchase of commodities are shown as a share of the

sector’s turnover to reflect how dependent the sector is on physical resources.

B.2.

Environmental profile –

Includes weights of both total waste volumes

and recycling, in order to reflect both the tendency to create a leakage of

material, which could potentially be avoided, and the proficiency with which

the material is recovered today, which could potentially be improved.

B.3.

Scope for improved circularity

– The

product

of three qualitatively

evaluations. A score of ‘high’, ‘medium’ or ‘low’ was assigned to each quantity,

associated with scores of 10, 5 and 1 respectively. The

product

synthesis was

selected due to the interdependence of the four quantities.

•

Intrinsic material value of output (and waste).

Qualitatively estimates the in-

trinsic value of the material handled in each sector. Both raw materials and

value-added parts are taken into account. Implies both economic and envi-

ronmental value.

Potential for higher value-add from circular activities.

States how much more

value could potentially be added through circular economy activities; e.g. the

theoretical amount of intrinsic material value, value added services, and lon-

ger lifetime. Implies both economic and environmental value.

Feasibility in terms of cost and complexity of implementation.

Sizes the esti-

mated feasibility of improving circularity, accounting for e.g. whether prod-

ucts/materials cross borders or not, how materials are mixed, the cost of sep-

aration, and feasibility to engage customers.

•

Figure A1: Summary of methods and data used in the sector selection in the Denmark pilot

Prioritisation

sectors based

on role in

the national

economy

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

Prioritisation of

sectors based

on Circularity

potential

NOTE: GVA = gross value added; CAGR = compound annual growth rate.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Figure A2: Overview of scoring of ‘Role in national economy’ in the Denmark pilot

High

Medium

Low

A.1

A.2

A.3

A.4

Strategic

dimen-

sions

SECTORS

Pharmaceuticals

Machinery

Food and

Beverages

Basic Metals

and fabricated

products

Electronic

products

Rubber and

plastic products

Construction

Hospitals

Mining and

quarrying

Shipping

Electricity and gas

Agriculture,

forestry and

fishing

Water supply,

sewerage

GVA

CAGR

FTEs

CAGR

Imports

Exports

1 Green: value add/employees >4% of total, CAGR >3%; Red: value add/employees <1% of total; CAGR <0%, Orange: value add/

employees 1-4% of total, CAGR 0-3%.

2 Green: imports/exports >5% of total; Red: imports/exports <1% of total; Orange: Imports/exports 1-5% of total.

3 Semi-quantitative.

SOURCE: Ellen MacArthur Foundation.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

Figure A3: Overview of scoring of ‘Circularity potential’ in the Denmark pilot

High

Medium

Low

Information n/a

B.1

B.2

B.3

Share not

recovered

Score for

improved

circularity

SECTORS

Pharmaceuticals

Machinery

Food and Beverages

Basic Metals and fabricated

products

Electronic products

Rubber and plastic products

Construction

Hospitals

Mining and quarrying

Shipping

Electricity and gas

Agriculture, forestry and

fishing

Water supply, sewerage

Material

intensity

Waste

generated

1 Green: material value >40% of sales turnover; Red: material value 10% of sales turnover; Yellow: material value 10-40% of sales

turnover.

2 Green: waste generated

≥10%;

Red: waste generated <1%; Yellow: waste generated is 1%-10% of total waste in Denmark

3 Share of waste not recycled.

SOURCE: Ellen MacArthur Foundation.

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Opportunity prioritisation and sector impact assessment

This appendix describes the assumptions and calculations behind the opportunity

prioritisation and impact assessment for each focus sector in the Denmark case study. The

methodology for the assessment is described more detail in Sections 2.2.1 – 2.2.3 of the

toolkit report. It begins with a qualitative assessment and prioritisation using the ReSOLVE

framework, followed by a quantitative impact assessment (where possible). Figure B1

provides a detail of this qualitative assessment for the construction sector.

Figure B1: Qualitative assessment of potential of opportunities for the Construction &

Real Estate sector in the Denmark pilot

QUALITATIVE ASSESSMENT OF POTENTIAL

•

Use of biological elements in architecture (e.g. ‘living

roofs’ that purify water)

Return of organic construction material to biosphere

•

Sharing of floor space reducing demand for new buildings

•

Shared residential floor space (e.g. Airbnb,

Couchsurfing, Hoffice)

Shared office space (e.g. Liquidspace) and increase of

desk sharing policies

Multi-purposing of offices and public buildings for

better utilisation

Re-purposing of building interiors to increase lifetime

of existing buildings

•

Increased use of under-utilised buildings

•

Coordination of all stakeholders along value chain to

reduce structural waste

Energy use optimisation through low-energy houses

and smart homes

•

Increased reuse and high-value recycling of building

components and materials, enabled by

•

Designing buildings for disassembly

New business models (e.g. other owner of materials

than property owner)

Building passports/signatures and reverse logistics

ecosystems

Increased teleworking to reduce need for office

floor space

XCHANGE

SOURCE: Ellen MacArthur Foundation

Low potential

Modular production off-site for rapid assembly on-site

3D printing of building components

Prioritised for further assess-

ment

Indirectly included as enabler of

key sector opportunities

High potential

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

The ten prioritised opportunities in the Denmark case study span one or more actions in

the ReSOLVE framework, as described below.

Food and beverage:

•

Value capture in cascading bio-refineries (Loop; implicitly Regenerate if more

organic materials are returned to the bio-cycle). Impact assessment described in

Figure B3.

Reduction of avoidable food waste (Optimise). Impact assessment described in

Figure B4.

•

Construction and real estate:

•

Industrialised production and 3D printing of building modules (Optimise, Ex-

change). Impact assessment described in Figure B5.

Reuse and high-value recycling of components and materials (Loop). Impact as-

sessment described in Figure B5.

Sharing and multi-purposing of buildings (Share; implicitly Virtualise as an en-

abler). Impact assessment described in Figure B6.

•

Machinery:

•

Remanufacturing and new business models (Loop; implicitly Share as opportu-

nity is partly enabled by performance models that imply access over ownership

and design for upgradability). Impact assessment described in Figure B7.

Packaging:

•

Increased recycling of plastic packaging (Loop). Calculation of additional plastic

material recycling described in Figure B8.

Bio-based packaging where beneficial (Regenerate).

•

Hospitals:

•

Performance models in procurement (Loop, Share). Impact assessment de-

scribed in Figure B9.

Waste reduction and recycling in hospitals (Loop, Optimise).

•

A quantitative impact assessment was conducted for seven of these opportunities,

following the method described in Section 2.2.3 in the toolkit report. The driver tree in

Figure B2 can illustrate this method and its key components are outlined below.

Branch A. Net value created in deep dive sub-sector.

The net value creation is defined

as a product of the overall adoption rate of the circular economy opportunity, the

number of ‘units’ addressed, and the net value created per unit.

•

Adoption rate. The adoption rate is a quantitative answer to the question ‘How

widely will this opportunity have been adopted in a circular scenario?’ where

100% means full realisation of the potential. In the Denmark pilot, the adoption

rates were always expressed as a difference between the circular scenario (2035

and 2020 horizons) and a ‘business as usual’ scenario (where some adoption rate

is typically also greater than zero). This allows the model to take into account

that circular economy opportunities will probably be adopted to some extent

even in a non-circular scenario.

Number of units in deep dive sub-sector. The number of units is used to de- note

any quantity used as the basis of the quantification in the subsector. The unit

could be (an estimated) number of products, or a volume of material flow (such

•

100

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

as tonnes of organic waste). It could also be a monetary unit, such as ‘value of

purchased goods’ or ‘output of new buildings’.

•

Net value created per unit. Circular activities bring two kinds of direct financial

benefits to businesses: (i) cost savings from materials, components or labour

(for example due to parts recovery or virtualisation), and (ii) increased reve-

nues (from additional sales and/or a higher unit price). Additional costs include

in- creased labour costs, increased material/component costs (for example to

design more robust products), and increased energy and capital expenditure, for

example to set up bio-refineries or remanufacturing plants. These elements can

all be assessed separately (as was done in the Denmark pilot), or, alternatively,

for a high-level estimate, in one value (e.g. 5% net cost savings per unit). They

can also be assessed for consumers rather than businesses (as in, for example,

the reduction of avoidable food waste).

Figure B2: Schematic overview of sector-specific impact quantification

Circular scenario adoption rate, %

Adoption

rate

Net value

created in

deep-dive

sub-sector

EUR million

Business as usual scenario adoption rate, %

Additional

revenues

and cost

savings per

activity

EUR per unit

Labour

Additional

costs per

activity

EUR per unit

Sector size

Deep-dive

sub-sector

size

Services

Materials / components

Energy

Capital

Additional sales

Price / value increase

Material / labour savings

Number

of units in

deep-dive

sub-sector

Net value

created per

unit in deep-

dive sub-

sector

EUR per unit

Size of

sector vs.

deep-dive

sub-sector

Net value

created

in sector

EUR

million

Scale up

factor to full

sector

Scalability

factor

(between 0

and 1)

SOURCE: Ellen MacArthur Foundation

Branch B. Scale-up factor.

The scale-up factor is used to bring the net impact estimated

for the deep-dive sub-sector to the full sector (and adjacent sectors). The calculation

is driven by the relative size of the adjacent sub-sectors compared to the deep dive

sub-sector, and a ‘scalability’ factor introduced to reflect the relative applicability of the

circular economy opportunity in different sub-sectors. The final scale-up factor is the

sum of each individual scale-up factor for all sub-sectors present.

•

Relative size of sub-sector. This calculation is based on the relative economic

size of the individual sub-sectors, for example calculated by comparing output or

gross value added.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

101

•

Scalability factor. This value, set between 0 and 1, is introduced to adjust the

scaling based on how applicable an opportunity is to an adjacent sub-sector

compared to the deep-dive subsector. For example, a scalability factor of 0.2

means that the impact is estimated to be 20% of the impact estimated for the

deep-dive sub-sector.

Figures B3–B9 summarise the assumptions, estimates and scaling for each of impact

assessments, along with the sources used. An overview of the types of sources for

estimates per opportunity is provided in Figure B10. These assumptions should be read

in light of the scenario description detailed in Figure 8.

While the quantification of circular economy opportunities follow the approach in Figure

B2 in general, variations were introduced to account for differences in the nature of each

opportunity. A calculated example of one of the opportunities is given in the section

below. In Figures B3–B7, the ‘mini’ driver trees shown contain ‘Branch A’ of the driver

tree, while the tabulated scale-up below is a representation of ‘Branch B’.

It should also be noted that due to variations in the use of scale-factors between the

conservative and ambitious circular economy scenarios, the relative contribution of each

opportunity to the total sector-specific presented in figures B3–B9 are different from

those given in Figure 10, which are averages of these two scenarios.

Figure B3: Value capture in cascading bio-refineries

Impact assessment summary, 2035

102

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Size as share of

food and beverage

sector

Food and

beverage

NOTE: Results estimated for impact of industries inside Denmark only. This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured in

the economy-wide CGE modelling. BaU = business as usual.

SOURCES:

1 Five company / industrial organisation interviews and five sector expert interviews.

2 Additional price per tonne dependent on type of by-product/waste and its application. Energy production as biofuell/biogas estimated to generate additional EUR 20–30/

tonne. New chemicals estimated to generate EUR 70–80/tonne. Costs estimated to 40–50% of product value.

3 The Netherlands Organisation for Applied Scientific Research, Opportunities for a Circular Economy in the Netherlands (2013). Pricing estimates derived from approximate

current and future prices for a 34 waste / by-product streams.

4 Danish EPA, Organiske restprodukter - vurdering af potentiale og behandlet mængde (2014); Kortlægning af madaffald i servicesektoren (2014); Kortlaegning af

dagrenovation i Danmark - Med fokus på etageboliger og madspild (2014).

5 Estimate, taken as 80% of waste generated by the food and beverage industry per EUR of GVA (from Statistics Denmark). See also M. Gylling et al., The 10+ million tonnes

study: increasing the sustainable production of biomass for biorefineries, University of Copenhagen (2013), concluding that the agricultural sector could produce an additional

10 million tonnes of by-products for use in bio-refineries.

Figure B4: Reduction of avoidable food waste

Impact assessment summary, 2035

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103

NOTE: Results estimated inside Denmark only. This sector-specific impact does not include indirect effects, e.g. on supply chains,

that are captured in the economy-wide CGE modelling. BaU = business as usual.

SOURCES:

1 SITRA, Assessing the circular economy potential for Finland (2015).

2 Eurostat.

3 Danish Government, Denmark without waste I (2013); Danmark uden affald II (2015).

4 A. Halloran et al., Adressing food waste reduction in Denmark (Food policy 49, 2014).

5 Danish Environmental Protection Agency, Kortlægning af dagsrenovation i Danmark – Med fokus på etageboliger og madspild

(2014).

6 Danish Environmental Protection Agency, Kortlægning af madaffald i servicesektoren: Detaljhandel, restauranter og storkøkkener

(2014).

Figure B5: Industrialised production and 3D printing of building modules; reuse and high-value recycling of components and materials

Impact assessment summary, 2035

104

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

NOTE: Results estimated for impact of industries inside Denmark only. This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured

in the economy-wide CGE modelling. BaU = business as usual.

SOURCES:

1 Estimate, informed by three company interviews and three sector expert interviews.

2 Estimates based on reported savings by the Broad Group and WinSun, consolidated in expert interviews. 3D printing savings estimated as 50% of WinSun’s reported

savings, since there is still very little data to exemplify cost savings. Actual savings will vary on a case-by-case basis and be dependent on the size and complexity of

components being 3D printed. See also Ellen MacArthur Foundation, SUN and McKinsey Center for Business and Environment,

Growth Within: A Circular Economy Vision for

a Competitive Europe

(2015); www.archdaily.com/289496/; http://www.yhbm.com/index.php?siteid=3

3 Estimates, informed by literature and expert interviews. See, e.g. US Environmental Protection Agency, Using Recycled Industrial Materials in Buildings (2008); Skive

municipality, Afslutningsrapport Projekt Genbyg Skive (2015).

4 Statistics Denmark.

5 P.-E. Josephson & L. Saukkoriipi, Waste in construction projects: call for a new approach (Chalmers University of Technology, 2007); M. Hogan, The Real Costs of Building

Housing (SPUR, 2014).

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105

Figure B6: Sharing and multi-purposing of buildings

Impact assessment summary, 2035

NOTE: Results estimated for impact inside Denmark only. This sector-specific impact does not include indirect

effects, e.g. on supply chains, that are captured in the economy-wide CGE modelling. BaU = business as usual.

SOURCES:

1 Estimate, informed by literature: GSA Office of Government-wide Policy, Workspace utilisation and allocation

benchmark (2011); Cushman & Wakefield, Office space across the world (2013); vasakronan.se/artikel/det-digitala-

arbetslivet-ar-har; SITRA, Assessing the circular economy potential for Finland (2015); Ellen MacArthur Foundation,

SUN and McKinsey Center for Business and Environment,

Growth Within: A Circular Economy Vision for a Competitive

Europe

(2015).

2 Statistics Denmark; 100% of commerical buildings; 10% of residential, small residential, small non-residential

buildings; 50% of public buildings and sports buildings.

3 Statistics Denmark.

4 Office hours = 10 hours per day, After hours = 4 hours per day. Current utilization during office hours taken as 20%

higher than reported by GSA.

Figure B7: Remanufacturing and new business models

Impact assessment summary, 2035

106

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

NOTE: Results estimated for impact of industries inside Denmark only. This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured

in the economy-wide CGE modelling. BaU = business as usual.

SOURCES:

1 Five sector experts were interviewed for the analysis of cost breakdown and value potential; findings tested on high level with six Danish company and industry

representatives.

2 Towards the Circular Economy Vol. I, Ellen MacArthur Foundation (2012); Assessing Circular Economy potential for Finland, SITRA/McKInsey (2014).

3 Cost breakdown and technical complexity per component gathered from, a.o.: LCA analysis on Vestas V112 model, PE (2011); E.ON Wind Turbine Technology and

Operations Factbook (2013); Windpower Engineering & Development (2012), http://www.windpowerengineering.com/design/mechanical/understanding-costs-for-large-

wind-turbine-drivetrains; EWEA (2009).

4 Wind power demand: Coarse grained estimates based on projections by BTM/Navigant, McKinsey & Co., and DWIA.

5 However, larger secondary value may be derived from successfully remanufactured / refurbished EEEs, as stated by, e.g. Ricoh.

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

107

Figure B8: Increased recycling of plastic packaging

Impact assessment 2013

NOTE: This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured in the economy-

wide CGE modelling.

SOURCES:

1 Total volumes: Danish Environmental Protection Agency, Statistik for emballageforsyning og indsamling af emballageaffald

2012 (2015). Volume distribution and recycling rates are reconciled from 2008 data provided by the Danish Environmental

Protection Agency.

2 Accurate data for PET not inluded in used data set. The the recycling rate is therefore assumed not to change, thus giving a

zero contribution to the 2035 scenario.

3 Estimates, based on interviews with sector experts from the waste management industry and the Danish Environmental

Protection Agency.

4 Estimates, based on interviews with sector experts and ambition levels presentet in the Denmark without waste strategy.

Danish Government, Denmark without waste. Recycle more, incinerate less (2013).

5 Calculated as the sum of addtional volume collected by 2035 at 2035 yield and the additional yield of the collected baseline

volume.

Figure B9: Performance models in procurement in the hospital sector

Impact assessment summary, 2035

NOTE: This sector-specific impact does not include indirect effects, e.g. on supply chains, that are captured in the economy-wide

CGE modelling. BaU = business as usual.

SOURCES:

1 Statistics Denmark, Danish Regions

2 Estimates, informed by 4 company interviews; 4 hospital / sector expert interviews

3 Savings rate depends on product category. Based on expert interviews with healthcare equipment providers and case studies

from performance contracts in other industries (e.g. white goods, automotive, printers). The distribution of savings between

hospitals and suppliers has not been modelled. It could be argued that it is skewed towards hospitals in the short term since

suppliers want to create incentives for hospitals to set up performance contracts, but could equilibrate at a more even split in the

long-term as the model gets established and consolidated.

4 Weighted averages of product categories

Figure B10: Key sources for assumptions & estimates for each circular economy opportunity

Circular economy opportunity

Addressable value pool[1]

Danish EPA

Literature/reports, Interviews, Danish

EPA

Value creation and costs

Adoption rate

108

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Food & beverage

2 Reduction of avoidable food waste

Industrialised production and 3D

printing of building modules

Reuse and high-value recycling of

components and materials

Sharing and multi-purposing of

buildings

Value capture in cascading bio-

reﬁneries

Literature/reports, interviews

Literature/reports, Interviews

Literature/reports, interviews

Interviews

Construction

& Real estate

Literature/reports, interviews

Interviews

Interviews, Danish EPA

Literature/reports, interviews

Interviews

Interviews, Danish EPA

Machinery

Plastic packaging

Literature/reports

Interviews

Remanufacturing and new business

models

Increased recycling of plastic

packaging

Bio-based packaging where

beneﬁcial

Literature/reports, DBA

Interviews, literature/reports

Danish EPA

Literature/reports, interviews

interviews, Danish EPA

Interviews

Danish Regions, interviews

N/A

9 Performance models in procurement

Hospitals

10 Waste reduction and recycling

Literature/reports, interviews

N/A

Interviews

Legend:

Sizes of product categories or sub-sectors provided by Statistics Denmark

Literature/reports – Published studies from institutes, businesses or academia

Interviews – company experts and/

or external experts

Danish EPA / DBA – data and/or interviews from Danish EPA or DBA

Danish regions – data on public expenditure from Danish regions

N/A – data not collected (no

quantiﬁcation made)

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109

Impact assessment: Value capture in cascading bio-refineries

The following summarizes the impact quantification for the pork and dairy sub-sectors

of the food and beverage sector, as summarised in Figure B3. It should be noted that

the estimated valorisation is an addition or supplement to current valorisation pathways,

which is reflected both in the adoption rate and net value added per unit volume. Only

existing technologies (at R&D or early commercial stage) have been considered as part

of this opportunity.

•

Adoption rate. Overall, the technologies required to produce high-value prod-

ucts (e.g. proteins, nutraceuticals, or food ingredients) are at R&D or pilot stage,

wherefore the 2020 adoption rate was set to 20% (vs. 0% in the BaU scenario).

By 2035, however, it is reasonable that all these enabling technologies, along

with capital to build capacity, will be available in a circular scenario, leading

to a 90% adoption rate assumption (vs. 20% in BaU). These assumptions were

stress-tested with experts and also seen to correlate well with the recent TNO

report on the Dutch economy.

Total volume and different waste streams. The total waste volume from both

industries was broken down into sub-components to reflect different value cre-

ation opportunities for different types of waste. Each waste volume and its com-

position were estimated using direct data and interviews with industry experts,

and was assumed to be constant over the modelled time period.

○

Pork industry: ~3.9 million tonnes per year, divided as 94% wastewater slurry,

1% bone meal, fat, grease and mycosa, 1% hair, bristles and hooves, and 4%

manure, gut content and other waste.

Dairy industry: ~1.5 million tonnes per year, divided as 89% whey and other

former foodstuffs, and 11% other waste.

•

○

•

Net value per unit volume. Two main sources of value were considered: ex-

traction or synthesis of (bio)chemicals, or energy through either biofuel or direct

energy extraction.

○

For modelling purposes, these two value creation pathways were separated

into the ‘Food and beverage’ (FBV) sector, the ‘Chemical industry, plastics

and pharmaceuticals’ (CHM) sector and the ‘Gas and heat’ (GDT) sector. (See

Appendix C for details on sector categorisation in the Danish economy.)

The value creation was expressed in terms of EUR/tonne waste or by-prod-

uct material, and was individually estimated for each identified waste stream

(see above) and value creation activity. Initial pricing estimates were de-

rived from approximate current and future prices for 34 waste / by-product

streams in the recent TNO report and discussed with experts before finalized.

The value creation was expressed as a price ‘delta’ compared to current

prices, taking into account that most waste is currently valorised in some

way. The price ‘deltas’ thus reflect the increase in value creation that can be

unlocked through improved technologies and processes. In some cases, the

‘deltas’ where increased between the 2020 and 2035 scenario, to reflect an

increase in maturity for technologies that require a longer time to develop.

The price delta per waste stream and sector is summarised in Figure B12.

At the same time, an estimate of volume allocation to the three sectors

was conducted, based on assumptions on technological maturity and de-

mand-pull from the respective sectors. It is assumed that a fraction of the

waste / by-product streams is valorised by the pork / dairy processors them-

selves. This fraction is generally increased from 2020 to 2035, as valorising

by-products becomes an increasingly important part of the food processor’s

○

110

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

business model. The volume allocation per waste stream and sector is sum-

marized in Figure B11.

○

Costs were expressed as percentages of the value created per waste stream.

▫

For the CHM and GDT sectors, the costs were as follows: Materials

10%, Labour 10%, Services 5%, Capital 25% (reflecting an expected

raw material price increase die to the higher value of waste-derived

products the need for capital expenditure to build new plant capacity).

The material cost is booked as additional revenue for the pork/dairy

processors (as the waste / by-product streams are sourced from them).

For the FBV sector, the costs were as follows: Labour 10%, Capital 25%

(assuming no material sourcing or external services needed as bio-

refining becomes an integrated part of existing operations).

▫

As an example, consider wastewater slurry valorisation from the pork industry (3.7

million tonnes).

By 2020, a 20% adoption rate entails that ~750 thousand tonnes are processed to

add additional value compared to business as usual. The assumed price deltas for the

CHM and GDT sectors are 30 and 20 EUR/tonne, respectively. The volume distribution

is 10% vs. 90%, i.e. most of the wastewater will go to generate biofuels and heat. The

pork industry does not generate any additional value from this waste stream, but will

get revenue of 10% (3 and 2 EUR/tonne respectively) from selling the wastewater to

these adjacent industries. In addition, 80% of the volume valorised by the CHM sector

is cascaded to the GDT sector for additional valorisation. After subtracting the 50%

cost base, the CHM sector generates a net value of EUR 1.1 million. The GDT sector

generates EUR 6.7 million plus EUR 0.6 million from material streams cascading from

the CHM sector. Finally, the Pork industry generates an additional EUR 1.6 million from

the price premium of the material streams sold to the CHM and GDT sectors. The net

value created from the wastewater slurry is thus EUR 10 million. Adding up the other five

material streams from pork and dairy gives a net value creation of EUR 16.2 million.

By 2035, the net adoption rate is 70% (90% vs. 20% in BaU), meaning that ~2.8 tonnes

are processed. The shift in volume share towards more valuable products and the

higher value per tonne yields EUR 15.6 million for the CHM sector, 30.6 million for the

GDT sector (21.9 million from direct material allocation and 8.7 million from cascaded

material from the CHM sector), and 11.7 million from the pork industry (including inhouse

valorisation and revenues from selling wastewater to CHM and GDT. The net value

created from the wastewater slurry is thus EUR 57.9 million. Adding up the other five

material streams from pork and dairy (totalling 70% of 5.4 million tonnes) gives a net

value creation of EUR 97 million, corresponding to an average net value of 25 EUR/tonne

(as illustrated in figure B3).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

111

Figure B11: Pork and Dairy – Price ‘delta’ per sector and waste stream

2020 scenario

2035 scenario

gure B10. Pork

nd Dairy – Price

elta' per sector

nd waste stream

PORK

EUR / tonne

Food

processor

Chemical

industry

Gas & heat

Food

processor

Chemical

industry

Gas & heat

Wastewater slurry

Bone meal, fat, grease,

mucosa

Hair, bristles, hooves

–

100

480

600

Manure, gut, other

–

DAIRY

Whey & former feedstuﬀs

Other waste

NOTE: Prices are relative to estimates of current prices per waste stream

Figure B12: Pork and Dairy – volume allocation per sector and waste stream

Figure B11. Pork and

Dairy – volume

alloca8on per sector

and waste stream

PORK

2020 scenario

2035 scenario

Percent

Food

processor

Chemical

industry

10%

Gas & heat

Food

processor

10%

Chemical

industry

30%

Gas & heat

Wastewater slurry

Bone meal, fat, grease,

mucosa

Hair, bristles, hooves

90%

60%

100%

60%

40%

10%

20%

70%

30%

Manure, gut, other

100%

40%

30%

DAIRY

Whey & former

feedstuﬀs

Other waste

20%

10%

70%

40%

20%

40%

20%

80%

50%

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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Economy-wide impact quantification

Economy-wide impact assessment methodology

The economy-wide impact assessment was conducted using NERA Economic

Consulting’s N

ERA global model. A multi-sector, multi-region trade, dynamic

computable general equilibrium model. The model uses standard macro and

microeconomic theory to represent the flow of goods and factors of production within

the economy. A simplified version of these interdependent economic flows is shown in

Figure C1. It illustrates the flow of goods, services and payments in a typical CGE set up

between the different economic agents in the domestic and international markets.

In the model, there is a

Figure C1: Overview of a Computable general

representative household in each

equilibrium (CGE) model

region. Households supply factors

of production, including labour and

capital, to firms. In return, firms

provide households with payments

for the factors of production.

Firm output is produced from a

combination of productive factors

and intermediate inputs of goods

and services supplied by other firms.

The final output of individual firms

can be consumed within Denmark

or exported. The model also

accounts for imports into Denmark.

Goods and services in the model

are treated as ‘Armington’ goods

Exports

and services, that is, imported and

domestically produced goods and

services are assumed to be only

imperfect substitutes.

In addition to consuming goods

and services, households can

accumulate savings, which they provide to firms for investments in new capital.

Taxes are collected by a passive government, which recycles tax receipts back to the

households as lump-sum transfers.

Another feature of the CGE framework is that all markets are required to clear, meaning

that the sum of regional products and factors of production must equal their demands,

and that the income of each household must equal its factor endowments plus any net

transfers received. In other words, there can be ‘no free lunches’. The model assumes

general equilibrium, which requires that for all sectors, regions and time periods, there is

a global equilibrium where supply and demand are equated simultaneously, as producers

and households anticipate all future changes. The mechanism by which this is achieved

is through price changes.

To analyse the economic impact of scenarios (e.g. structural change from increased

circularity in the economy), CGE models such as the N

ERA model represent the

interactions and feedback effects in the exchange of goods and services simultaneously

between consumers, producers and government and across sectors, regions and time.

They are therefore particularly useful to assess both the direct and indirect effects of

structural changes and are able to analyse scenarios of changes to the economy with

potentially large impacts that have not been implemented in the past.

Limited work has been done to date in modelling the circular economy in a CGE

framework. Our review of the literature identified just two sources that would qualify as

economic impact assessments of the circular economy using hybrid or CGE frameworks.

At the time of writing, to our knowledge, there are no CGE models that can fully

Assessment of Scenarios and Options towards a Resource Efficient Europe,

European Commission (2014),

and

A National CGE modeling for Resource Circular Economy,

Korea Environment Institute (2006).

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

113

represent the attributes of a truly circular economy. These include: inputs and material

substitutions; changes in resource productivity and production technology; new circular

economic sectors, their services and products; priced externalities; and the generalised

changes in the stocks and flows of goods, capital, labour and materials.

CGE model description

The CGE model used for the analysis represents five world regions: Denmark and its

main trading partners, which have been aggregated as the Rest of Europe, China, Oil

exporting countries and Rest of the world. Different aggregations of the economic

sectors were used for Denmark and the other regions. In Denmark there are 21 economic

sectors (16 non-energy and 5 energy sectors), while in the rest of the world 17 economic

sectors (12 non-energy and 5 energy) were represented. From a time perspective,

the model was set up to span between 2015 and 2035 and was run in 5-year time

increments. These sectoral and geographic dimensions are summarised in Figure C2.

Figure C2: Sectoral and geographical aggregates in the CGE Model in the Denmark

pilot

SECTOR

GAS

OIL

COL

CRU

ELE

ELY

GDT

MEP

CNS

CNS-Repair

FBV

CHM

AGR

FAB

MIN

AOG

WRH

SER

RPD

RNT

HSP

SOT

TRN

WTR

DESCRIPTION

Natural gas works

Refined oil products

Coal transformation

Crude oil

Electricity, gas and heat

Electricity

Gas and heat

Machinery and electronic products

Construction - New buildings and infrastructure

Construction - Repair and maintenance of buildings

Food and beverages

Chemical industry, plastics and pharmaceuticals

Agriculture, forestry and fishing

Basic metals and fabricated metal products

Mining

Other manufacturing

Services - wholesale, retail and hospitality

Services

Services - Repair of machinery and other durables

Services - Renting of buildings

Services - Hospitals

Services - other

Transport

Sewerage and waste management

REGION

Denmark

Yes

EU, China,

OPEC, RoW

Yes

SOURCE: NERA Economic Consulting.

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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Producer behaviour in the model is characterised by a ‘production function’. A

production function represents how different inputs are used to manufacture a

commodity or service. For example, production of machinery requires capital, labour,

energy, and other materials as inputs. Parameters in the production function define

the way in which substitution between inputs and outputs changes in response to

changes in the relative prices of inputs and outputs. These price-induced substitution

relationships are called ‘elasticities’. Figure C3 provides an illustrative representation

of a production function. The sigmas (σ) shown are illustrative substitution elasticities

between the different inputs. Consumer behaviour, the production of natural resources

and regional trade are similarly represented in the CGE model by these ‘nested’

functions.

Figure C3: Generic structure of production functions in the CGE Model

SOURCE: NERA Economic Consulting.

Theoretically, there are several ways to represent the circular economy within a CGE

framework and, as with any modelling exercise, choosing between options involves an

effort versus quality trade-off. This trade-off will be between the availability of time,

effort and data on the one hand, and the required quantity and quality of detail in

representing circular economy activities, sectors and flows of goods, materials and

externalities, on the other.

Figure C4 presents four potential approaches to represent circularity in a CGE

framework and their pros and cons. For policymakers to select which of those

approaches is best suited to their needs, there are three important aspects to consider:

Detail and precision in representation of economic relations in the circular econ-

omy (e.g. are sectors and services associated with circular economy activities to

be explicitly modelled, e.g. product dismantlers in the refurbished goods supply

chain?).

Degree and scope of representation of economic and materials flows (e.g. in ad-

dition to monetary flows, does the model need to explicitly represent physical

flows of virgin materials, recovered/recycled materials, different by-product and

waste types?).

Time and effort requirements, (duration of the assessment, access to internal and

external experts and modellers) and data and assumption requirements (quantity

of primary data readily available to model the required level of detail).

As shown in Figure C4, the approach selected for the Denmark pilot study was chosen

as a balanced compromise between the three criteria above

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

115

Figure C4: Potential approaches and trade-offs for representing circularity

within a CGE framework

APPROACH DESCRIPTION

Use an existing CGE framework

to model circularity as an in-

crease in resource efficiency or

changes in consumption pref-

erences

PROS

Simplest approach to (partially)

modelling circularity

CONS

Very general representation

Impacts depend on exogenous

parameters (productivity or

preferences)

Partial representation or circu-

larity, no structural change

As part of a hybrid approach,

re-estimate production func-

tions in existing CGE structure

to match the sector specific

estimates of circularity

Easy to implement bottom-up

cost and output effects

Captures direct effects on focus

sectors and indirect effects on

the economy

Limited data requirements and

easily replicable

Bottom-up cost and output ef-

fects are exogenous

Materials flows not explicitly

modelled (captured indirectly by

financial flows)

Only partial representation of

structural change (no new tech-

nologies or sectors)

Important time and effort re-

quirement

Significant requirement of de-

tailed data / assumptions of new

activities to calibrate model

Very time-intensive and complex

modelling exercise

Substantial data and assump-

tions requirements

Develop CGE structure that

includes new circular activities

(e.g. regenerate, share) as sepa-

rate economic activities. Works

with hybrid approaches.

Does not require quantifying

effects in an ad hoc manner

Approximate size and some

effects of circular economy can

be quantified

Highly detailed representation

of circular sectors and flows

Size and effects of circular econ-

omy quantified

Circularity levers endogenously

determined

Develop CGE structure that rep-

resents all materials and value

flows and represents all exter-

nalities in production and utility

functions. Works with hybrid

approaches.

APPROACH SELECTED FOR

DENMARK PILOT

SOURCE: NERA Economic Consulting.

As described in Section 2.3.1 in the toolkit report, the hybrid approach consists of several

steps preceding the actual CGE modelling. As illustrated in Figure C5, it begins with

representing the impact induced by circular economy scenarios in the focus sectors

in the form of an input-output table. These changes are then used to ‘re-parametrise’

production (and utility) functions according to the following procedure:

•

Interpolate input effects from cost savings (or increases) as well as output ef-

fects of revenue increases per focus sector for intermediate model years 2025

and 2030 based on the sector-specific quantification for years 2020 and 2035.

Re-parametrise production functions (i.e. estimate new parameter values) to

match decreases (or increases) in the values of input factors into the focus sec-

tors relative to the baseline value.

Re-parametrise production functions to match increases (or decreases) in the

values of the output from focus sectors relative to the baseline value.

Impose these time-varying changes in inputs and outputs for all model years (i.e.

the input-output value structure of implementing the circular economy opportu-

nities) by redefining (re-calibrating) the production formulae of all focus sectors.

•

Figure C5: Overview of a ‘hybrid’ CGE approach

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• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

QUANTIFY DIRECT IMPACT

BY SCALING UP FROM

PRODUCTS AND SECTORS

CONVERSION OF

DIRECT IMPACTS INTO

CGE MODEL INPUT

ACTIVITIES

IDENTIFY SECTOR

OPPORTUNITIES

REPRESENTATION OF

CIRCULARITY IN CGE

MODEL

RUN SCENARIOS IN

CGE AND ANALYSE

RESULTS

FOOD AND

BEVERAGE

Goods and services

GDP

δ=0

CONSTRUCTION

Materials

Energy + Value added

δ=0

Energy

δ=0

Fossil fuels

δ=0

EMPLOYMENT

Capital

Value added

δ=0

Labour

EMISSIONS

MACHINERY

TOTAL

EFFECTS

OUTPUT

Product/sub-sector

technical poteantial

Sector economic

potential

Distribution of direct

impacts as CGE

model input

Implementation of

direct impacts in

CGE

Economy-wide

and inter-sectoral

impacts

SOURCE: NERA Economic Consulting, Ellen MacArthur Foundation

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

117

After re-parametrisation, the model is run and will optimise supply and demand of all

commodities and services in the economy via price impacts. The results for the re-

parametrised version of the production (and utility) functions now represent the circular

economy scenario(s) in the CGE model and can then be compared to the baseline

scenario.

Scenario descriptions, key assumptions and sources

•

The macro-economic impact modelling was conducted by calibrating the CGE

model to a ‘baseline’ (or business as usual) reference scenario and then quantify-

ing the changes to key macroeconomic indicators after running a ‘circular econ-

omy’ scenario through the model. Two scenarios were assessed, a ‘conservative’

and an ‘ambitious’ version of the circular economy.

As described above, the scenario inputs to the CGE model were modified in-

put-output tables for Denmark for the years 2020 and 2035, where input and

output values were adjusted based on the impact from the sector-specific op-

portunity assessment (see Chapters 2–6 Appendix B and Section 2.2.3 of the

toolkit report). The macro-economic model therefore quantified the direct and

indirect economy-wide effects that the sector specific structural changes would

have on the broader Danish economy.

•

Baseline scenario.

The baseline scenario was developed through the following steps:

•

Incorporating the Denmark 2011 input-output table within the GTAP8 dataset and

scaling other regions’ economic flows by actual GDP growth from 2007 till 2011

such that a globally balanced dataset was achieved.

Building in exogenously specified regional forecasts, including Danish projections

Calibrating the baseline: Adjusting model parameters such that they replicate the

macroeconomic outlook by targeting GDP, carbon emissions by sector and by

fuel, energy price, and energy production projections. This baseline calibration

resulted in a projection consistent with the baseline scenario assumptions.

•

Circular economy scenarios.

From a macroeconomic modelling perspective, the key

assumptions of the circular economy scenarios (for both the ambitious and conservative

cases) were as follows:

•

The functional form of the production and utility functions remain the same be-

tween the baseline and the circular economy scenarios.

Behavioural parameter values of the utility function remain the same between

the baseline and the circular economy scenarios.

Energy sector assumptions remain the same between the baseline and the cir-

cular economy scenarios (i.e. no explicit modelling of an additional shift towards

renewable energy).

•

Each circular economy scenario is represented by producing an input-output table that

represents the changes induced by the circular economy opportunities, quantified as

described in section 2.2.3 of the toolkit report. The allocation of changes in input factors

(labour, materials, energy and capital) was done based on an analysis of the changes in

demand due to the circular economy activities,

and from which sectors’ key material

inputs are provided in the current (2011) input-output table.

The main difference between the ‘conservative’ and ‘ambitious’ scenarios are how the

impact assessed for the deep-dive sub-sector is scaled up to adjacent (sub-)sectors.

This difference is described in detail in Appendix B.

Several data sources were combined to construct the baseline calibration and circular

economy scenario analysis. These are summarised in Figure C6.

For example: reduced demand for materials and increased demand for labour due to remanufacturing in

machinery; reduced demand for labour and increased need for capital for industrialised production and 3D

printing of building modules.

118

• DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY

Figure C6: Data sources used in the baseline calibration and CGE modelling in the

Denmark pilot

Data

Data source

Denmark

Rest of World

Benchmark year input/output table

Primary factor and commodity tax rates, output

and export tax (subsidy) rates, and import tax

rates

•

Statistics Denmark

GTAP 8 database

GTAP 8 dataset includes Armington elasticities, intra-

import elasticity of substitution, factor substitution

elasticities, factor transformation elasticities.

Other sources include:

Paltsev, S., J.M. Reilly, H.D. Jacoby, R.S. Eckaus, J.

McFarland, M. Sarofim, M. Asadoorian and M.

Babiker, 2005: The MIT Emissions Prediction and

Policy Analysis (EPPA) Model: Version 4.

Mikkel Barslund, Ulrik R. Beck, Jens Hauch, Peter B.

Nellemann, “MUSE: Model documentation and

applications,” Danish Economic Council, Working

Paper 2010:4.

DREAM group

•

Substitution elasticities for production,

consumptions functions

GDP and employment data and projections to

2035

Energy demand data and projections to 2035

Energy price data and projections to 2035

Energy production data and projections

CO2 emissions data and projection to 2035

Danish Energy Agency (ENS)

Statistics Denmark

Own calculations

1.A.1.1.1.1.1

EIA IEO

2013

1 US Energy Information Administration – International Energy Outlook 2013

http://www.eia.gov/forecasts/archive/ieo13/

SOURCE: NERA Economic Consulting.

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119

Assessment of policy options

An initial mapping of policy interventions to barriers (see Section 2.2.5 in the toolkit

report) can result in a large number of policy options. It can be useful as a first step

to apply a high-level policy impact and cost assessment. Other factors such as time

to implementation, time to achieve outcome, and distributional effects can also be

taken into account. Such a high- level qualitative prioritisation can provide input for

the subsequent due diligence and impact assessment/cost-benefit analysis in the

policymaking process.

An example of such a prioritisation exercise for the ‘Value capture in cascading bio-

refineries’ opportunity in the Danish pilot is found in Figure D1. Such a matrix can be the

result of an analytical exercise as the one described in this appendix or can be made

more directly based on expert input.

Figure D2 provides an overview of the basic arithmetic of the policy assessment tool

developed for the Denmark pilot study. The tool is a workbook that contains 87 policy

interventions identified to address the barriers to the circular economy opportunities

in the five focus sectors. The goal of the tool is to rank the policies by their relative

cost-effectiveness using a semi-quantitative scoring function. This is done by scoring

each intervention on two dimensions, ‘impact’ and ‘cost’, from which a weighted ‘cost-

effectiveness score’ is derived.

The development and implementation of the tool described here is one of many

alternatives that policymakers can use as a first step to narrow down a long list of policy

options to those with the best potential to address the barriers to circular economy

opportunities. It should be noted that the main benefit of this tool was that it facilitated

discussion. Ultimately, the final sets of policy options for each sector were determined

with the help of significant input from government stakeholders and sector experts.

While the approach outlined here is a useful first step, it is underlined that it is not meant

as a substitute for adequate due diligence and impact assessment in the standard policy

making process.

The scoring rules and methodology used to arrive at a prioritised set of policy options

are described in detail below. Each policy intervention was scored independently of

others, i.e. not allowing them to work in conjunction with any other policy, but keeping

in mind their potential to work well as part of a package. All scores are relative, with

comparisons made across several dimensions including policy types, circular economy

opportunities and sectors to ensure adequate scoring distributions.

Scoring of impact dimension

The ‘impact score’ of a policy is the product of two equally weighted factors: the

‘importance of a barrier’, which builds on the detailed barrier analysis described

in Section 2.2.4 of the main report; and the tentative effectiveness of the policy

intervention at overcoming the barrier. The methodology, described in detail below,

was systematically applied to all policy interventions to obtain a first set of impact

scores, which were discussed and iterated in sector ‘deep dive’ sessions with multiple

stakeholders.

•

Scoring the ‘importance of barrier’:

Based on expert judgment on the size/

importance of the barrier to deliver the circular economy opportunity.

Scoring the ‘effectiveness’ in 2020 and 2035:

Based on an expert-guided esti-

mate of how effective the policy intervention would be in addressing the barrier,

given existing initiatives, over two time periods, equally weighted:

○

Short-term effectiveness (by 2020) with higher scores given to economic/fis-

cal incentives (subsidies, taxes, guarantees) and lower scores to information

or R&D interventions.

•

Figure D1: Prioritisation of policy options – ‘Value capture in cascading bio-refineries

Form public private

partnerships to finance the

deployment of mature bio-

refining technologies

loan guarantees for the

Provide low-cost loans or

Incorporate bio-refining into

the government’s long-term

strategic plans

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refining technologies

HIGH

Stimulate the development

of advanced, high-value

bio-refining technologies by

funding cross-institutional

R&D clusters

Reduce VAT on high value

IMPACT

chemicals derived from waste

feedstock

Require municipalities to send

organic waste for one round

of processing to extract high

value compounds before it

could be incinerated / used as

fertiliser

Identify and communicate

necessary changes to

EU policy (or its national

implementation) to address

unintended consequence

Require municipalities

to collect organic waste

separately

Propose a minimum proportion

of 2nd generation biofuels in the

EU biofuel target

Provide a business

advice service

LOW

HIGH

COST

SOURCE: Ellen MacArthur Foundation; NERA Economic Consulting

LOW

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○

Long-term effectiveness (by 2035) with the same scores for economic/fiscal

incentives and those for information or R&D increased or decreased where

relevant.

Scoring of cost dimension

The ‘cost’ score of a policy is the product of two equally weighted factors:

‘administrative

and transaction costs’, determined by estimates and expert consultation; and wider

economic costs of the intervention. The methodology, described in detail below, was

systematically applied to arrive at a first set of cost scores, which were discussed and

iterated in sector ‘deep dive’ sessions with multiple stakeholders.

•

Scoring the ‘administrative and transaction costs’:

Based on an expert-guid-

ed estimate of the combined cost incurred by government to set up and operate

the policy and the cost to the private sector of complying with it.

○

Cost incurred by government refers to any foregone revenue or additional

spending commitment entered into by the government by virtue of the poli-

cy.

Cost to the private sector refers to one-off adjustment costs and any in-

crease in the cost of doing business caused by the policy.

○

•

Scoring the ‘wider economic cost’:

based on an expert-guided estimate of the

cost–benefit trade-off between economic advantages and disadvantages in a

sector created by the policy across government, businesses and consumers.

○

An example is a policy that reduces market competition creates advantages

for businesses, but disadvantages for consumers. Similarly, a subsidy creates

an advantage for its recipients, but disadvantages for the government.

The ‘economic advantage and disadvantage’ component focuses on each

particular sector. The scoring has not taken into account the intrinsic benefits

of the policy supporting circular economy activities, since they are addressed

in the ‘impact’ score.

The ‘balance across the economy’ component looks at the average net dis-

advantage in other parts of the economy due to a sector-directed policy, but

not on the distribution of advantages and disadvantages, which belongs to

the political viability sphere.

○

The assessment does not incorporate the economy-wide computational general

equilibrium modelling of the impact of circular economy opportunities.

The total impact and cost scores are combined to provide a rank between 1 and 3:

Impact and cost are both greater than 50 (out of 100), putting the policy on the

short-list

One or other of the impact and cost scores is 50 or above, putting the policy in a

‘supporting policy’ category

Neither impact nor cost score reaches 50, putting the policy in the unattractive

category.

Figure D3 shows a worked example of how the tool was used to provide an initial score

for a particular policy option. All of these individual scores that comprise the total

impact and total cost scores were subsequently discussed with the project team and

Danish government stakeholders and adjusted accordingly.

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Figure D2: Snapshot and description of the policy assessment tool

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Figure D3: Worked example of the implementation of the scoring methodology.

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Why the circular economy matters

The linear ‘take, make, dispose’ economic model relies on large quantities

of cheap, easily accessible materials and energy and is reaching its physical

limits. The circular economy is an attractive and viable alternative that

businesses are already exploring today.

The circular economy is one that is restorative and regenerative by design

and aims to keep products, components, and materials at their highest utility

and value at all times, distinguishing between technical and biological cycles.

This new economic model seeks to ultimately decouple global economic

development from finite resource consumption. It enables key policy

objectives such as generating economic growth, creating jobs, and reducing

environmental impacts, including carbon emissions.

A favourable alignment of factors makes the transition possible. Resource-

related challenges to businesses and economies are mounting. An

unprecedented favourable alignment of technological and social factors

enables the transition to the circular economy.

As many circular economy opportunities have a sound underlying

profitability, businesses are driving the shift towards the circular economy.

Yet there are often non-financial barriers limiting further scale-up or holding

back pace. Policymakers therefore can play an important role to help

overcome these barriers and to create the right enabling conditions and,

as appropriate, set direction for a transition to the circular economy. The

toolkit aims to complement existing literature by offering policymakers an

actionable step-by-step methodology to design a strategy to accelerate the

transition towards the circular economy.

The following is an adapted version of Chapter 1.1 of the toolkit report, aimed at providing

a basic understanding of the circular economy for the reader. It covers both ideas

and insights developed in the past and more recent thinking, including the ReSOLVE

framework developed by the Ellen MacArthur Foundation and the McKinsey Center for

Business and the Environment.

From linear to circular – Accelerating a proven concept

CIRCULAR ECONOMY – AN INDUSTRIAL SYSTEM THAT IS RESTORATIVE AND

REGENERATIVE BY DESIGN

The linear ‘take, make, dispose’ model, the dominant economic model of our time, relies

on large quantities of easily accessible resources and energy, and as such is increasingly

unfit for the reality in which it operates. Working towards efficiency – a reduction of

resources and fossil energy consumed per unit of economic output – will not alter the

finite nature of their stocks but can only delay the inevitable. A deeper change of the

operating system is necessary.

The notion of the circular economy has attracted attention in recent years. The concept

is characterised, more than defined, as an economy that is restorative and regenerative

by design and aims to keep products, components, and materials at their highest

utility and value at all times, distinguishing between technical and biological cycles. It

is conceived as a continuous positive development cycle that preserves and enhances

natural capital, optimises resource yields, and minimises system risks by managing finite

stocks and renewable flows. It works effectively at every scale.

The circular economy provides multiple value creation mechanisms that are decoupled

from the consumption of finite resources. Consumption should in a true circular

economy only happen in effective bio-cycles; elsewhere use replaces consumption.

Resources are regenerated in the bio-cycle or recovered and restored in the technical

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • DENMARK CASE STUDY •

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cycle. In the bio-cycle, life processes regenerate disordered materials, despite or without

human intervention. In the technical cycle, circular economy technologies and business

models aim to maximise the value extracted from finite stocks of technical assets and

materials, and thereby address much of the structural waste in industrial sectors. In

the biological cycle, a circular economy encourages flows of biological nutrients to be

managed so as not to exceed the carrying capacity of natural systems, and aims to

enhance the stock of natural capital by creating the conditions for regeneration of, for

example, soil.

In a diverse, vibrant, multi-scale system, restoration increases long-term resilience and

innovation.

The systems emphasis in circular economy matters, as it can create a series

of business and economic opportunities, while generating environmental and social

benefits. The circular economy does not just reduce the systemic harm engendered by a

linear economy; it creates a positive reinforcing development cycle.

The circular economy rests on three key principles, shown in Figure E1.

•

Preserve and enhance natural capital

by controlling finite stocks and balancing

renewable resource flows—for example, replacing fossil fuels with renewable en-

ergy or using the maximum sustainable yield method to preserve fish stocks.

Optimise resource yields

by circulating products, components, and materials at

the highest utility at all times in both technical and biological cycles – for exam-

ple, sharing or looping products and extending product lifetimes.

Foster system effectiveness

by revealing and designing out

negative external-

ities,

such as water, air, soil, and noise pollution; climate change; toxins; conges-

tion; and negative health effects related to resource use.

•

These three principles of the circular economy can be translated into a set of six

business actions: Regenerate, Share, Optimise, Loop, Virtualise, and Exchange – together,

the ReSOLVE framework (see Figure E2). For each action, there are examples of leading

companies that are already implementing them.

Each of the six actions represents a major circular business opportunity that, enabled

by the technology revolution, looks quite different from what it would have 15 years

ago or what it would look like in a framework for growth in the linear economy. In

different ways, these actions all increase the utilisation of physical assets, prolong their

life, and shift resource use from finite to renewable sources. Each action reinforces and

accelerates the performance of the other actions.

The ReSOLVE framework offers businesses and countries a tool for generating

circular strategies and growth initiatives. Many global leaders have built their success

on innovation in just one of these areas. Most industries already have profitable

opportunities in each area.

A short description of these levers, and examples of businesses that are implementing

them, follows below.

REgenerate.

Shift to renewable energy and materials; reclaim, retain, and regenerate

health of ecosystems and return recovered biological resources to the biosphere.

Cumulative new investments in European renewable energy represented USD 650 billion

over the 2004–13 period.

The Savory Institute has influenced the regeneration of more

than 2.5 million hectares of lands worldwide.

John Fullerton, (Capital Institute)

Regenerative Capitalism: How Universal Principles and Patterns Will Shape

Our New Economy,

(2015).

Angus McCrone,

Global Trends in Renewable Energy Investment 2014

(Frankfurt School-UNEP Collaborating

Centre for Climate & Sustainable Energy Finance, the United Nations Environment Programme (UNEP) and

Bloomberg New Energy Finance, 2014).

Figure E1: Circular economy – an industrial system that is restorative and regenerative by design

PRINCIPLE 1

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Preserve and enhance natural capital

by controlling finite stocks and

balancing renewable resource flows

ReSOLVE levers: regenerate, virtualise,

exchange

Regenerate

Renewables flow management

Renewables

Substitute materials

Finite materials

Virtualise

Restore

Stock management

PRINCIPLE 2

Optimise resource

yields by circulating

products, components

and materials in

use at the highest

utility at all times in

both technical and

biological cycles

ReSOLVE levers:

regenerate, share,

optimise, loop

Regeneration

Biosphere

Biogas

Farming/collection

Parts manufacturer

Biochemical

feedstock

Product manufacturer

Recycle

Service provider

Refurbish/

remanufacture

Reuse/redistribute

Cascades

6 2803 0006 9

Maintain/prolong

Consumer

Anaerobic

digestion

Extraction of

biochemical

feedstock

Collection

User

Collection

PRINCIPLE 3

Foster system effectiveness by

revealing and designing out negative

externalities

All ReSOLVE levers

Minimise systematic

leakage and negative

externalities

1 Hunting and fishing

2 Can take both post-harvest and post-consumer waste as an input

SOURCE: Ellen MacArthur Foundation, SUN and McKinsey Center for Business and Environment,

Growth Within: A Circular Economy Vision for a Competitive Europe

(2015).

Drawing from Braungart & McDonough, Cradle to Cradle (C2C).

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Share.

Keep product loop speed low and maximise utilisation of products, by sharing

them among different users (peer-to-peer sharing of privately owned products or public

sharing of a pool of products), by reusing them through their entire technical lifetime

(second hand), and by prolonging their lifetime through maintenance, repair, and design

for durability. BlaBlaCar is one famous car example growing at 200% per annum with 20

million registered users in 19 countries. BMW and Sixt’s Drive Now offer by-the-minute

rental of cars that can be collected and dropped anywhere in a city centre. Lyft matches

passengers needing a lift with drivers of their own cars willing to provide one through a

smartphone app. In housing, Airbnb has more than one million spaces listed in more than

34,000 cities across more than 190 countries.

Optimise.

Increase performance/efficiency of a product; remove waste in production

and supply chain (from sourcing and logistics, to production, use phase, end-of-use

collection etc.); leverage big data, automation, remote sensing and steering. All these

actions are implemented without changes to the actual product or technology. A well-

known illustration of this lever is the lean philosophy made famous by Toyota.

Loop.

Keep components and materials in closed loops and prioritise inner loops. For

finite materials, it means remanufacturing products or components and recycling

materials. Caterpillar, Michelin, Rolls Royce, Philips or Renault are just a few companies

exploring this direction. For renewable materials, it means anaerobic digestion and

extracting biochemicals from organic waste. The Plant is an example of closed loop,

zero-waste food production located in Chicago.

Virtualise.

Dematerialise resource use by delivering utility virtually: directly, e.g. books

or music; or indirectly, e.g. online shopping, autonomous vehicles, virtual offices. Google,

Apple, and most OEMs plan to release driverless cars on the market in the next decade.

Exchange.

Replace old with advanced non-renewable materials, apply new technologies

(e.g. 3D printing or electric engines) and choose new products/services (e.g. multimodal

transport). For instance, in 2014 Chinese company WinSun 3D-printed ten houses, each

about 195 square metres, in 24 hours.

BENEFITS OF THE CIRCULAR ECONOMY

The transition towards the circular economy can bring about the lasting benefits

of a more innovative, resilient and productive economy.

The principal benefits to

moving to the circular economy are as follows:

•

Substantial net material savings and reduced exposure to price volatility:

based on detailed product-level modelling, the Ellen MacArthur Foundation has

estimated that, in the medium-lived complex products industries, the circular

economy represents net material cost savings at an EU level for an ‘advanced’

scenario of up to USD 630 billion annually; in fast-moving consumer goods

(FCMG) at the global level net materials savings could reach USD 700 billion

annually – see Figure E3.

Increased innovation and job creation potential:

circularity as a ‘rethinking

device’ has proved to be a powerful new frame, capable of sparking creative

solutions and stimulating innovation. The effects of a more circular industrial

model on the structure and vitality of labour markets still need to be further

explored, but initial evidence suggests that the impact will be positive (see

below).

Increased resilience in living systems and in the economy:

land degradation

costs an estimated USD 40 billion annually worldwide, without taking into

account the hidden costs of increased fertiliser use, loss of biodiversity and loss

of unique landscapes. Higher land productivity, less waste in the food value chain

•

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and the return of nutrients to the soil will enhance the value of land and soil as

assets. The circular economy, by moving much more biological material through

the anaerobic digestion or composting process and back into the soil, will reduce

the need for replenishment with additional nutrients. This is the principle of

regeneration at work.

The circular economy can be an important lever to achieve key policy objectives

such as generating economic growth, creating jobs, and reducing environmental

impact.

Multiple studies have already demonstrated how the circular economy

can contribute at a national, regional and supranational level to objectives such as

generating economic growth, creating jobs, and reducing environmental impact. While

using different methodologies and performed on different sectoral and geographical

scopes, these studies have consistently demonstrated the positive impacts of the

circular economy: growing GDP by 0.8–7%, adding 0.2–3.0% jobs, and reducing carbon

emissions by 8–70% (see Figure 4).

Figure E2: The economic opportunity of the circular economy

Complex durables with medium

lifespans, EU

USD billion per year, net material cost savings based on

current total input costs per sector

Consumer industries, global

USD billion per year, net material cost savings based on

total material savings from consumer categories

706

630

Other

Motor vehicles

Packaged food

Machinery and equipment

Apparel

Electrical machinery and

apparatus

Other transport

Furniture

Radio, TV and communication

Office machinery and computers

Beverages

Fresh food

Beauty and personal care

Tissue and hygiene

NOTE: Rough estimates from advanced scenario

SOURCE: Towards the Circular Economy 1, 2 by the Ellen MacArthur Foundation

CIRCULAR ECONOMY LITERATURE

The circular economy concept has deep-rooted origins and cannot be traced back to

one single date or author. Its practical applications to modern economic systems and

industrial processes, however, have gained momentum since the late 1970s as a result

of the efforts of a small number of academics, thought-leaders, and businesses. The

general concept has been refined and developed by the following schools of thought,

which all treat the economy as a complex adaptive system and draw on insights from

living systems especially:

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•

Regenerative design (Prof. John T. Lyle);

Performance economy (Prof. Walter Stahel);

Cradle to Cradle (Prof. Michael Braungart and William McDonough);

Industrial ecology (Prof. Roland Clift, Thomas E. Graedel);

Biomimicry (Janine Benyus);

Natural capitalism (Amory Lovins);

Blue Economy (Gunter Pauli).

To learn more about the concepts that lie behind the circular economy framework,

a good starting point is Chapter 2 of

Towards the Circular Economy I

by the Ellen

MacArthur Foundation (2012). For a broader discussion of the three principles and the

ReSOLVE framework, see the report

Growth Within: A Circular Economy Vision for a

Competitive Europe.

For a more general discussion of the interplay between the circular

economy, employment, education, money and finance, public policy and taxation, see

the book

The Circular Economy – A Wealth of Flows

by Ken Webster, Head of Innovation

at the Ellen MacArthur Foundation.

Ellen MacArthur Foundation, Stiftungsfonds für Umweltökonomie und Nachhaltigkeit (SUN) and McKinsey

Center for Business and Environment,

Growth Within: A Circular Economy Vision for a Competitive Europe

(2015).

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Figure E3: Estimated potential contribution of the circular economy to economic growth, job

creation and reduction of greenhouse gas emissions

GDP IMPACT

WHOLE ECONOMY

(MATERIALS AND

ENERGY)

WHOLE ECONOMY

(MATERIAL FOCUS)

SELECTED SECTORS

(MATERIAL FOCUS)

NET EMPLOYMENT

6.7

N/A

3.0

2.0

1.0

1.4

0.6

0.8

1.0

N/A

0.3

0.8

N/A

0.8

N/A

0.7

0.2

N/A

0.3

1 2030 scenario.

2 Full scenario; GDP impact equal to trade balance effect.

3 ‘Material efficiency scenario’; GDP impact equal to trade balance effect.

4 Net job creation from increased reuse, remanufacturing, recycling, bio-refining and servitisation.

5 Built environment.

6 Forestry, pulp and paper, machinery, equipment and electronics, built environment, food waste, P2P sharing.

7 Remanufacturing industry.

8 Ontario; Waste management and recycling industry.

9 Waste management and recycling industry; compiled from several reports, see http://ec.europa.eu/environment/circular-

economy/index_en.htm, http://ec.europa.eu/smart-regulation/impact/planned_ia/docs/2014_env_005_waste_review_en.pdf

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GHG EMISSION REDUCTION

SOURCE

25.0

Ellen MacArthur Foundation, SUN

and McKinsey Center for Business

and Environment

70.0

Club of Rome

10.0

Club of Rome

8.0

TNO

N/A

Cambridge Econometrics, Biointelli-

gence service

N/A

WRAP

N/A

EC, TNO

N/A

SITRA

N/A

Zero Waste Scotland

N/A

Conference Board of Canada

4.5

Zero Waste Europe

SOURCE: NL: TNO, Opportunities for a circular economy in the Netherlands (2013); EU (1): Ellen MacArthur Foundation, SUN

and McKinsey Center for Business and Environment, Growth Within: A Circular Economy Vision for a Competitive Europe (2015);

EU (2): Cambridge Econometrics / Biointelligence Service / EC, Study on modelling of the economic and environmental impacts

of raw material consumption (2014); SWE: Club of Rome, The circular economy and benefits for Society (2015); UK: WRAP,

Employment and the circular economy: job creation in a more resource efficient Britain (2014); FIN: SITRA, Assessing circular

economy potential for Finland (2014); EU, built environment: TNO / EC, Assessment of scenarios and options towards a

resource efficient Europe: an analysis for the European built environment (2013); SCO: Zero Waste Scotland, Circular economy

evidence building programme: Remanufacturing study (2015); EU, waste management: Zero Waste Europe, EU circular economy

package: Questioning the reasons for withdrawal (2015); CAN: Conference Board of Canada, Opportunities for Ontario’s Waste:

Economic Impacts of Waste Diversion in North America (2014)

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ABOUT THE ELLEN MACARTHUR FOUNDATION

The Ellen MacArthur Foundation was established in 2010 with the aim of accelerating

the transition to the circular economy. Since its creation the charity has emerged as

a global thought leader, establishing circular economy on the agenda of decision

makers across business, government and academia. The charity’s work focuses on

four interlinking areas:

EDUCATION: INSPIRING LEARNERS TO RE-THINK THE FUTURE THROUGH THE

CIRCULAR ECONOMY FRAMEWORK

We are creating a global teaching and learning platform built around the circular

economy framework, working in both formal and informal education. With an

emphasis on online learning, the Foundation provides cutting edge insights and

content to support circular economy education and the systems thinking required to

accelerate a transition.

BUSINESS AND GOVERNMENT: CATALYSING CIRCULAR INNOVATION AND

CREATING THE CONDITIONS FOR IT TO FLOURISH

Since our launch, we’ve emphasised the real-world relevance of our activities and

understand that business innovation sits at the heart of any transition to the circular

economy. The Foundation works with Global Partners (Cisco, Google, Kingfisher,

Philips, Renault, and Unilever) to develop circular business initiatives and to address

challenges to implementing them.

INSIGHT AND ANALYSIS: PROVIDING ROBUST EVIDENCE ABOUT THE BENEFITS

OF THE TRANSITION

We work to quantify the economic potential of the circular model and develop

approaches for capturing this value. Our insight and analysis feeds into a growing

body of economic reports highlighting the rationale for an accelerated transition

towards the circular economy, and exploring the potential benefits across different

stakeholders and sectors.

COMMUNICATIONS: ENGAGING A GLOBAL AUDIENCE AROUND THE CIRCULAR

ECONOMY

The Foundation communicates cutting edge ideas and insight t§hrough its circular

economy research, reports, case studies and books disseminated through our

publications arm. We utilise new and relevant digital media to reach audiences who

can accelerate the transition, globally. In addition, we aggregate, curate, and make

knowledge accessible through Circulate, an online location dedicated to providing up

to date news and unique insight on the circular economy and related subjects.

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Published November 2015

Charity Registration No. 1130306 • OSCR registration no. SC043120 • EU transparency register N°389996116741-55