Shifting The UAE Towards A Circular Economy
How a circular economy would yield enormous environmental, social, and economic benefits to the UAE and its neighboring countries.
Right now, the world operates in a “linear economy” model that is not sustainable. Every second, the equivalent of one garbage truck of textiles is landfilled or burned, and the equivalent of six garbage trucks of edible food is wasted globally. If we continue on this path, by 2050, global demand for resources will almost triple to 130 billion tons annually, which would overuse the earth’s capacity by more than 400%.
Since the UAE is currently focusing on creating and maintaining a sustainable environment and infrastructure which is a key pillar in the National Agenda in line with Vision 2021, one of the highly recommended solutions that can drive the nation towards having social and economic sustainability is through aiming towards achieving a circular economy.
A circular economy would yield enormous environmental, social, and economic benefits across the world. One study estimates the benefits of a circular economy would be US$7 billion in new revenue opportunities from recycling for cities and recyclers, 250–350 million metric tons less carbon dioxide (CO2) in the air, 80 million tons of material recovered from residential single-stream recycling and 30 million more households with access to convenient recycling.
How can we make the circular economy a reality?
1. Redefine waste A linear economy leaves a long trail of waste, starting with byproducts and emissions from the manufacturing process, piling on with single-use packaging and ending with often underutilized, finished products discarded in landfills.
A circular economy strategy seeks to eliminate waste from the start and create “closed loops” that keep materials within the system. Such a closed-loop system would reuse byproducts as future inputs and run on renewable energy and sources from recycled materials. The shorter or tighter a loop, the better, because it typically would yield the most savings by reducing costs, such as labor and energy.
Waste is not just about pollution and plastic packaging. Underutilization -from cars to clothing- is another waste in the current linear model. For example, the average European car has five seats but carries on average less than two people per trip- and is parked 92% of the time.
In a circular economy, it’s expected that many industries will move from an asset ownership to a service/sharing model. With automobiles, for example, the shift to ride sharing (already underway in some large cities) could significantly increase the efficient use of resources (fewer cars per capita need to be produced, saving raw materials and fuel) while reducing pollution.
2. Retain value Extending the useful life of products also combats underutilization. To that end, there is a push to have producers and consumers:
- Repair and refurbish - The highest value is created when we find ways to maintain products, rather than quickly discard them or even recycle them.
- Reuse - Experts see product reuse and redistribution as the next best option to maintaining existing products
- Recycle - Investment in innovative technologies and processes is helping many companies incorporate recycling and recycled materials into their production
3. Invest in a circular economy The challenges of transitioning from a linear economy to a circular one are numerous. But so, too, are the innovative companies and entrepreneurs rising to meet this challenge with new technologies, products and business models. Opportunities to invest in a circular economy are growing rapidly as more companies, governments and consumers are motivated to find new circular economy business models, policies and consumption patterns.
If you’re interested in equities, you can invest in funds targeting environmental solutions, or in investment strategies that take sustainability or environmental, social and governance (ESG) factors into consideration. In fixed income, you can invest in municipal bonds that finance infrastructure supporting water, recycling and waste, as well as green bonds that support sustainability-related projects.
In the private sector, venture capital helps fund early-stage companies that are developing innovative technologies or services to advance the principles of a circular economy. Private equity funding is critical as companies mature from early-stage entrepreneurship and need to scale their products or service offering.
Cities occupy only 1% of land on earth but account for 75% of natural resource consumption, 50% of global waste, and 60% to 80% of greenhouse emissions. By 2050, more than 70% of people will be living in cities.
Some ways cities in the region could improve their efficiency and quality of life would be to:
- Reduce the need for vehicles (and shift to electric-powered ones) by improving public transportation and bicycle infrastructure.
- Require that buildings be designed to make more efficient use of resources and energy, including the possibility that buildings even produce energy. Industrial and modular processes could lower construction costs by 50%, compared with traditional onsite construction. Passive houses, which are purposely designed to significantly minimize heating and cooling needs, could reduce energy consumption by 90%.
- Power themselves with renewable energy, including bioenergy from recycled food and other organic urban waste. A recent study on residual organic waste in Amsterdam found that using bio-refineries, waste separation and return logistics could lead to added value of €150 million, as well as 900,000 tons of material savings and a reduction of 600,000 tons in CO2 emissions annually.
- Improve water conservation and treatment systems. Recovering energy in the wastewater sector can actually offset the energy required for treatment.
Not only would the abovementioned help the UAE become one of the pioneers in supporting the transformation towards a circular economy globally, this global initiative provides innovative and advanced technology-based startups with an exceptional opportunity to make global connections, to showcase their innovations and products and to form partnerships and cooperation with leading international companies that are participating in this initiative, while simultaneously achieving social and economic sustainability that benefits everyone within the society.
Steven Rees is the Head of Investments for the Middle East and North Africa at J.P. Morgan Private Bank.