Green Circular Economy: A New Paradigm for Sustainable Development (Circular Economy and Sustainability) 3031403037, 9783031403033

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Circular Economy and Sustainability

Pardeep Singh Anamika Yadav Indranil Chowdhury Ravindra Pratap Singh   Editors

Green Circular Economy

A New Paradigm for Sustainable Development

Circular Economy and Sustainability Series Editors Alexandros Stefanakis, Technical University of Crete, Chania, Greece Ioannis Nikolaou, Democritus University of Thrace, Xanthi, Greece Editorial Board Members Julian Kirchherr, Utrecht University, Utrecht, The Netherlands Dimitrios Komilis, Democritus University of Thrace, Xanthi, Greece Shu Yuan (Sean) Pan, National Taiwan University, Taipei, Taiwan Roberta Salomone, University of Messina, Messina, Italy

This book series aims at exploring the rising field of Circular Economy (CE) which is rapidly gaining interest and merit from scholars, decision makers and practitioners as the global economic model to decouple economic growth and development from the consumption of finite natural resources. This field suggests that global sustainability can be achieved by adopting a set of CE principles and strategies such as design out waste, systems thinking, adoption of nature-based approaches, shift to renewable energy and materials, reclaim, retain, and restore the health of ecosystems, return recovered biological resources to the biosphere, remanufacture products or components, among others. However, the increasing complexity of sustainability challenges has made traditional engineering, business models, economics and existing social approaches unable to successfully adopt such principles and strategies. In fact, the CE field is often viewed as a simple evolution of the concept of sustainability or as a revisiting of an old discussion on recycling and reuse of waste materials. However, a modern perception of CE at different levels (micro, meso, and macro) indicates that CE is rather a systemic tool to achieve sustainability and a new eco-effective approach of returning and maintaining waste in the production processes by closing the loop of materials. In this frame, CE and sustainability can be seen as a multidimensional concept based on a variety of scientific disciplines (e.g., engineering, economics, environmental sciences, social sciences). Nevertheless, the interconnections and synergies among the scientific disciplines have been rarely and not in deep investigated. One significant goal of the book series is to study and highlight the growing theoretical links of CE and sustainability at different scales and levels, to investigate the synergies between the two concepts and to analyze and present its realization through strategies, policies, business models, entrepreneurship, financial instruments and technologies. Thus, the book series provides a new platform for CE and sustainability research and case studies and relevant scientific discussion towards new system-wide solutions. Specific topics that fall within the scope of the series include, but are not limited to, studies that investigate the systemic, integrated approach of CE and sustainability across different levels and its expression and realization in different disciplines and fields such as business models, economics, consumer services and behaviour, the Internet of Things, product design, sustainable consumption & production, bio-economy, environmental accounting, industrial ecology, industrial symbiosis, resource recovery, ecosystem services, circular water economy, circular cities, nature-based solutions, waste management, renewable energy, circular materials, life cycle assessment, strong sustainability, environmental education, among others.

Pardeep Singh • Anamika Yadav • Indranil Chowdhury • Ravindra Pratap Singh Editors

Green Circular Economy A New Paradigm for Sustainable Development

Editors Pardeep Singh Department of Environmental Studies PGDAV College, University of Delhi New Dehli, India

Anamika Yadav Centre for Science and Environment New Delhi, India

Indranil Chowdhury Department of Economics PGDAV College, University of Delhi New Delhi, India

Ravindra Pratap Singh Central Public Works Department (CPWD) Government of India New Delhi, India

ISSN 2731-5509 ISSN 2731-5517 (electronic) Circular Economy and Sustainability ISBN 978-3-031-40303-3 ISBN 978-3-031-40304-0 (eBook) https://doi.org/10.1007/978-3-031-40304-0 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Paper in this product is recyclable.

Contents

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Circular Economy Aspirations: Three Strategies in Search of a Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Anil Hira and Ronaldo Au-Yeung

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The Environment Value System and Green Circular Economy . . . . . . . Lledó Castellet-Viciano, Vicent Hernández-Chover, and Francesc Hernández-Sancho

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Circular Economy and Sustainable Production and Consumption . . . Arzoo Shahzabeen, Annesha Ghosh, Bhanu Pandey, and Sameer Shekhar

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Green Human Resource Management and Circular Economy. . . . . . . . Abhay Punia, Ravindra Pratap Singh, and Nalini Singh Chauhan

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Economies of Scale in Green Circular Economies . . . . . . . . . . . . . . . . . . . . . . Vicent Hernández-Chover, Lledó Castellet-Viciano, and Francesc Hernández-Sancho

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Temporal Study of the Interrelationship Between Economics and Environmental Degradation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 Niloy Sarkar, Amit Singh, Pankaj Kumar, and Mahima Kaushik

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Cities as Emerging Centers in a Circular Economy: An Assessment of Indian Cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Anindita Roy Saha and Garima Gupta

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Trade and Management of Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 Shouvik Chakraborty

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Contents

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Carbon Emission from Liquid Fuel and Pollution Haven Hypothesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Badri Narayanan Gopalakrishnan and Apra Sinha

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The Development Practice and Reform Optimization Path of Green Circular Economy in Erhai Lake of China . . . . . . . . . . . . . . . . . . . 201 Tang Xuebing, Cai Jun, and Zhang Shoulei

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Recent Trends in Biohydrogen Economy: Challenges and Future Perspectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 Ekta Mishra, Shruti Kapse, and Shilpi Jain

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Strategic Planning and Business Sustainability in Agribusiness: Analysis in a Model Farm in Brazil . . . . . . . . . . . . . . . . . . . 235 Najara Escarião Agripino, Kettrin Farias Bem Maracajá, and Janine Vicente Dias

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Application of Industrial Ecology Principles In and Around Cement Industry in NCR of Delhi: Potentials, Problems and Possibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 Anuja Malhotra and Nandan Nawn

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Challenges and Recommendations for a Green Circular Economy. . . 283 Lledó Castellet-Viciano, Águeda Bellver-Domingo, Vicent Hernández-Chover, and Francesc Hernández-Sancho

Chapter 1

Circular Economy Aspirations: Three Strategies in Search of a Direction Anil Hira and Ronaldo Au-Yeung

Abstract The “circular economy” is a concept embraced by policymakers in the European Union and China. It represents a recognition of growing global environmental challenges, including climate change, and the externalities costs of waste. In this chapter, we compare the nascent policy efforts to define and operationalize the circular economy in the EU, China, and the United States (US), the major global economies. We begin by comparing how each entity defines circular economy, finding widely varying and ambiguous concepts. We then turn to macro-level or economy-wide policies. Here we find notable efforts to spread principles. In the EU, such efforts are taking the form of new global standards and regulations, while in China they are in the form of goals for industrial waste reduction at the provincial level. The US is notable for its lack of action at the national level. The real activity in the US around circular economy transformation appears to be happening at the meso- or industry-level. Here we see a haphazard effort to create new supply chains and manage waste streams, parallel with an effort around constructing eco-industrial parks, in an attempt to share energy and reuse waste. We find such efforts to be haphazard and disorganized. We close with some reflections around the progress needed for the next steps to create a circular economy, including conceptual and measurement clarification; developing viable business and economic models that, together with regulation, incentivize businesses to change the production models; and spreading circular concepts to ensure adequate societal support to accept the consumption changes required. Keywords Circular economy · US · China · European Union · Waste · Supply chains

A. Hira () · R. Au-Yeung Department of Political Science, Simon Fraser University, Burnaby, BC, Canada e-mail: [email protected]; [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Singh et al. (eds.), Green Circular Economy, Circular Economy and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_1

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1.1 Introduction Current (linear) production and consumption models generate enormous amounts of waste across the globe, suggesting the need to think through new, more circular models. While there are few good global measurements, the EU has funded a CREEA (Compiling and Refining Environmental and Economic Accounts) project including the EXIOBASE that seeks to estimate overall waste. Using these data, Tisserant et al. (2017) estimate that households in the North generate 1–2 tons of solid waste per year. In 2007, total global waste was estimated to reach as much as 3.2 gigatons (1 billion metric tons or Gt), of which just 1 Gt was recycled or reused, 0.7 was incinerated, gasified, composted, or used as aggregates, and 1.5 Gt was landfilled. While plastics have been gaining the most attention due to their persistence in the environment, the main sources in terms of volume are construction, waste metal, inert material, and paper/wood (Pacini and Golbeck 2020). Haas et al. (2015) estimate that just 37% of materials are currently circular, mostly including recycling and reuse as energy sources, though they note even this estimate is likely overblown. A more recent estimate is that only 15% of solid waste is recycled, with the rest going to landfills (Pietzsch et al. 2017). As a result of these stark facts, a general movement toward sustainable materials use and reduction has taken shape. One central focus of this movement is conceptualized in the “circular economy” (CE) concept. This chapter focuses on comparing the policies behind such transformations, across the three largest global economies of the European Union (EU), China, and the United States (US). Our attention is on plans around the material flows reflected in the transition to a CE as a next step beyond climate change adjustments, which are focused purely on energy. No one knows yet what a true zero waste economy looks like or how to balance environmental with economic and social needs. We examine the CE as a “club good” for global policy practice in which the largest economic entities need to lead the way. So far, the US has not embraced the CE in policy, beyond acknowledging the principle. By contrast, the more robust experiments in CE policies in the EU and China are important as they serve as prototypes for future international rules and norms around sustainability. In fact, the EU has been active in promoting CE projects globally, including dialogues and a recent memorandum with China (Kern et al. 2020). Suárez-Eiroa et al. (2019) point out that there are three relevant levels of analysis for the CE. At the micro-level, individual companies make decisions about material use and disposal. At the meso-level, they refer to inter-firm networks, such as industrial parks seeking to develop industrial symbiosis or coordination and sharing of materials, energy, and waste. The macro-level refers to social and policy approaches to the CE. This chapter focuses on policies at the macro- and meso-level in the three largest global economies. A different level of analysis and focus would be needed to study the micro-level.

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1.2 What Does the Circular Economy Mean? Boulding’s classic 1966 article was the precursor for the circular economy. In the article, the economist referred to closed and open economy systems, characterizing the linear economy as “the cowboy economy” of a new frontier, while the CE was more like a “spaceship economy”, recognizing finite natural resources and the importance of waste management. The popularization of the CE concept is often traced back to Pearce and Turner’s 1989 work on natural resource and environmental economics. They helped to introduce the idea of a “bioeconomy”, whereby the natural resource endowments of the Earth are part of a system that not only provides useful products but also the resources for all types of living organisms. Thus, the efficient use of resources has consequences well beyond their initial use, including the costs of disposition of waste materials. The problem is how to cost out waste products appropriately, which are not reflected in the initial production costs. This links with the long-standing notions of “industrial ecology”, the bioeconomy, and ecosystems, in emphasizing the need to reuse industrial waste products and seeing the production process as affecting larger natural systems. It also links with the more recent ideas around a “green economy” that emphasizes shifts to lower carbon emissions. Becque et al. (2016, 5) offer perhaps the most comprehensive definition of the circular economy, stating that it rests on three principles: (a) To preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows (b) To optimize resource yields by circulating products, components, and materials at the highest utility at all times (c) To foster system effectiveness by designing out negative externalities. Implicit within this is the use of renewable energy as well as using energy in the most productive way. Ghisellini et al. (2016, 11) suggest that the CE decouples environmental pressure from economic growth. They state that “CE implies the adoption of cleaner production patterns at company level, an increase of producers and consumers responsibility and awareness, the use of renewable technologies and materials (wherever possible) as well as the adoption of suitable, clear and stable policies and tools”. Perhaps, what is equally important is the gradually increasing rejection of previous production and consumption patterns, reflecting overall “resource use inefficiency”. One of the leading CE proponents, the Ellen MacArthur Foundation based in the UK, offers three basic principles on their website: eliminate waste and pollution; circulate products and materials at their highest values; and regenerate waste. While these principles have been widely embraced, they do not easily translate into clear policy prescriptions or actions. The fact is that there is a great deal of contestation around the CE. Kirchherr et al. (2017) find 114 definitions for CE, which range from recycling to sustainable

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development. Reike et al. (2018) suggest that the concept has evolved over roughly three phases. The first phase from the 1970s to 1990s emphasized dealing with waste reduction and management, such as “polluter pays” principles and waste treatment (“end of pipe”) policies gaining traction. In the second phase, from 1990 to 2010, there was more emphasis on integrating preventive measures, along with the ideas around the harmony between business and environmental objectives. Businesses can gain in terms of both efficiency and reputation from proactive environmental measures. They identify this as the timeframe when the phrase “circular economy” started to gain roots. From 2010, the third phase reflected the increasing concerns around population growth, resource depletion, and climate change. This is the period when the three Rs (reuse, recycling, and reduction (of use)) gained traction. Korhonen et al. (2018a), in turn, suggest the main principle for the CE should be that “the material flows released from economy to nature should be in a form in which nature can utilize them in its own functions”. They provide the examples of using biomass as fertilizers to expand forests that can act as carbon sinks, or using anaerobic digesters to create fertilizers out of biowastes. However, they also acknowledge even such shifts may not be enough to manage natural resources if global consumption, spurred by population growth, continues to increase. In a similar vein, Korhonen et al. (2018b) usefully posit that there are four key elements to achieve a true circular economy: 1. Industrial ecology, focused on material and energy flows of nature. 2. Industrial symbiosis, to focus on organizing networks of business and consumer actors. 3. Cradle-to-cradle design to consider the entire life cycle of a product. 4. The sharing economy to reduce the need for individual ownership. In short, the CE principles seek to shift society beyond climate change emissions reduction, recycling toward a zero waste society, and a completely closed-circle resource approach to production. This requires efforts well beyond waste reduction and disposal to include a wide range of areas for attention, from eco-design to energy, packaging, and production process efficiency to re-use, remanufacturing, and repurposing. Even farther along lie the tasks of cleaning up legacy waste, including ubiquitous plastic.

1.2.1 Working Definitions of the CE in the US, EU, and China The US does not have federal legislation regarding establishing a CE, though a number of states and municipalities have promoted the concept, most notably San Francisco, with its zero waste program. US government agencies ranging from the USAID to NIST promote the CE concept. However, they are generally limited in the scope of their CE activities. For example, the EPA has a short website defining a CE; however, its webpage on strategy only discusses recycling. USAID (n.d.) promotes circularity via renewable energy. NIST (n.d.) mentions the possibilities

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for supporting measurement of waste (see bibliography for link). In sum, the US is far behind the EU and China in terms of accepting and promoting a CE. Lacking national-level policies, we discuss US CE activities in the meso-section below. The EU Action Plan for the Circular Economy (2015) offers the following definition, an economy “where the value of products, materials and resources is maintained ( . . . ) for as long as possible and the generation of waste is minimised” in order to achieve “a sustainable, low carbon, resource efficient and competitive economy”. China’s Circular Economy Promotion Law (2008, art. 2) defines the CE as “general reduction, reuse, and resource utilization [ziyuan hua] activities in the process of production, distribution, and consumption”. It refers to resource utilization as “the direct use of waste as raw materials or the recycling of waste”, which has a broader denotation than the traditional concept of recycling. The article further delineates reduction as activities that “reduce resource consumption and waste generation during production, distribution, and consumption”. For the purpose of the law, reuse is defined as “the use of waste as a product directly or after repair, refurbishment, and remanufacturing, or the use of all or part of the waste as part of other products”. Together, resource utilization, reuse, and reduction (of use) form the Chinese version of the three Rs that guide Beijing’s operationalization of the CE concept. In its Guidelines for Compiling Circular Economy Development Plans, the National Development and Reform Commission (NDRC 2010, 1) adds another layer to the Chinese definition of the CE concept, asserting that “circular economy is a fundamental change to the traditional growth model of ‘mass production, mass consumption, and mass waste’ and is an economic development model that maximizes resource conservation and environmental protection”. It is, however, worth noting that the emphasis of China’s CE definition has shifted over time. While the Circular Economy Promotion Law (2008, art.4), the Guidelines for Compiling Circular Economy Development Plans (NDRC 2010, 3), the Notice on Printing and Distributing the National Environmental Protection 12th Five-Year Plan (State Council 2011), and the Announcements on Circular Economy Development Strategy and Near-Term Action Plan (State Council, 2013) all prioritized prevention or reduction of use in the first place, the priority has shifted since China’s 13th Five-Year Plan (2016–2020). In fact, both the Mediumand Long-Term Plan for the Construction of Renewable Resources and Recycling Systems (2015–2020) (Ministry of Commerce et al. 2015) and the 14th Five-Year Plan on Circular Economy (NDRC 2021, 3) altered the course, with the former prioritizing recycling and sorting and the latter emphasizing reuse and resource utilization. In short, paralleling the lack of agreement around CE among scholars (Kirchherr et al. 2017), each country in our study interprets the term differently, leading to various guiding principles. Furthermore, even within the same country, the concept can be altered over time, as we have seen in the case of China.

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1.3 The CE from a Policy Perspective Reike et al. (2018) suggest that there have been three general historical periods in circular economy strategies in the US and EU, an approach that resonates with other scholars (Blomsma and Brennan 2017). • From the 1970s to 1990s (CE 1.0), the focus was on dealing with waste. During this time, waste management, including “polluter pays” and “end-ofpipe” approaches predominated, with landfills, incineration, and later, recycling being the primary methods of dealing with waste. In this period, business was a passive partner. • In the second phase (CE 2.0), in the wake of the 1987 Brundtland Report, there was a greater emphasis on preventative measures, seeking to enlist businesses to improve efficiency and their general reputation. Concepts such as industrial ecology and life cycle thinking gained traction, as the perspective shifted from production processes to include their effects on ecosystems. The authors see the seeds for the spread of the idea around the circular or closed-loop economy starting to spread during this period. • From 2010, CE 3.0, according to the authors, the limitations on growth including population pressures and resource depletion were becoming increasingly accepted. There was a grudging acceptance that consumption has limits. Becque et al. (2016, 5) suggest five main areas for CE policy interventions: public procurement; collaboration platforms/sharing economy; providing technical support to businesses; fiscal policy, particularly around taxes; education, information and awareness; and regulation, particularly around materials. They further note that the transition to the CE will inflict pain upon linear-dependent businesses even while growing new lines, something most authors ignore. There are a number of barriers to the CE: cultural, including a lack of awareness and motivation at the company and consumer levels; regulatory, with a lack of policies, including procurement and appropriate taxation; market, reflecting a lack of successful business models around CE; and technological, including an inability to design viable remanufacturing processes (Kircherr et al. 2018). To these, we can add a lack of data and information throughout the factors. In practice, global CE policy activities are more focused more on recycling than reuse. Ranta et al. (2018) suggest that there is a lack of institutional support for the CE. They examine three dimensions of institutionality: regulative; normative, including business certification and accreditation systems; and culture-cognitive, reflecting shared beliefs and values, and find each lacking in support. As examples, there is inadequate regulation regarding disposal of materials or incentivizing reuse. There is inadequate transparency or certification systems to spur businesses who want to brand their products as eco-friendly. Moreover, customers generally prefer new products. Where they see corporate initiatives, pressures are haphazard and inconsistent. For example, Huawei felt pressure from private stakeholders and thus began an e-cycling program. Dell’s recycling program was spurred by California’s

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law that requires it to arrange for recycling end-of-life products and by perceived cost savings from recycling.

1.4 EU’s CE Policy Recognizing the unique nature of the EU as a federation of nation states, we choose to limit our observations here to the EU level of strategy. Each nation state has their own CE strategy that is beyond the scope of this work. Perhaps more concerning is the high degree of differentiation across EU nations (Mazur-Wierzbicka 2021). Under the Europe 2020 Strategy (European Commission 2011), the EU introduced the idea of promoting resource efficiency that contained circular economy concepts. The EU 2015 Action Plan for the Circular Economy suggests a number of avenues for progress, including eco-design; product labeling; government procurement; waste management; improving standards for secondary materials; innovation, investment and R&D; and monitoring progress. Across these concepts, the literature signals the importance of four main documents: the Circular Economy Package (2015), which lays down the conceptual groundwork; the Waste Directive; the EcoDesign Directive; and the REACH (Registration, Evaluation, Authorization, and Restriction of Chemicals) regulation (EC 1907/2006) which lays out regulations for the use of chemicals. Domenech and Bahn-Walkowiak (2019) describe additional documents that build upon the CE momentum. These include the Resource Efficiency Roadmap (2011), the Circular Economy Action Plan (COM 2020 98), and the Europe 2020 Strategy. They describe the main policy tools as water regulation, including the polluter pays principles, extended producer responsibility, and accepting the concepts of waste hierarchy and life cycle analysis. Furthermore, the Eco-Design Directive seeks to improve energy efficiency. The authors’ main criticism is the reluctance in adequately using the tax policy to reflect true resource costs. They also point to the inconsistencies across national-level policies, particularly in Central and Eastern Europe. The Circular Economy Action Plan mentions the development of sector-specific initiatives in electronics and IT; batteries and vehicles; packaging; plastics; textiles; construction and buildings; and food, water, and nutrients. Wilts et al. (2016) describe three CE policy instruments from EU policies that can be generalized. The first is setting up waste/recycling targets. The second is creating mandatory design standards for recycling, reuse, and repairability. The third is placing responsibility upon individual producers, which would mean that producers would bear the costs for the entire life cycle of the product. They note that while attractive, each concept is challenging to put into practice because of the lack of ready indicators. Joltreau (2022) notes extended producer responsibility (EPR) as an important EU initiative. EPR forces producers to finance the recycling and waste management costs of the products they create. The most common policy instrument for EPR is the advance disposal fee, which is charged at the point of sale. There is also a

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responsibility to create a producer responsibility organization (PRO) that can take on the collecting, sorting, recycling, and waste activities. The author points out the EPR regulations vary considerably across member states in the EU. Den Hollander et al. (2017) point to the “waste hierarchy”, a concept arising in the European Waste Framework Directive of 2009 that sets out a priority order for managing waste. The priorities reflect CE notions, with preventing waste as the preferred option, reuse, recycling, and other recovery as an intermediate one, and disposal as a last resort. They note the limitations of this approach in that it does not consider dematerialization (reduction of inputs) or decoupling (reduction of consumption), as well as the idea that there is a one way flow up the hierarchy for improvement. The EU also introduced the Waste Frame Directive that prohibits the shipment of hazardous material outside of the OECD area, in response to concerns about dumping waste in the South. Moreover, the EU has a Landfill Tax to try to incentivize reuse (Gregson et al. 2015, 227). The EU waste hierarchy is a central conceptual framework for the CE. It dates back to 2008, and sets up the following in order of priority: prevention; preparing for re-use; recycling; recovery; and finally disposal (EC n.d.-a, b, c, d, e). Maitre-Ekern (2021) points out that EU waste policy is focused primarily on prevention, such as through extended producer responsibility (EPR), and reducing impact, to the neglect of eco-design and re-use and recycling through secondary market development. There is an issue, for example, around the lack of repair parts and capacity for re-use. Moreover, information about the waste profile of products and secondary products are not readily available to consumers. She calls the need transition as one from EPR to PPR (pre-market producer responsibility). Eco-design is more of a concept than a practice so far. The 2005/32/EC Directive of the EU required companies who produce certain energy-using products to integrate environmental factors into their design. The EC website offers general language resolutions around eco standards for a number of products ranging from computers to dishwashers to vacuum cleaners. There is also a suggestion of the possibility of mandatory labeling of energy use to inform consumers (EC, Sustainable product). However, companies so far lack a clear methodology for how to accomplish the redesign of consumer items to make them more circular (Grote et al. 2007). In terms of the REACH regulation, the 2006 EU regulation seeks to embrace the precautionary principle of industry ensuring the safety of chemical materials before authorities register and license them. The other goal was to move toward regulatory harmonization across member states, which might, in turn, spur innovation (Williams et al. 2009). Alaranta and Turunen (2021) suggest that the distinction between waste and chemicals regulation should be eliminated, merging REACH with the waste directive. The main issues are that chemicals are no longer traced once they become part of a product, and certainly not as part of a waste stream. Furthermore, new design principles fail to adequately consider legacy waste. Botos et al. (2019) point out that the US has taken a very different approach to hazardous chemicals from the EU REACH approach in rejecting the precautionary

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principle. The main federal law is the Toxic Substances Control Act (TSCA) of 1976. Rather the approach is more common law, allowed for legal action against chemical-induced harm rather than pushing industry to prove safety. As in the EU there is likewise a sub-federal, state, level of safety regulation. If a chemical is deemed risky based on evidence, the Environmental Protection Agency (EPA) can limit or ban its use, after requiring testing. Evaluations at the supra-national level are so far limited, reflecting the recency of the strategy. Friant et al. (2021a, b), reflecting others, conclude that EU “words” exceed their “actions”, with holistic language unmatched by policies, which focus primarily on “end of pipe” solutions, rather than the whole production process. They are concerned about the lack of mandatory targets; the lack of attention to developing secondary reuse markets and eco-design; inadequate fiscal incentives; and a modicum of awareness raising. Based on a series of stakeholder interviews, Kirchherr et al. (2018) find that the primary barriers in the EU to CE transition are in a lack of market incentives and corporate culture. They find that EU regulations have not focused on these key factors. Calisto Friant et al. (2021a, b) assess EU policies more harshly, suggesting that they are rhetorical, focusing in practice more on increasing recycling and waste management, without undertaking the fundamental shifts needed to develop a CE. In fact, examining the EC Resource Efficiency Scorecard (2016), the most recent of which is 2015, reveals a reliance on very general indicators, such as overall amounts of resources (including land, water, and carbon), are used per output (GDP). While these are a good starting point, they are just that.

1.5 Chinese CE Policies China is a late mover in developing the circularity of its economy. Nonetheless, the country has thus far been highly successful in CE development. According to the National Bureau of Statistics (2015), Beijing’s CE index increased by 37.6% between 2005 and 2013, with improvements in resource intensity, waste intensity, recycling, and contaminant disposal rates of 34.7%, 46.5%, 8.2%, and 74.6%, respectively. Furthermore, despite subnational-level regional differences (Fan and Fang 2020), studies have found a strong trend of decoupling economic growth from mass use of natural resources (Bleischwitz et al. 2022; Matthews and Tan 2011), as well as improvements in end-of-life waste recycling (Wang et al. 2020), utilization of plastic wastes (Jiang et al. 2020), and overall circularity (Wang et al. 2020). As in China’s climate change adjustments (Hira and Au-Yeung 2023), the driving force behind Beijing’s CE development can be attributed to its internalization and full realization of the negative externalities related to the linear economic growth model of mass production, mass consumption, and mass waste. In official documents, state agencies explicitly cite resource depletion and environmental concerns due to rapid industrialization and urbanization (State Council 2005, 2013;

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NDRC 2010) as well as supply chain and resource security issues owing to overreliance on foreign resources (NDRC 2021) as the reasons why the People’s Republic is in an urgent need of developing a circular economic growth model. In the view of the central government, the CE is the “fundamental measure necessary to eliminate China’s environmental and resource constraints” (NDRC 2010, 1) and the solution to “the conflict between economic growth and resources and the environment” (State Council 2013). To resolve issues such as resource depletion, seen in the linear economic development model, Beijing has made the CE a national objective since 2005 with the publication of Opinions on Accelerating the Development of Circular Economy (State Council 2005), following a top-down and central governmentdriven approach to policy implementation (Bleischwitz et al. 2022; Matthews and Tan 2016). The Circular Economy Promotion Law (2008) makes “ . . . subnational governments above the county level . . . responsible for organizing, coordinating, and regulating affairs in relation to circular economy promotion in their respective jurisdictions” (art. 5) and requires higher governments to “make regular assessments of the work of the lower authorities . . . against major indicators” (art. 14). Together, these provisions form the basis for the “target responsibility” enforcement model wherein the career advancement of subnational officials is contingent upon their jurisdictions’ contribution to the national CE targets (McDowall et al. 2017; Bleischwitz et al. 2022). Given the direct and immediate responsibilities and incentives tied to local authorities under this model, subnational governments are well incentivized to engage in inter-jurisdictional competitions in an effort to contribute to national CE targets. Evidently, during China’s 14th Five-Year Plan period (2021–2025), 19 out of 31 provincial jurisdictions (excluding Hong Kong, Macau, and Taiwan) have adopted more ambitious targets than that of the central government, in terms of energy consumption reduction (as per unit of GDP), as Fig. 1.1 shows. Only three provinces (Guangxi, Yunnan, and Gansu) have selected an energy consumption reduction target lower than the national standard. While the national aim targets a reduction of energy consumption (as per unit of GDP) by 13.5% compared to 2020 levels (NDRC 2021, 4), the average objective among provincial jurisdictions seats at nearly 14%, a significantly higher aim considering the overall size of China’s economy. On top of the momentum generated by inter-jurisdictional competitions, we observe that the social responsibility model has generated a “catch up” effect in which weaker performing subnational governments are likely to embrace no less ambitious aims. Notably, Liaoning, Shanxi, Xinjiang, Hebei, and Inner Mongolia, the five worst performative jurisdictions in Fan and Fang’s (2020) analysis, have all adopted energy consumption reduction targets of 13.5% or higher during the 14th Five-Year Plan period, as Fig. 1.1 illustrates. In fact, Inner Mongolia and Hebei have one of the highest targets among China’s 31 provincial jurisdictions. At the same time, while much of China’s CE development approach is top down and directed by the central government, it is worth noting that the model does allow for flexibility and tailored approaches according to local conditions. For example, whereases the national 14th Five-Year Plan on Circular Economy (NDRC 2021,

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Fig. 1.1 Provincial 14th Five-Year Plan targets of energy consumption reduction (as per unit of GDP). (Source: Compiled by Au-Yeung from provincial 14th Five-Year Plans. Note: we choose to examine the per unit GDP energy consumption target because of data availability issues for other major indicators at the subnational level)

3) puts a strong emphasis on reuse and resource utilization, Shanghai continues to prioritize prevention in the first place up to its lasted provincial CE promotion plan (Shanghai Government 2022). This is perhaps due to the exceptionally high resource utilization rate in the provincial-level municipality: during the 13th Five-Year Plan period (2016–2020), the city/province has achieved a bulk industrial solid waste utilization rate of 99.7% (Shanghai Government 2022). Additionally, regions, such as Tianjin, have their own special CE indicators for local needs, such as desalination rate, which is not present in either the national plan or subnational targets in most provincial jurisdictions. China’s model comes with a few significant flaws. Foremost among them is the fact that the economy is seen as the central focus of Beijing’s CE strategy, implying that circularity follows economic growth (Bleischwitz et al. 2022). As the authors point out, the fact that the CE is centrally administrated by the NDRC, as opposed

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to the Ministry of Ecology and Environment, indicates economic needs overshadow circularity concerns. In fact, China’s Circular Economy Promotion Law (2008, art. 4) makes it explicit, stating that “the circular economy shall be promoted on the premises of being . . . reasonable in economy . . . ”. China’s official CE progress index reflects this prioritization. Notably, three out of five measures are weighted in relative relations to economic growth. The resource and waste intensity rates, for their parts, are respectively measured by per unit GDP resource consumptions and waste productions (National Bureau of Statistics 2015). Although in 2017 the NDRC (2017) published a more comprehensive set of indicators, now including 17 different measurements, many of the important indexes (namely, resource productivity, energy consumption, water consumption, and land output rates) remain to be weighted in relative relations to the overall economic performance. Perhaps the most vital indicator among the “non-per unit GDP” measures is the solid industrial waste utilization rate, but China has shown no tangible progress in improving it in recent years. As Fig. 1.2 shows, there has in fact been a deterioration of China’s solid industrial waste utilization. Between 2012 and 2017, the overall amount declined by 193 million tons, while the utilization rate decreased from 61.49% to 54.71%. Although there has been a reserving trend thereafter, we see no improvement in solid industrial waste utilization up to 2019 (compared to 2012 levels). 2100

64.00%

2050

62.00%

2000

60.00%

1950 58.00% 1900 56.00% 1850 54.00%

1800

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1750 1700

50.00% 2012

2013

2014

2015

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2018

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Utilization Rate

Fig. 1.2 Solid industrial waste utilization rate, 2012–2019. (Source: Gathered by Qianzhan Industry Research Institute (2020) from National Bureau of Statistics, Ministry of Environment and Ministry of Environment and Ecology)

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This perhaps explains why China has altered its CE priority from prevention and reduction (of use) to recycling and resource utilization since the 13th FiveYear Plan period. Nonetheless, its poor performance in resource utilization indicates a significant room for future improvement, a stark fact well recognized by the central government (NDRC 2021). While no one is yet sure about the implication of China’s import ban on waste products,1 it provides a clear signal for future international cooperation among the “club members”: coordination on improving and building resource utilization capacities. At the macro level, the Chinese approach shows the value of national goals and indicators of progress. While China is one country, the discipline of the central government over the provinces should not be exaggerated. Thus, differential levels of progress are revealed, suggesting the need for tailoring according to local conditions, including level of energy generation and use and manufacturing presence; access to renewable resources; and competence of local authorities. We see the need to prove “progress” regularly as potentially obfuscating such needs. Last but not least, across the South, economic growth remains the priority. It seems that the tension between it and sustainability has not yet been resolved.

1.6 CE Meso-Level Experiments – Eco-Industrial Parks Given the challenges of creating effective national-level policies or business systems, one approach could be more feasible- the creation of eco-industrial parks that link different suppliers and users of waste and byproducts. Prior to the UN’s agenda emphasizing industrial resource efficiency, industrial parks were primarily based on the co-location of related industries operations. The focus on clusteringrelated industrial operations was driven by the goal of improving the efficiency, as well as reducing costs, for industry by sharing infrastructure, such as land, roads, and drainage ways, between co-located businesses. Eco-industrial parks, however, differ by also prioritizing the exchange of waste resources between industrial park establishments, thereby simultaneously extracting economic value and reducing industrial pollution. Eco-industrial parks, by adopting the concept of “waste as a resource”, facilitate a shift from a linear model of industrial production to a closedloop model whereby the waste from a particular industrial activity can become raw materials for other industrial activities within the park (Sharma 2013). An eco-industrial park requires a data system around circularity. Thus, risk is distributed and shared along the entire supply chain, along with gaining commitment from customers. Evidently, creating a viable eco-industrial park also requires new

1 The implication of the import ban remains a controversial debate. While some argue the ban will result in a scarcity of recycled materials (e.g., Qu et al. 2019), others see it as beneficial to the CE (e.g., Wen et al. 2021). We observe that the ban maybe beneficial to China’s CE, considering its poor resource utilization performance (and capacity).

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governance arrangements. Success in creating such arrangements can create an exemplar effect, where a platform design for the system could be imitated and adapted for other products and locations (Kornietzko et al. 2020; Ehrenfeld and Gertler 1997). Government policies that promote industrial zoning are important in tackling manufacturing pollution via eco-industrial parks (World Bank Group 2017). The Danish eco-industrial park of Kalundborg has achieved a semi-mythical status in the emerging CE literature. The Kalundborg park is singled out, as a coal-fired power station, oil refinery, pharmaceutical plant, and plasterboard manufacturing plant share water, byproducts and residues, and energy through a Combined Heat and Power (CHP) system (Gregson et al. 2015, 223). Other smaller companies also participate in the by-product and reuse market. The power station supplies excess heat and steam to industrial and residential neighbors. Similarly, by-products of the power and refining processes are used by other industries through a series of complex contracts and arrangements that have evolved over time. Municipal authorities play a crucial role in managing water treatment and streamlining environmental regulations for collective benefit (Valentine 2016). Lehtoranta et al. (2011) find that Scandinavian pulp and paper industries have naturally developed symbiotic operations, “typically consisting of power plants, chemical manufacturing plants, waste management facilities, and sewage treatment plants that operate around the ‘anchor tenant’, a pulp and paper mill. Such systems often engage in close interaction with local municipalities by providing employment, district heating, and waste disposal”. However, emerging studies about eco-industrial parks cast doubts about the spontaneous re-creation of the Kalundborg experiment, which relied on both a propitious co-location of symbiotic firms, and deep relations of trust among company and government officials (Branson 2016). Consider, furthermore, that Kalundborg’s success depends on the excess heat of a coal-fired plant, one that is likely to be shut down in the future, putting the experiment in jeopardy. Similarly, Lybæk et al. (2021), studying a Danish bioenergy and combined heat and power plant that uses dairy and pig waste, point to serious policy gaps in maximizing project outputs, including a lack of knowledge about waste management among companies, municipalities, and the companies; a lack of incentives for reuse of waste, such as access to finance; a lack of market demand; and coordination breakdowns among different levels of government and private and public stakeholders. In the south of France are two other EIP experiments, “Salaise-Sablons” in Lyon and “Les Portes du Tarn” in Toulouse. The latter is the subject of a mini case study by Belaud et al. (2019). The park opened in 2017. The authors note that the park includes mixed uses, including 20% to stores and leisure, and another 15% for agricultural activities. The park was developed with community consultation and includes community gardens. The local urban planning agency helped to coordinate the public private, and community stakeholders around an information system that sought to manage and monitor water, energy, and waste streams. While it is too early to make assessments, the experiment has some notable innovations in including retail and community input and activities.

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While there is no federal circular economy policy in the US, various states and municipalities have moved in this direction, such as San Francisco’s now famous attempt to move toward zero waste. In terms of eco-industrial parks, there are several examples. In an early (2004) article, Heeres et al. compare eco-industrial parks in Baltimore, Brownsville, and Cape Charles with three Dutch parks. They find less active participation of both companies and the public in the US parks reduces their overall effectiveness. Companies in the US seem less convinced by the benefits of cooperation. They suggest planning for parks should focus less on material flows and more energy efficiency. Gibbs and Deutz (2005) count 34 ecoindustrial parks across the US. Examining a subset of these, the authors find that all come short of the goals of the parks, to share and reduce the overall use of energy and materials among multiple industry participants. They argue that most parks use the eco-industrial label for marketing and subsidy purposes, and are not subject to performance measures. Eckelman and Chertow (2013) by contrast, argue that the Campbell Industrial Park in Honolulu is successful. Established in 1958, it combines approximately 250 companies, including a coal-fired and an oil-based electricity generators; two oil refineries, which provide cogeneration; a wastewater treatment an oil and tyre recovery, and a cement plant. The steam from electricity generation is used in the oil refineries. Despite such isolated cases, the overall evidence indicates that circularity in the US remains a very nascent concept from a policy perspective, though the corporate sector has seized upon the benefits of touting its environmental achievements cloaked in the circularity concept (US Chamber of Commerce Foundation 2015). By sharp contrast, China embraces CE principles in its 12th Five Year Plan (2011–2015), where it states its goal to improve energy and water efficiency of heavy industries through recycling and remanufacturing, including encouraging exchanges between companies (Preston 2012). These feed into China’s policies to promote industrial eco-industrial parks where different companies co-locate in order to achieve efficiency, particularly in utilization of waste materials. Such initiatives are “top down” and primarily implemented through the National Demonstration Eco-Industrial Parks program (Bleischwitz et al. 2022; Zhang et al. 2010). Currently, the country has mainly three types of eco-industrial parks: sectoral (i.e., parks dominated and led by one or a few core enterprises through material and energy integration to establish symbiotic relationships among companies in a given industry or related fields); integrated (i.e., parks transformed from economic and technological development zones and high-tech industrial development zones; usually composed of enterprises from different industries); and venous (i.e., parks where the dominant sector is resource utilization) (Xu 2017; Bleischwitz et al. 2022). To qualify for funding as a national demonstrator in China, an industrial park must (1) pass pre-audits by related agencies at the provincial level; (2) develop a plan for eco-industrial park construction and prepare technical reports; (3) fulfill necessary qualifications, including (but not limited to) demonstrated support from local government, evidence of plans to establish an eco-industrial park, a strong

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record in upholding national legislation and policies related to environmental protection, and commitments to implement regional and national environmental assessments; (4) pass expert review of the plan and report; and (5) after gaining the national demonstrator status, the park is subject to triannual reviews (for details, see Zhang et al. 2010, 505–506; Thieriot and Sawyer 2015, 4). At first glance, the National Demonstration Eco-Industrial Parks initiative may seem overly strict, posing unnecessary and superfluous entry barriers. The incentives are, however, equally appealing. In addition to support, including taxation breaks, from the central government, the Measures for the Administration of National Ecoindustrial Demonstration Parks (Ministry of Economy and Environment et al. 2015, 14–15) explicitly requires subnational governments to “establish special subsidies or tax incentives” for national eco-industrial park demonstrators. Yunnan Province, for instance, provides a one-time grant of five million yuan (approx. 0.72 million USD) for successful applicants (Yunnan Government 2022).

1.6.1 Limitations of Eco-Industrial Parks In a review of eco-industrial park experiments, Bellantuono et al. (2017) conclude that government policy must play a guiding role, including in creating adequate incentives and organizational spaces for industrial symbiosis to have a chance to gel. Other challenges include the prohibitive cost of investments in innovative technological solutions (World Bank Group 2017). This hurdle raises concerns over competitiveness for firms operating within eco-industrial parks who have local competitors who are not required to meet similar technological advancement requirements (World Bank Group 2017). Management of eco-industrial parks can be hindered by the absence of clear and appropriate mandates, as well as sufficient financial support for resident enterprises (World Bank Group 2017). As Ewijk and Stegemann (2020) point out, beyond the concept of eco-industrial parks, there is a major logical gap in meso-level policy. Policymakers are seeking out what to do after waste is created, rather than investigating the potential uses of waste and developing markets (as well as designing) products for their use. As Xu (2017) notes, presently most existing Chinese eco-industrial parks are designed around resource sharing among different firms, implying that the utilization of waste materials is relatively neglected. The same cautions would apply to the US and the EU as well. On top of this, we have seen absent top-down direction, it is extremely difficult for private sector firms to organize themselves into eco-industrial park, a classic collective action problem.

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1.7 Conclusion We have reviewed the embrace of the circular economy concept by both China and the EU. The US does not yet seem ready to accept the idea at the national level. On both the supply and demand side, there are inadequate market mechanisms and incentives to create a consistent transition away from the linear model. Lacking clear conceptualization, measurement of progress is also ambiguous. So far, societies across the globe are not ready to embrace a switch to a CE, which would imply vastly different means of production and consumption. Considering the incremental, multi-layered approach of the EU’s circular economy policy package, Fitch-Roy et al. (2020) conclude: “disrupting the entire EU economy in the way that CE envisages requires bold, innovative approaches to almost all future policy design that take, as a starting point, non-linearity or circularity as a core objective”. Because of the costs and externalities issues noted above, whereby it is more costly at present to implement than a linear waste model, the circular economy is only likely to succeed where there is significant consumer pressure and/or proactive policies. Thus far, there are few signs of consumer pressure, as consumers, both retail and business, remain fixated on prices. For a circular economy to succeed thus requires strong government policies, including a general institutional framework to promote and enforce changes in supply chains. Zink and Geyer (2017) note serious challenges to implementing a CE upon which we build here. The first is that efficiency measures may take a long time to pay off vs. high upfront costs. This links with the “rebound effect” whereby increased efficiency reduces prices of inputs, thereby spurring consumption. The second is to link markets that may not have existing linkages based on supply chains or financial linkages. A ready example is the de-linking of fashion producers from secondary clothing and textile markets. A third challenge is the difficulty of substituting for more sustainable materials. The most prominent example is plastic. The final set of challenges relates to consumer acceptance of recycled materials, which are often not only more expensive but often perceived as being subpar in quality. In the area of planning, it seems that efforts at the macro level require the acceptance of the principles of a CE, alongside using regulation and policy to recognize the costs of pollution externalities. The real action seems to be happening on the meso-level of sectoral transformation including the promotion of new standards, regulatory incentives reflecting the true costs of pollution, and the promotion of eco-industrial parks. Even at the meso-level, there are multiple barriers and limitations to transitioning to a CE. These include regulatory constraints, lack of consumer awareness, inadequate information on resource flows, and an overall clear lack of incentives for the transition. As Antonioli et al. (2022) in an extensive study of Italian firms, most businesses simply not only do not find it profitable, and face considerable expenses in shifting from linear to circular supply chain strategies. For example, the EU Green Deal is bold in laying out plans for both circularity and the idea of creating clean energy and green jobs that would be “globally

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competitive and resilient”. However, the 2022 RePowerEU plan suggests a heavy reliance on natural gas as an immediate means to reduce reliance on Russian natural gas (EC, RePowerEC). In July 2022, the EU Parliament voted to designate natural gas and nuclear energy as acceptable transitional fuels (EC 2022). More fundamentally, how economic growth and sustainability can be compatibly pursued is entirely unclear, and an even more pressing question for countries in the South, where environmental enforcement is generally more lax (Hira and Pacini 2022). Much more research is needed to develop viable CE business models by sector, alongside regulatory action. Looking to the future, Hartley et al. (2020) suggest the following steps: adopting circular design standards and norms as part of regulations; expanded use of government procurement for CE promotion; reducing taxes and barriers to the production and trade of waste products; promoting the CE to consumers; and creating materials flow databases. This last point is echoed by other authors such as Kristensen and Mosgaard (2020) who find that measurement of circularity is severely lacking. One could add to this that information about the resource footprint is entirely lacking to both business and retail consumers. Until some of these gaps are filled at the global level, the CE will remain nothing more than a bold concept with limited achievement.

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Matthews JA, Tan H (2011) Progress toward a circular economy in China: the drivers (and inhibitors) or eco-industrial initiative. J Ind Ecol 15(3):435–457 Mazur-Wierzbicka E (2021) Circular economy: advancement of European Union countries. Environ Sci Eur 33:111 McDowall W, Geng Y, Huang B, Barteková E, Bleischwitz R, Türkeli S, Kemp R, Doménech T (2017) Circular economy policies in China and Europe. J Ind Ecol 21(3):651–661 Ministry of Commerce, NDRC, Ministry of Land and Resources, Ministry of Housing and Urban-Rural Development, All China Federation of Supply and Marketing Cooperatives (2015) Zaisheng ziyuan huishou tixi jianshe zhongzhangqi guihua (2015–2020) (Medium- and long-term plan for the construction of renewable resources and recycling systems (2015–2020)). Available at: http://www.mofcom.gov.cn/article/h/redht/201501/ 20150100878083.shtml. Accessed 24 Aug 2022 Ministry of Economy and Environment, Ministry of Commerce, and Ministry of Science and Technology (2015) Guojia shengtai gongye shifan yuanqu guanli banfa (Measures for the administration of national eco-industrial demonstration parks). Available at: https://www.mee.gov.cn/ gkml/hbb/bwj/201512/W020151224393857477727.pdf. Accessed 6 Sept 2022 National Bureau of Statistics (2015) ‘2013 nian woguo xunhuan jingji fazhan zhishu wei 137.6’ (‘China’s circular economy index is 137.6 in 2013’). Available at: http://www.stats.gov.cn/tjsj/ zxfb/201503/t20150318_696673.html. Accessed 31 Aug 2022 NDRC (2010) Xunhuan jingji fazhan guihua bianzhi zhinan (Guidelines for compiling circular economy development plans). Available at: http://www.gov.cn/gzdt/att/att/site1/20110128/ 001e3741a2cc0eac618a01.pdf. Accessed 24 Aug 2022 NDRC (2017) Xunhuan jingji pingjia zhibiao jieshi ji hesuan fangshi (Circular economy evaluation index interpretation and accounting method). Available at: https://www.gov.cn/xinwen/201701/12/5159234/files/44bca39e958a4b389bcf6e9ea4d5a782.pdf. Accessed 28 Aug 2022 NDRC (2021) Shisiwu xunhuan jingji fazhan guihua (14th Five-Year Plan on circular economy). Available at: https://www.ndrc.gov.cn/xxgk/zcfb/ghwb/202107/ P020210707324072693362.pdf. Accessed 24 Aug 2022 NIST (National Institute of Standards and Technology, US Govt.) (n.d.) Circular economy. Found at: https://www.nist.gov/circular-economy. Accessed 19 Aug 2022 Pacini H, Golbeck J (2020) Trade in scrap materials: looking beyond plastics. Preprints 2020100044 Pearce DW, Turner RK (1989) Economics of natural resources and the environment. Hemel Hempstead, Harvester Wheatsheaf, London Pietzsch N, Ribeiro JLD, Fleith J, de Medeiros. (2017) Benefits, challenges and critical factors of success for zero waste: a systematic literature review. Waste Manag 67:324–352 Preston F (2012) A global redesign? Shaping the circular economy. Energy Environ Resour Govern EERG BP 2012(2):1–1 Qianzhan Industry Research Institute (2020) ‘2020 nian zhongguo gongye guti feiwu chuli hangye shichang fazhan xianzhuang fenxi’ (‘Analysis of the market development of China’s industrial solid waste treatment industry in 2020’). Available at: https://ecep.ofweek.com/2020-08/ART93000-8420-30451941.html. Accessed 31 Aug 2022 Qu S, Guo Y, Ma Z, Chen W, Liu J, Liu G, Wang Y, Xu M (2019) Implications of China’s foreign waste ban on the global circular economy. Resour Conserv Recycl 144:252–255 Ranta V, Aarikka-Stenroos L, Ritala P, Mäkinen SJ (2018) Exploring institutional drivers and barriers of the circular economy: a cross-regional comparison of China, the US, and Europe. Resour Conserv Recycl 135:70–82 Reike D, Vermeulen WJV, Witjes S (2018) The circular economy: new or refurbished as CE 3.0? Exploring controversies in the conceptualization of the circular economy through a focus on history and resource value retention options. Resour Conserv Recycl 135(2018):246–264 Shanghai Government (2022) Shanghaishi ziyuan jieyue he xunhuan jingji fazhan shisiwu gui hua (Shanghai 14th Five-Year Plan on resource conservation and circular economy development). Available at: https://huanbao.bjx.com.cn/news/20220510/1223835.shtml. Accessed 27 Aug 2022

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Sharma A (2013) The landscape of industry: the transformation of (eco) industrial parks through history. View of landscape of industry: transformation of (eco) industrial park through history (theartsjournal.org). Accessed 2 Nov 2021 State Council (2005) Guowuyuan guanyu jiakuai fazhan xunhuan jingji de ruogan yi jian (Opinions on accelerating the development of circular economy). Available at: http://www.gov.cn/zwgk/ 2005-09/08/content_30305.htm. Accessed 24 Aug 2022 State Council (2011) Guowuyuan guanyu yinfa guojia huanjing baohu shierwu guihua de tongzhi (Notice on printing and distributing the national environmental protection 12th Five-Year Plan). Available at: http://www.gov.cn/zwgk/2011-12/20/content_2024895.htm. Accessed 23 Aug 2022 State Council (2013) Guowuyuan guanyu yinfa xunhuan jingji fazhan zhanlüe ji jinqi xingdong jihua de tongzhi (Announcements on circular economy development strategy and nearterm action plan). Available at: http://www.gov.cn/zwgk/2013-02/05/content_2327562.htm. Accessed 24 Aug 2022 Suárez-Eiroa B, Fernández E, Méndez-Martínez G, Soto-Oñate D (2019) Operational principles of circular economy for sustainable development: linking theory and practice. J Clean Prod 214:952–961 Thieriot H, Sawyer D (2015) Zhongguo gongye yuanqu ditan fazhan de zhengce qushi yu qudong yinsu (Policy trends and drivers of low-carbon development in China’s industrial zones). Available at: https://www.iisd.org/system/files/publications/drivers-low-carbon-developmentchina-industrial-zones-cn.pdf. Accessed 1 Sept 2022 Tisserant A, Pauliuk S, Merciai S, Schmidt K, Fry J, Wood R, Tukker A (2017) Solid waste and the circular economy: a global analysis of waste treatment and waste footprints. J Ind Ecol 21(3):628–640 US Chamber of Commerce Foundation (2015) Achieving a circular economy: how the private sector is reimagining the future of business. US Chamber of Commerce Foundation, Corporate Citizenship Center, Washington, DC USAID (n.d.) Promoting a circular economy. Found at: https://www.usaid.gov/energy/sure/ circular-economy. Accessed 19 Aug 2022 Valentine SV (2016) Kalundborg symbiosis: fostering progressive innovation in environmental networks. J Clean Prod 118:65–77 Wang H, Schandl H, Wang X, Ma F, Yue Q, Wang G, Wang Y, Wei Y, Zhang Z, Zheng R (2020) Measuring progress of China’s circular economy. Resour Conserv Recycl 163:105070 Wen Z, Xie Y, Chen M, Dinga CD (2021) China’s plastic import ban increases prospects of environmental impact mitigation of plastic waste trade flow worldwide. Nat Commun 12(1):1– 9 Williams ES, Panko J, Paustenbach DJ (2009) The European Union’s REACH regulation: a review of its history and requirements. Crit Rev Toxicol 39(7):553–575 Wilts H, Von Gries N, Bahn-Walkowiak B (2016) From waste management to resource efficiency – the need for policy mixes. Sustainability 8(7):622 World Bank Group (2017) An international framework for eco-industrial parks. World Bank Document (tralac.org). Accessed 10 Oct 2021 Xu, J. (2017) ‘Dui woguo shengtai gongyeyuan jianshe de sikao’ (‘Thoughts on the construction of eco-industrial parks in China’). In: 2017 collected works on urban development and planning, pp 1–5 Yunnan Government (2022) Yunnansheng renmin zhengfu guanyu yinfa 2022 nian wenzengzhang ruogan zhengce cuoshi de tongzhi (Notice on policies and measures for steady growth). Available at: http://lcj.yn.gov.cn/html/2022/zcjd_0715/66458.html. Accessed 8 Sept 2022 Zhang L, Yuan Z, Bi J, Zhang B, Liu B (2010) Eco-industrial parks: national pilot practices in China. J Clean Prod 18(5):504–509 Zink T, Geyer R (2017) Circular economy rebound. J Ind Ecol 21:593–602. https://doi.org/ 10.1111/jiec.12545

Chapter 2

The Environment Value System and Green Circular Economy Lledó Castellet-Viciano, Vicent Hernández-Chover, and Francesc Hernández-Sancho

Abstract When assessing the feasibility of implementing a project based on a circular economy model, it is necessary to consider the non-action cost as an alternative, that is, to analyse the costs and benefits that the non-implementation of the model will have. Generally, we tend to value the positive and negative aspects of the execution of a project, but rarely do we consider that not implementing them can also have repercussions. For example, the non-implementation of water reuse projects puts the satisfaction of water needs at risk, generating restrictions in the different uses with their consequent economic implications. In addition, it would continue promoting the overexploitation of aquifers and the reduction of the volume of water of surface sources as well as the decrease in the quality of all water bodies, affecting all ecosystems. Therefore, the inclusion of the costs of no-action in decision-making is essential to justify adequate investment policies that guarantee the implementation of the circular economy actions. Since most of the consequences related to circular economy actions are social and environmental and they usually do not have a market value, their quantification requires very specific economic assessment instruments. Keywords Water · Wastewater · Reuse · Externalities · Non-action cost

2.1 Introduction One of the main reasons why the circular economy is gaining increasing prominence is because of the great pressure being placed on natural resources and the environment in general. The non-profit group Forum for the Future estimates that the current rate of natural resource consumption is 1.5 times the rate of replenishment. If this consumption pattern continues, resource consumption in 2030 will be equivalent

L. Castellet-Viciano () · V. Hernández-Chover · F. Hernández-Sancho Inter-university Institute for Local Development (IILD-WATER), Water Economics Group, University of Valencia, Valencia, Spain e-mail: [email protected]; [email protected]; [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Singh et al. (eds.), Green Circular Economy, Circular Economy and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_2

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to the consumption of two planets, while three planets will be needed by 2050. Parallel to the significant consumption of environmental resources, large amounts of waste are generated globally, approximately 2.01 billion tonnes of municipal solid waste per year, of which at least 33% is not managed in an environmentally safe way. Looking ahead, waste generation is foreseen to reach 3.4 billion tonnes by 2050 worldwide, which doubles the population growth by then. Moreover, human activities have a lot to do with climate change, which is leading to more frequent occurrences of extreme events such as droughts, floods, earthquakes, hurricanes, etc. Longer periods of droughts and their increasing frequency are one of the main challenges in water resources management. Therefore, the need to implement strategies to enable sustainable development is becoming extremely relevant. Given this situation, the need to change the current linear economic and productive system to a circular one is becoming imminent. In recent years, the circular economy has been gaining prominence both at the global scale, in world politics and institutions, as well as at the national, regional and local levels. However, according to Korhonen et al. (2018), the growth of the circular economy has been on a theoretical basis. In this sense, much progress has been made in raising awareness of the need to leave behind the current linear economic model and replace it with a circular one, which aims to reduce the consumption of raw materials by making them stay longer in the economic system, while reducing the environmental impact associated with the extraction of these, the production processes of other materials and products, and the generation and disposal of waste generated in the whole stages of processes. However, practical implementation and scalability has been very limited (Ghisellini et al. 2016), with the exception of a few successful cases. The lack of implementation of circular economy-based projects is associated with the large number of barriers that need to be overcome for these projects to become a reality. In addition to social barriers, generally associated with a lack of information and a system that has been rooted in society for decades, and political and regulatory difficulties, derived from a fragmented administration and institutions in which the competences for resource management are very divided and regulated by different regulations that are disconnected from each other, there are also technological and economic or financial barriers. The implementation of projects based on the circular economy requires advanced technologies that, on the one hand, maximise the efficiency of processes and, on the other, allow the recovery of products and materials for their reintroduction into the production system. Some authors argue that the necessary technology is available and that there is no limitation on the part of technological development, and that the main disadvantage of not implementing these actions is fundamentally economic, since it is a technology that requires a large economic investment. In order to integrate and promote the circular economy, the fundamentals of sustainable development—economic, social and environmental sustainability—had to be reformulated in 2015 with the aim of unifying criteria in the member states of the United Nations. They became known as the Sustainable Development Goals (SDGs) (United Nations 2020). Consequently, the circular economy has become an instrument to help companies, public institutions and society in general to follow

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the principles of sustainable development (Kirchherr et al. 2017). If we analyse the Sustainable Development Goals, we can see that five of the 17 goals set are related to the circular economy. The five SDGs mentioned are the following: • • • • •

SDG6: Clean water and sanitation. SDG7: Affordable and clean energy. SDG8: Decent work and economic growth. SDG12: Responsible consumption and production. SDG15: Life on land.

When planning such a strategy, we must take into account the activities proposed by the circular economy, such as: • Recycling and reuse of water (Targets 6.1, 6.2, 6.3, 6.4 and 14.1). • Industrial symbiosis and the creation of industrial clusters, where all businesses take advantage of the energy and waste discarded by others, to use them in various functions, thus extending their useful life (Goals 3.9, 6.3, 7.3, 8.2, 12.4, 9.4 and 17.7). • Reduction of waste (Targets 12.3 and 12.5). • Reducing wasteful consumption and production (Targets 8.4 and 9.4). • Sustainable food production systems (Targets 2.4 and 2.5). • Favour and care for the environment and the natural ecosystem, reducing human impact on the environment and facilitating its expansion (Targets 15.1, 15.2 and 15.5). • Transition to renewable energy sources (Targets 7.2 and 7.3) and provide energy for all, including small developing countries (Targets 7.1 and 7.b). • The implementation of the 7Rs model, preserving the capabilities and functions of materials, allowing to preserve and even improve product quality (Targets 8.4 and 12.4). • Creating sustainable cities and merging industry with the natural environment (mutual benefit) (Targets 9.2 and 11.6). • Conservation and restoration of natural resources (Target 12.2). Today, technological changes have created new economic, social, and environmental opportunities. The different economic sectors have achieved greater flexibility and individualisation of products and services, as well as greater control of manufacturing and distribution processes that can be used to enhance the transition towards a circular economy or green economy, which are closely related. According to UNEP (2011), the Green Economy is an economic model that is committed to sustainable development and results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. It aims to reduce the consumption of energy, raw materials, and water, improve resource efficiency, minimise or reduce greenhouse gas emissions and pollution, promote waste reduction and reuse, prevent the loss of biodiversity and ecosystem services, and achieve social equity. To achieve the transition to the green economy, ten main sectors of the economy were considered with the capacity to: reduce poverty, invest in natural capital and its restoration, generate jobs and

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improve social equity, encourage renewable energy and energy efficiency, mobility and urban sustainability: agriculture, buildings, energy supply, fisheries, forestry, industry, tourism, transport, waste management, and water (UNEP 2011). However, the circular economy and the green economy cannot be achieved through technological development and innovation alone, but simultaneously require policy and regulatory mechanisms that promote sustainable development, rectify negative externalities, and promote eco-innovation in industry. In this sense, environmental regulation and the role of governments is essential to regulate economic production and social activities that may cause negative environmental externalities, as well as to create a coordination mechanism to assign responsibilities to the different actors involved in the activities, from public or private institutions, industries or companies, and the citizens themselves.

2.2 Benefits of the Circular Economy The shift from the current linear to a circular economic model is by no means a simple matter as it involves political changes at all levels; new organisational and structural forms that allow a transversal management of resources; changes at the business level to improve the efficiency of processes; as well as a new form of consumption by society. To help in the transition towards a circular economy, innovation and technology become fundamental aspects (Vanner et al. 2014; Acsinte and Verbeek 2015; Accenture 2014). But this change, which initially seeks to ensure environmental sustainability through a circular flow, in which the consumption of material resources is reduced thanks to a better use of resources and the reuse of products and waste generated throughout the production system, eliminating the dependence between economic growth and the production process, will have repercussions in ecological, economic and social terms. The identification of the impact that the circular economy will have on the environmental, social and economic levels is important in order to be able to move towards the creation of policies that allow for the appropriate management of this new system. It should be taken into account that when assessing the benefits generated by a given circular economy policy or action, it does not only affect those sectors directly involved, but also has an impact on the entire value chain. Moreover, the impacts can be perceived in the short, medium or long term, i.e., the effects can be perceived at different times since the action takes place or vary over time. Some of the circular economy measures may also have large-scale consequences and affect relations with other countries through imports and exports of raw materials and products. On the other hand, measures such as awareness-raising campaigns on the consumption of recycled products are intended to have an impact on consumption patterns but will ultimately have environmental, social and economic repercussions.

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2.2.1 Environmental Benefits One way to assess the benefits that the circular economy can generate through the implementation of all those actions that promote environmental sustainability is through ecosystem services, which are the numerous and varied benefits that the environment and ecosystems provide to society (MEA 2005). Generally, ecosystem services are classified into different groups, and these can vary according to different authors (Constanza et al. 1997; De Groot et al. 2002; Turner and Daily 2008; Camacho-Valdez et al. 2014) according to their diversity, functionality, processes and structure. However, the different ecosystem services are classified into four main groups: • Supporting services: These are services that support the full range of services provided by the natural environment, e.g., offering the living space for all living organisms while maintaining genetic diversity. • Provisioning services: These refer to any kind of natural goods that humans can obtain from the environmental system, e.g., food, water, timber, fuels, etc. • Regulating services: These are the benefits that are involved in balancing the processes of ecological systems, e.g., regulating air quality and soil nutrients, controlling pests and external events, etc. • Cultural services: These include a whole set of non-material benefits provided by ecosystems, e.g., aesthetic, cultural, historical, inspirational values, etc. Very few studies address the analysis of the benefits resulting from the application of circular economy globally, except for literature review articles that gather the main conclusions reached by very specific studies, almost all of them at the local level. Next, the main benefits of the circular economy from an environmental point of view are listed: minimisation of the use of natural resources, avoiding the generation of waste and the emission of greenhouse gases (Albino et al. 2016; Fraccascia et al. 2017; Paquin et al. 2015). However, there are some reports that try to quantify at the European level some of these benefits in terms of greenhouse gas reduction. To assess the environmental effects of the circular economy, the European Union focuses its attention on the textile, agri-food and construction sectors. For example, the Cambridge Econometrics & BIO Intelligence Service (2014) estimates that improving EU resource productivity by 3% would lead to a 25% reduction in greenhouse gas emissions by 2030. On the other hand, a study by Beasley et al. (2014) estimates the benefits of implementing different measures based on the circular economy in different sectors. This report estimates that the reduction of food waste would generate a reduction of CO2 equivalent emissions between 56.2 and 84.3 Mt by 2030. As a consequence, agricultural production adapted to the demand would generate the release of agricultural land, representing between 38,070 and 56,970 km2 in 2030. Other sectors analysed are textiles and furniture. It is estimated that practices focused on reuse in these sectors can reduce the amount of CO2 equivalent by approximately 18.4 Mt and 30.7 Mt by 2030. Besides this, the reuse of textiles

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is also estimated to reduce the use of fertilisers and pesticides in cotton production. The EEB estimates that the amount of fertilisers and pesticides that can be avoided ranges from 0.58 to 1.02 Mt in 2030. On the other hand, the Ellen MacArthur Foundation and the McKinsey Center for Business and the Environment (2015) also carry out an approach to the environmental impact of the circular economy. In this case, they avoid giving absolute values and talk about potential greenhouse gas reduction percentages that the circular economy could produce in the mobility, food systems and building sectors, which are estimated at 48% by 2030 and up to 83% by 2050. The study estimates that, among other things, in the automobile and building materials sectors, land use and the use of water and fertilisers in agriculture, the consumption of primary materials could decrease by up to 32% by 2030 and 53% by 2050. Another important piece of information is provided by the European Commission (2015) on the effects of the implementation of one of the most important Directives of the first decade of the twenty-first century, the Waste Framework Directive. A policy review in this area has not been carried out since 1975. This report assesses the positive effects of preventing a large part of municipal biodegradable waste from ending up in landfill and of reuse and recycling actions. It is estimated that, thanks to these actions, the emission of 65,556 Mt of CO2 equivalent could be avoided by 2035.

2.2.2 Social Benefits Most of the existing studies on the impact of the circular economy at a social level focus on the estimation of jobs that would be generated. For example, the EEB report (2014) estimates that thanks to the circular economy 1/6 unemployed young people could get a job. Cambridge Econometrics & BIO Intelligence Service (2014) associates a 2% improvement in EU resource productivity with the creation of two million additional jobs by 2030. In the work of Mitchell and James (2015), which analyses the social impact of the circular economy in the UK, the authors go further, and in addition to estimating the jobs that could be generated, they also refer to their quality, namely medium-skilled jobs, which would compensate for the effect that industrialisation had on this group of employment. Furthermore, they argue that the circular economy would enhance job creation in those regions with the highest unemployment rates, thus equalising regional unemployment disparities. In contrast, there is very little information on the implications regarding gender, labour competences, job quality, well-being issues, as well as equity guarantees (Sehnem et al. 2019). Murray et al. (2017) point out that not including social aspects from the basis on which the foundations of the circular economy are built, as issues such as inter- and intra-generational equity, gender, racial and religious equality and other diversity, financial equality, or in terms of equality of social opportunity are not addressed or are not addressed in a very clear way.

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2.2.3 Economic Benefits A large part of the literature review by Rizos et al. (2017) focuses the economic benefits of the circular economy on job creation. Undoubtedly, the generation of jobs is not only beneficial on a social level, but also on an economic level. On the other hand, other studies and reports try to connect the impact that the circular economy can generate through the improvement of the efficiency of the productive system on GDP. For example, Cambridge Econometrics & BIO Intelligence Service (2014) estimates that EU GDP can benefit from a 2% to 2.5% improvement in resource productivity; however, any further improvement in resource productivity would have a net cost to GDP as the abatement options become more expensive. On the other hand, the Ellen MacArthur Foundation and the McKinsey Center for Business and the Environment (2015) determine that an increase in resource productivity of 3% by 2030 in Europe, equivalent to 1.8 trillion euros, could be achieved through the implementation of advanced technology and the incorporation of newer organisations in the mobility, food and construction sectors. It should be borne in mind that these results are indicative, as estimates are based on assumptions, due to the difficulty of calculation, the uncertainty of the effects themselves, and the large number of variables that influence GDP. Perhaps the most tangible effects occur at the micro level with the creation of value at the industrial level. The creation of value through the reuse of products and materials together with greater efficiency of the processes that allow for a better use of resources is expected to generate a reduction in costs in terms of marginal cost, consumption of raw materials, waste management, and environmental taxes (Sehnem et al. 2019).

2.3 The Cost of No Action The current “take-make-use-dispose” system puts at risk the sustainability of the environment, on which both social sustainability and economic sustainability depend. Moreover, the fact that the availability of some of these commodities is becoming very limited has resulted in an increase in the price of raw materials and their volatility. When assessing the feasibility of implementing projects aimed at improving the sustainability of the production and consumption system, it is necessary to consider non-action as an alternative, i.e., to analyse the costs and benefits of not implementing the projects. Generally, we tend to assess the positive and negative aspects of implementing a project or measure, but rarely, if ever, do we consider that non-implementation may also have repercussions. For example, the non-implementation of water reuse projects puts at risk the satisfaction of water demands, generating restrictions in the different uses with their consequent economic implications, as well as continuing to promote the overexploitation of

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aquifers and the reduction of the volume of water from superficial sources, as well as continuing to promote the reduction of the quality of the water bodies as a whole, affecting the entire ecosystem. Another of the areas most analysed from the point of view of non-action in recent years is climate change. Perhaps because, despite the warnings of the impact that it has and will have on the economic, social and environmental levels, little has been done or is being done to reduce or mitigate its effects. Hence, the need to emphasise that failure to take action also has a cost. Obtaining the costs of non-action becomes an instrument that provides relevant information for monitoring and predicting changes in the condition of the environment. Expressing the cost of non-action in monetary terms (economic costs) provides a common unit for assessing impacts across sectors, countries and over time. Thanks to that, they can be compared with the costs of a project or action, contributing to the justification of projects, or helping in the decision-making process and choosing between different alternative actions. Therefore, the inclusion of the costs of non-action in decision-making is essential to justify appropriate investment policies to achieve the aims of the circular economy. As these are social and environmental costs that have no market value, their quantification requires very specific economic valuation tools. When implementing actions or measures with effects on the environment, it must be taken into account that in order to measure the effects on the environment it is necessary to take into consideration the time as a variable. The effects can occur in the short, medium, or long term, or be different over time. For example, when it comes to an action whose objective is to replace a raw material with a recycled or reused material, such as the implementation of a project for the reuse of reclaimed water to supply crop fields, the effects observed could be different as time goes by. If the water to be replaced comes from an aquifer, the short-term effects will basically be the reduction of pressure on the aquifer; however, the most relevant effects will occur in the medium and long term, as the aquifer is recharged with water and the natural water balances will be re-established; the quality of the water in the aquifer, which in coastal areas may have been exposed to marine intrusion due to low water levels, will also improve; and indirectly the general condition of the surface water bodies above the aquifer and the ecosystems of the area as a whole will also indirectly benefit. Therefore, just as the benefits of certain actions or projects increase over time, non-action or non-implementation of measures based on the circular economy can have different effects over time and get worse the longer the time passes.

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2.4 Environmental Externalities 2.4.1 Internalisation of Externalities Decoupling economic growth from environmental degradation is one of the main challenges that the circular economy aims to achieve. Today, both policy makers and companies and industries themselves have realised that the environmental degradation generated by the current production and consumption system itself poses a risk to ensure the viability of their own businesses and economic development in general. When there is a market failure as a consequence of the divergence between social costs and private costs, we have what are called externalities. Externalities can be positive, when a positive effect is not reported as a benefit, or negative, when the market does not capture the costs of a negative effect. One of the most frequently occurring types of externalities, and with a negative character due to poorly defined property rights, are environmental externalities. The current system of production and consumption results in external costs on the environment, and therefore on society, that do not impact on the economic performance of the agent that generates them. Some of these environmental externalities are the costs in terms of loss of biodiversity and damaged ecosystems, depletion of terrestrial and marine species and natural resources, or greenhouse gas emissions that harm human health and enhance climate change. Such externalities are global and very widespread, but can vary widely at national, regional and local scales. Taking into account the importance of the environmental impacts generated by the current linear economic system, some authors have tried to evaluate the environmental impacts generated by this system in economic terms. The study carried out by Trucost (2013) estimates that economic activities in the primary sector generate an environmental impact valued at 7.3 trillion dollars per year, which represents 23% of global economic production, according to 2009 numbers. A similar approach is taken by Stern (2006), whose work estimates that the environmental damage generated by greenhouse gas emissions represents 5% of GDP, while taking measures to reduce this environmental impact would only represent 1% of annual GDP. In order to address the environmental impacts generated by the production system and promote more sustainable actions based on the circular economy, it is necessary to internalise environmental externalities (Ding et al. 2014; Eidelwein et al. 2018). The internalisation of externalities consists of a set of public or private measures that ensure that both the costs and the indirect benefits generated by a given activity are included in the final price of the goods or services that are marketed (Ding et al. 2014).

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2.4.2 Methods to Quantify Environmental Value in Monetary Terms One of the main limitations to the internalisation of environmental externalities is their quantification in monetary terms. It is not always easy to identify and quantify the environmental externalities resulting from a given activity, and even less in economic terms. In some ways, it is possible to estimate or predict the number of animals or species that may be affected by a given action or process; in the same way, it is possible to predict or estimate the generation or reduction of greenhouse gases that an activity produces/reduces; or the volume of water that a given activity consumes or saves... but determining the economic value that this entails is a challenge. Despite the difficulty of quantifying them, there are different methodologies that allow us to quantify these externalities. Some of the most commonly referenced methodologies in the literature for valuing environmental externalities are “willingness to pay”, “contingent valuation”, “life cycle assessment”, “payments for ecosystem services”, or “setting prices”. These are key words used in most recent research, which emphasise the quantification and internalisation of the externalities of infrastructures.

2.4.2.1

Contingent Valuation Method

This method is one of the most widely applied in environmental issues. It is based on the valuation of the environmental benefits derived from implemented improvements, depending on the economic amount that potential beneficiaries are willing to pay or the monetary value they would pay for maintaining it. This value is obtained directly from those affected through a series of surveys or interviews, designed to determine the willingness to pay for an environmental benefit, or if applicable, the monetary value they would be willing to accept as compensation for environmental damage. In the case of willingness to pay, the interviewer has to narrow down the respondent’s ideal monetary value for that particular environmental benefit. This is done by offering an initial amount and increasing this amount until the respondent gives a negative answer, which will indicate the overestimate of the value of the environmental improvement, while the answer prior to the negative one (the highest positive answer) will indicate the underestimate (Llinares and Romero 2008). This methodology is a relatively easy way to obtain an economic estimation of environmental assets, as it allows valuing environmental goods through the valuation of the user who directly benefits from them. • The questions should have the following characteristics in order to avoid possible biases: • The format should be a dichotomous choice (willing or unwilling to pay). • The response rate has to be above 70% of the whole sample. • Interviews should be in a face-to-face format.

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• Always ask first whether you are willing to pay, not whether you are willing to accept. • The results should be compared with another type of method. With this, the contingent valuation may have a better chance of truly reflecting the value estimated by the interviewees, but it would be convenient to support these results with other types of study, as it may still present doubts (Llinares and Romero 2008).

2.4.2.2

Analytic Multicriteria Valuation Method

Multicriteria Methods are based on Decision Theory (specifically, Multicriteria Decision Theory), whose main idea is that “economic agents in charge of decisions do not only focus on a single objective, but also seek to satisfy a series of goals associated with these objectives” (Romero 1996). The Analytic Multicriteria Valuation Method, hereafter referred to as AMUVAM, is one of the most widely used methods in recent years (Martin-Gamboa et al. 2017). It is composed of the Analytic Hierarchy Process method, referred to as AHP, and a “pivot” value consisting of activities with a market that can regulate them. The AMUVAM method tries to collect the Environmental Services that can have a direct value in the market, to use them as the “pivot” value that will give way to estimate a monetary value for those Environmental Services that do not have a market and therefore, need a reference to give a monetary value. Therefore, from the value of the market services that can be found in a specific place, we can determine the value of the ecosystem services by using a “Pivot” value and estimate a relationship for their monetary value (Aznar et al. 2012). As discussed, the AMUVAM is composed of the AHP and a market pivot value. The AHP is a “selection of alternatives on the basis of a number of criteria or variables, which are often in conflict” (Saaty, 1980). However, this method has a problem, it does not give a direct economic value, hence the need to include a pivot value. For the application of AHP, a decision-maker is needed, who searches from a set of alternatives for the one that best suits his or her interests. It also requires the definition of the criteria to be used to determine which alternatives are most in line with the decision-maker’s wishes. The different interests of the criteria are then weighted in order to select the alternatives. Once all alternatives and criteria are defined, they are compared with the comparison scale (Saaty, 1980) to obtain “n matrices”, where “n” is the number of criteria defined above. The result is a matrix that is used to see the weighting of the alternatives, according to all the criteria and the weight given by the decision-maker.

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Demand Curves: Econometric Modelling and Mathematical Programming

In this section, the construction of demand curves will be described, but focused on the case study of this work: the price of water and how this intervenes in the economic valuation of ecosystem services. For decisions on the uses of water resources in situations of scarcity, it is necessary to know the economic value of water and how it varies depending on the intended use. For this reason, if water is a final good, i.e., the users are direct consumers then it is a final demand (e.g., urban use). On the other hand, if it is an intermediate good, where the user is a producer, it is a derived demand that is determined by the final demand (e.g., farmers, industrialists). The purpose of this methodology is to lay the foundations of a water market depending on its use and demand, in order to be able to economically value the ecosystem services linked to water. In order to value it, econometric models and mathematical programming techniques are used: • Econometric models: the application of statistical techniques to economic phenomena. • Mathematical programming: establishes models that try to obtain the optimal solution according to a set of constraints. Linear regression models aim to reveal and model the relationship between a quantitative dependent variable (costs) and one or more factors, which are known as independent or explanatory variables. The costs of an investment project depend on different variables, such as storage tanks, length of networks, area (km2 ) to be protected, number of pumps, remote sensing and monitoring systems, etc. Consequently, the scalability of the project under study can be explained with a predictive model. Knowing how geographical and technical variables influence the formation of the investment and maintenance cost allows multiple scenarios to be generated, thus reducing uncertainty in decision-making. In order to validate a predictive model capable of projecting the costs of any investment project similar to the current one, a series of basic hypotheses of the model are analysed in order to check the normality of the residuals, multicollinearity of the variables, independence of the residuals and homoscedasticity. The normality of the residuals states that the model errors are normally distributed. If this hypothesis is not fulfilled, it may be because outliers are found in the sample. Multicollinearity occurs when there is linear dependence between the independent variables. The multicollinearity of the variables can be checked by means of the Variance Inflation Factor (VIF). When the VIF is close to 1 it means that there is no correlation between the variables. The independence of the residuals is given by the Durbin-Watson test. The Durbin-Watson test measures the degree of autocorrelation between the residual corresponding to each observation and the previous one. When DW < 1.18 it can be stated that there is correlation, when DW > 1.4 there is no correlation and when DW takes values between 1.18 and 1.4 the independence of the residuals is inconclusive. Homoscedasticity means

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that the error of the variance of the variable is maintained across observations. Using SPSS, homoscedasticity is tested by looking at the predicted and residual values on a graph. If no trends in the distribution are observed, the assumption of homoscedasticity is fulfilled.

2.4.2.4

Travel Cost Method

This method is widely used to value natural parks and, therefore, their ecosystem services from a recreational point of view. The basic principle is found in the relationship between the time used to reach the location where the study is carried out and the time used for their usage and enjoyment, with the money (the real cost) that is used in the same place, such as the amount of fuel used, the expenditure made in the natural area. It could be related to contingent valuation, since it ultimately relates consumer preferences to the consumer’s willingness to pay. However, there is an important difference between contingent valuation and the travel cost method: in contingent valuation the question would be “how much would I be willing to pay...?” or “how much would I be willing to accept for...?” In the travel cost method, it would be “how much have you paid for...?” a more true-to-life question. This methodology also relates to opportunity cost. This is because we not only count the money, which is the real cost of the services of the natural area, and the travel and use time, but also the cost of using this time for this activity, as it could have been used for something else (Llinares and Romero 2008). This method is often used with the comparison to an existing market to carry out an economic valuation: the consumption of a good or ecosystem service of a natural area is linked to the consumption of another marketable or private good. Therefore, it is possible to have an economic approximation of the ecosystem service to be monetarily valued.

2.4.2.5

Hedonic Price Method

This method was first presented by Griliches (1971). Starting from an ecosystem service without a defined market, it determines how the pleasure or discomfort of consuming this ecosystem service affects the price of goods that are indirectly affected and for which there is a defined market (Llinares and Romero 2008). The hedonic pricing methodology starts with the identification of the goods with a given market that are believed to be affected by the hedonic variable. Once identified, the percentage of the value of these goods that have been obtained thanks to this hedonic variable must be calculated. Once this percentage of value is obtained, the marginal willingness to pay can be calculated. An example to understand this method would be, in a newly constructed building we have two types of houses. Both have exactly the same characteristics in terms of size, rooms, layout, materials and appliances, etc. However, house A has a view

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of a Natural Park, with the benefits of aesthetics, fresh air, etc. However, house B has views to a wastewater treatment plant, with the problems that this implies: noise, bad odour, etc. This difference in external factors, which cannot be given a monetary value, means that house A has a higher economic value than house B, and in this way, the percentage of value that this ecosystem service implies in the hedonic price of the house could be calculated.

2.4.2.6

Choice Experiment Method

The choice experiment method is one of the most widely used methods for the economic valuation of environmental assets (Brouwer et al. 2009). This technique consists of assessing and valuing environmental goods by their characteristics and attributes and probabilistic models are applied to choose from a list of different scenarios, understanding among them the different characteristics that can be obtained depending on whether or not action is taken to alleviate environmental problems. For this, an estimated marginal cost is used that can be converted into a willingness to pay by users to change the situation of this environmental good (Glenk et al. 2015). As can be seen, it is similar to the contingent valuation method discussed above. The difference lies in the fact that in the choice experiment the respondent chooses between different scenarios that have different attributes, depending on the form of action that may or may not be established. Therefore, the surveyor has already calculated the economic valuation of the ecosystem service with the different attributes, giving the respondent a choice between them. Normally, the no action scenario, i.e., the current situation, is compared with various scenarios where action is taken, but the form and, above all, the availability of the resource varies (more or less action is taken, depending on the purpose to be achieved).

2.4.2.7

Shadow Prices

The first study related to shadow prices was carried out by Färe et al. (1989) in order to economically value a negative environmental impact resulting from human activities. This negative environmental impact is called undesirable output, and it can be economically valued thanks to the distance function methodology developed by these authors. This methodology has been widely used by numerous authors in order to value the environmental impact generated in different fields (Färe et al. 1993, 1998; Yaisawarng and Klein 1994; Coggins and Swinton 1996; Swinton et al. 1998; McClelland and Horowitz 1999; Reig-Martínez et al. 2001; HernandezSancho et al. 2010). More recently, regarding the water resources management, Bellver-Domingo et al. (2017) use this methodology to calculate the value that would be generated by the removal of emerging pollutants from wastewater, preventing them from reaching the environment.

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It is important to highlight that the so-called undesirable outputs analysed in the different works are considered negative environmental externalities resulting from any human activity. The calculated shadow prices are an approximation of the value that could be given to the environmental damage resulting from a given action, which has not been incorporated into the final price of the goods and services that have caused it. Among the advantages of this methodology for valuing externalities through distance functions with respect to other methods introduced previously are its robustness and the reduced costs compared to the always costly survey processes and the possible appearance of biases associated with both the questions asked and the interviewer himself.

2.4.2.8

Cost-Benefit Ratio

One of the methodologies that presents a great potential to be applied in this study due to its proximity to the topic addressed is the benefit-cost ratio developed by González-Sanchis et al. (2019). The objective of the study is to analyse the efficiency and feasibility of forest management in a semi-arid area located in eastern Spain, between the provinces of Castellón and Valencia. This research takes into account the water balance of the area, the biomass production, and the reduction of fire risk as benefits. To quantify the profitability of the different forest management practices proposed, the benefit-cost ratio is used to obtain an indicator to evaluate the effectiveness and profitability under different scenarios. The benefit-cost ratio developed in the study is presented below:     MVW · W · 1 − Pf + MVW · Wf · Pf + BV · TB · 1 − Pf + BV · TB · Pf .BC = Pf · FEC · BrA + Pf · RC · BrA + MC where: • MVW, marginal value of water (A C/m3 ). • W and Wf , water availability in the soil calculated considering the percolation before and after a fire (m3 ). • Pf , probability of fire occurrence. • BV, biomass value (A C/Mg). • TB, total biomass extracted (Mg). • FEC, fire extinguishing costs (A C). • BrA, area burned (ha). • RC, restoration costs (A C/ha). • MC, management costs (A C/ha).

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2.5 Conclusions Today’s society is increasingly aware of the need to implement actions to promote the change from the current linear model to a circular one. There is a growing predisposition on the part of policy makers and the productive and industrial sector to promote and implement actions that facilitate the transition, since this is the only way to cover the risks in the supply of resources and materials, increasing the response capacity of the production and consumption system in the face of anomalies and shortages in the sources of raw materials, as has been seen in recent years. Many literature references mention the high technological investment required by production sector to promote the recovery and recycling of materials and products; however, when the environmental, social and economic costs of maintaining the current linear economic system are analysed, they probably far surpass those of the actions to be implemented. Therefore, when talking about economic and financial barriers, emphasis should be placed on the lack of mechanisms to finance these technologies. One possible way of guaranteeing the financing of this kind of technology is through the internalisation of environmental and social externalities, but for this purpose there must be appropriate mechanisms to introduce them into the cost of the products or services. The fact that products or services do not internalise the environmental and social externalities generated along the production and consumption chain does not encourage the use of recycled materials and prevents recycled materials or products from competing in price with materials or products from conventional sources. Thus, one of the ways to support the use of products or services that use recycled materials is to internalise the external benefits of these technologies and make them competitive in the market. The internalisation of the external costs resulting from the environmental impacts generated by the current production and consumption system through the application of taxes should have an impact on the reduction of these impacts and also on the increased use of recycled materials, more efficient or more environmentally sustainable processes, since those products or services that are not sustainable or less sustainable should have a higher cost due to the taxes associated with the environmental impacts generated by their production or use. In this sense, it is necessary to emphasise the need to promote all those policies and measures that allow the incorporation of positive and/or negative environmental externalities in products or services, either through taxes, subsidies, support from the EU Structural Funds or other sources of financing, etc. We can conclude that from the point of view of the internalisation of environmental externalities there are a number of challenges that need to be addressed in order to effectively integrate the circular economy into the production and consumption system. These challenges are mainly: (i) to establish institutional procedures to promote the internalisation of environmental externalities through the actors involved; (ii) to establish a common framework of economic instruments to be applied to economically quantify environmental and social externalities;

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(iii) to establish the mechanisms and structures necessary for the integration of externalities.

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European Commission (2015) Commission Staff Working Document: additional analysis to complement the impact assessment SWD (2014) 208 supporting the review of EU waste management targets Färe R, Grosskopf S, Lovell CK, Yaisawarng S (1993) Derivation of shadow prices for undesirable outputs: a distance function approach. Rev Econ Stat:374–380 Färe R, Grosskopf S, Roos P (1998) Malmquist productivity indexes: a survey of theory and practice. In: Index numbers: essays in honour of Sten Malmquist. Springer, Dordrecht, pp 127– 190 Färe R, Grosskopf S, Lovell CK, Pasurka C (1989) Multilateral productivity comparisons when some outputs are undesirable: a nonparametric approach. The review of economics and statistics, 90–98 Fraccascia L, Albino V, Garavelli CA (2017) Technical efficiency measures of industrial symbiosis networks using enterprise input-output analysis. Int J Prod Econ 183:273–286 Ghisellini P, Cialani C, Ulgiati S (2016) A review on circular economy: the expected transition to a balanced interplay of environmental and economic systems. J Clean Prod 114:11–32 Glenk K, Martin-Ortega J, Pulido-Velazquez M, Potts J (2015) Inferring attribute non-attendance from discrete choice experiments: implications for benefit transfer. Environ Resour Econ 60(4):497–520 González-Sanchis M, Ruiz-Pérez G, Del Campo AD, Garcia-Prats A, Francés F, Lull C (2019) Managing low productive forests at catchment scale: considering water, biomass and fire risk to achieve economic feasibility. J Environ Manag 231:653–665 Griliches S (1971) Price indexes and quality change. Studies in new methods of measurement. Harvard University Press, Cambridge Hernández-Sancho F, Molinos-Senante M, Sala-Garrido R (2010) Economic valuation of environmental benefits from wastewater treatment processes: an empirical approach for Spain. Sci Total Environ 408(4):953–957 Kirchherr J, Reike D, Hekkert M (2017) Conceptualizing the circular economy: an analysis of 114 definitions. Resour Conserv Recycl 127(September):221–232. https://doi.org/10.1016/ j.resconrec.2017.09.005 Korhonen J, Honkasalo A, Seppälä J (2018) Circular economy: the concept and its limitations. Ecol Econ 143:37–46 Llinares Llamas P, Romero López C (2008) Economía y Medio Ambiente: herramientas de valoración ambiental. Tratado de tributación medioambiental 2:1189–1225. ISBN 978-848355-735-8 Martín-Gamboa M, Iribarren D, García-Gusano D, Dufour J (2017) A review of life-cycle approaches coupled with data envelopment analysis within multi-criteria decision analysis for sustainability assessment of energy systems. J Clean Prod 150:164–174 McClelland JD, Horowitz JK (1999) The costs of water pollution regulation in the pulp and paper industry. Land Econ:220–232 MEA (2005) Ecosystems and human well-being: synthesis. Island Press, Washington, DC Mitchell P, James K (2015) Economic growth potential of more circular economies. Waste and Resources Action Programme (WRAP), Banbury Murray A, Skene K, Haynes K (2017) The circular economy: an interdisciplinary exploration of the concept and application in a global context. J Bus Ethics 140(3):369–380 Paquin RL, Busch T, Tilleman SG (2015) Creating economic and environmental value through industrial symbiosis. Long Range Plan 48(2):95–107 Reig-Martínez RE, Picazo-Tadeo A, Hernandez-Sancho F (2001) The calculation of shadow prices for industrial wastes using distance functions: an analysis for Spanish ceramic pavements firms. Int J Prod Econ 69(3):277–285 Rizos V, Tuokko K, Behrens A (2017) The circular economy: a review of definitions, processes and impacts. CEPS papers (12440) Romero C (1996) Análisis de las decisiones multicriterio, vol 14. Isdefe, Madrid Saaty TL (1980) The analytic hierarchy process. McGraw-Hill, New York

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Sehnem S, Vazquez-Brust D, Pereira SCF, Campos LM (2019) Circular economy: benefits, impacts and overlapping. Supply Chain Manage 24:–784 Stern N (2006) Stern review: the economics of climate change Swinton J, Harwood J, Grenfell BT, Gilligan CA (1998) Persistence thresholds for phocine distemper virus infection in harbour seal Phoca vitulina metapopulations. J Anim Ecol:54–68 Trucost PLC (2013) Natural capital at risk: the top 100 externalities of business. TEEB, Geneva Turner RK, Daily GC (2008) The ecosystem services framework and natural capital conservation. Environ Resour Econ 39(1):25–35 UNEP (2011) Towards a Green Economy: Pathways to sustainable development and poverty eradication - A Synthesis for Policy Makers. https://www.unep.org/greeneconomy United Nations (2020) The sustainable development agenda. https://www.un.org/ sustainabledevelopment/development-agenda/ Vanner, R., Bicket M, Withana S, ten Brink P, Razzini P, van Dijl E, Watkins E, Hestin M, Tan A, Guilcher S, Hudson C (2014) Scoping study to identify potential circular economy actions, priority sectors, material flows & value chains. Study prepared for the European Commission, DG Environment Yaisawarng S, Klein JD (1994) The effects of sulfur dioxide controls on productivity change in the US electric power industry. Rev Econ Stat:447–460

Chapter 3

Circular Economy and Sustainable Production and Consumption Arzoo Shahzabeen, Annesha Ghosh, Bhanu Pandey, and Sameer Shekhar

Abstract For a long time, it has been a common, one-way process of using materials taken from the earth and ending up discarding them as waste. The circular economy is primarily concerned with the reduction of waste and pollution, the reuse of products and materials, and the renewal of nature. It is an alternative model of production, consumption, and disposal that is being proposed as a way to address both mounting environmental crises and expanding global prosperity. It is considered a powerful tool for resource conservation and reducing needless environmental exploitation. Efficient and effective output can be guaranteed through the adoption of sustainable consumption and production practices. It safeguards the requirements of future generations while ensuring that human activities do not exceed Earth’s carrying capacity. The consumption pattern in an economy determines the growth and success of the economy, which can be improved by switching to reusable products. In this chapter, we have looked at the theoretical foundations of the circular economy and their connections to sustainability as they are currently formulated in the literature. The research also aimed to provide a concise summary of the circular economy, including its background, possibilities, management, business opportunities, and metrics. The chapter discussed the gap between conventional and circular economic systems. Furthermore, the study also discussed the challenges and limitations of the circular economy at the institutional, technical, managerial, and societal levels. Keywords Linear economy · Natural resources · Recycle · Reduce · Reuse · Waste

A. Shahzabeen Mount Carmel College, Autonomous, Bengaluru, Karnataka, India A. Ghosh () Department of Life Sciences, School of Natural Sciences, Central University of Jharkhand, Ranchi, India B. Pandey · S. Shekhar CSIR-Central Institute of Mining & Fuel Research, Dhanbad, Jharkhand, India © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Singh et al. (eds.), Green Circular Economy, Circular Economy and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_3

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3.1 Introduction Since the industrial revolution, both the growing global population and demand for natural resources have increased significantly, indicating a rise in natural resource consumption. As a result of such indiscriminate use, there has been a significant depletion of our natural resources, and there has been strong speculation that the resulting environmental damage will exceed the environment’s carrying capacity in the near future. Additionally, driven by these factors (urbanization, population bloom, industrialization, and other anthropogenic activities), the rates of global waste generation have been alarming, and by 2050, the world is projected to generate 3.4 billion tons of waste per year, a significant increase from the 2.01 billion tons generated annually at present (Kaza et al. 2018). Environmental issues such as biodiversity loss, air, soil, and water pollution, the depletion of resources, and unsustainable land usage are increasingly threatening the life-support systems of the Earth (Rockstrom et al. 2009). To deal with these problems, the circular economy has gained popularity in recent times. However, there is still a long way to go in order to make the shift from a linear to a circular economy paradigm, which will necessitate the introduction of novel insights that will ultimately result in cutting-edge technology developments that will enable the creation of environmentally friendly goods and services (Abad-Segura et al. 2020). The idea of a circular model of production is not a new concept. Boulding (1966) described Earth as a “closed spaceship” with limited reservoirs of resources, and humans must discover the significance of being a part of this cyclical ecological system of production. Other possible sources of inspiration for the notion of a circular economy include Rachel Carson’s Silent Spring (Carson 1962), the “limits to growth” argument of the Club of Rome (1970), and the work of eco-economist Herman Daly (Naustdalslid 2014). In the year 1990, Pearce and Turner (Pearce and Turner 1990) introduced the concept of a circular economy in their book “Economics of Natural Resources and the Environment,” using ideas from the previous studies of Kenneth E. Boulding. It began by looking at the traditional linear economic system and developing a new economic model known as a “circular economy,” which was based on the first two laws of thermodynamics. They developed a conceptual framework, such as the source-product-pollution mode of the circular economy. However, it is important to note that the concept of a “circular economy” does not apply to thermodynamics, because no system can be 100% circular (or closed) according to the entropy law (Andersen 2007). Table 3.1 provides a summary of the objectives and conclusions of some noteworthy investigations published to date. Initially, the 3Rs were the cornerstones of the circular economy idea, which includes reducing, reusing, and recycling (Wu et al. 2014), and later, the 6Rs principle was adopted, which mainly encompasses reusing, reducing, redesigning, recycling, recovering, and remanufacturing (Jawahir and Bradley 2016). Various cultural, social, and political systems influenced the distinct evolution of the notion of a circular economy. In the early 1990s, the circular economy concept

To promote the circular utilization of agricultural resources

To develop a new system of circular economy using traditional linear economic system

To present a multi-sectorial and macro-meso level framework to monitor (and set goals for) circular economy implementation in cities To review the history of the circular economy concept to provide a context for a critical examination of how it is applied currently

To describes a new tool to ensure the quantification of circular initiatives and the method to define it

2

3

4

6

5

Objective of the studies To adapt the theoretical circular economy framework in the field of agriculture

S.No. 1

Circular economy-related initiatives require integrated bottom-up and top-down approaches to implementation and evaluation. Critical research gaps observed in this study include the circular economy concept application to and assessment of the biological systems (e.g., agricultural industries) and the chemical/biochemical industry products and value chains A new Circular Business Model (CBM) visualization tool, which overcomes the main limitations of the existing models able to explain circular economy concepts but not to boost its practical implementation in industry. Every industry can use CBM to find hidden circular possibilities or choose the optimum circular economy strategy

Conclusions The gap between circular economy framework and agriculture sector could be reduced in two ways: (i) by adapting the general circular economy framework to the agricultural sector’s specificities; (ii) by evaluating how indicators of agricultural production systems’ circularity support decision-making Publicity and education should be strengthened to promote the concept of ecological values and green consumption in the whole society like choosing less packaging or recyclable items, rather than a one-time item to minimize waste generation. Traditional linear system could be used to develop a new circular economy which uses the first two laws of thermodynamics. Developed a new conceptual framework for circular economy, such as the source-product-pollution model. Four economic functions of the environment can be identified: amenity values, resource provision, waste and emission sink, and life-support system Framework encompasses circular economy key concepts, such as flexibility, modularity, and transparency. It is structured to include all sectors in which circular economy could be adopted in a city

Table 3.1 Highlights of some of the important studies published on circular economy till date

(continued)

Bianchini et al. (2019)

Winans et al. (2017)

Cavaleiro de Ferreira and Fuso-Nerini (2019)

Pearce and Turner (1990)

Jun and Xiang (2011)

References Velasco-Muñoz et al. (2021)

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To describe the foundations for establishing a circular in small and medium enterprises in India To present the principles of sustainable manufacturing to serve as the basis, and to provide the technological elements to ensure the creation of a circular economy To describe the role of soil and land management in a circular economy

8

10

9

Objective of the studies To map methodological developments regarding circularity metrics for products and services

S.No. 7

Table 3.1 (continued)

The circular economy is highly dependent on the functioning of soils and land for the production of food and other biomass. Earth diminishing potential for resource production, due to a range of reasons, is leading to resource scarcity. The management of the resources, land, and soil is thus necessary to make a circular economy successful

6R-based technological elements, which encompass reusing, reducing, redesigning, recycling, recovering, and remanufacturing are identified and shown as essential ingredients for achieving economic growth, environmental protection, and societal benefits

Conclusions The circular economy is expected to be the optimal pathway to sustainable development. A good circularity metric should measure how circular strategies contribute to sustainable development without shifting the burden from reduced material consumption to increased environmental, economic, or social impacts The circular economy faces institutional, technical, managerial, and societal challenges

Breure et al. (2018)

Jawahir and Bradley (2016)

Sohal et al. (2022)

References Corona et al. (2019)

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was introduced into German environmental policy with the goal of addressing challenges associated with input materials and natural resource utilization for longterm economic growth (Geng and Doberstein 2008). Since the beginning of the twenty-first century, China has pursued comprehensive circular economy policies, such as resource-oriented, production-oriented, waste-oriented, use-oriented, and life cycle-oriented. In China, the notion of circular economy is utilized as a tool for profitable product creation, the development of new technologies, the updating of equipment, and the improvement of industrial management (Yuan et al. 2006). In the United Kingdom, Denmark, Switzerland, and Portugal, the circular economy concept is mostly applied to waste management, although in certain regions of Korea and Japan, an increase in consumer responsibility for material and waste usage has been seen for its application. In North America and Europe, enhancing 3Rs initiatives (reduce, reuse, and recycle) and conducting product-level life cycle analyses have been the primary motivation behind the application of the circular economy concept (Winans et al. 2017).

3.1.1 Why Circular Economy? We use materials obtained from the earth and, at last, throw them away as waste— the process is direct. The circular economy mainly focuses on the elimination of waste products, using materials to their full value, and their subsequent renewal. By these methods, it boosts economic growth. The circular economy is the model for sustainable use of nature and its products by eradicating toxic substances from nature. The circular economy focuses on corporate and industrial processes for the natural development of products. It promotes the idea of conserving natural resources by combining science and technology with societal policies. In today’s time, circular economies can be understood as a universal system that flows in a circular loop with multiple knots (Cavaleiro de Ferreira and Fuso-Nerini 2019). The circular economy provides structural support to the combined existing methods and plans in a systematic way, which helps in achieving low consumption of resources and low production of pollution with a high circulation rate. Essentially, it promotes the idea of preserving the ecosystem’s balance and preserving the environment and natural resources for future generations, so that our children and grandchildren can benefit from the resources provided by nature. The main component of a circular economy is related to the usage of products and the energy flow of the products in an ecosystem. The most important is a closed-loop ecosystem in which waste is nearly zero because every residual created from waste is used for product renewal or to create new products from its segments.

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3.2 Principles of Circular Economy • Elimination of pollution and waste: The elimination of waste and pollution is the primary tenet of the circular economy. Because the resources on our planet are limited, a take-make-waste economic system cannot function over the long run. The circular economy paradigm blends scientific principles with natural cycles. Waste that is produced can be recycled with the aid of contemporary technology. Rather than piling up, generated trash should be incorporated into subsequent manufacturing cycles. Companies were able to develop practical circular economy strategies within the industrial ecology framework due to technological advancements, design, and recovery processes (Hobson 2016). This encouraged a decrease in raw material consumption and waste production, which has positive environmental and financial effects for businesses (Andersen 2007). • Circulation of products and raw materials at their highest level of values: Circulating goods and materials at their peak utility value is the circular economy’s second tenet. Maintaining materials in use implies using them either as a product or, when that is no longer possible, as components or raw materials. Nothing is wasted in this manner, and materials and goods maintain their inherent value. There are numerous ways to maintain the circulation of goods and resources, and it can be useful to consider two primary cycles: the technological cycle and the biological cycle. In the technological cycle, products are reused, repaired, remanufactured, and recycled, whereas biodegradable materials are returned to the ground in the biological cycle via procedures such as composting and anaerobic digestion. Prolonging replacement is one method of extending the lifespan of an item when it is owned. Replacement behavior can be influenced by a wide range of elements, including customer attitudes and situational circumstances (Van Nes 2016). This may be caused by product development strategies (layout for repair and upgrade, etc.) or a strong product connection. If a customer returns a used item, allowing the product, parts, or materials to be recirculated, it is one way for businesses to realize value from those products (Wilson et al. 2017). Its highest degree of value is maintained if the object continues to function as a whole. As an alternative, users might sell, generally through a third-party website or a used-goods store. Last but not least, individuals could promote reuse by donating unwanted goods to charities or friends and family or by sharing them on networks. In a circular economy, material recycling is the lowest degree of value preservation, although in specific product categories and situations it might be significant. In these situations, correct disposal and recycling are required. Anaerobic digestion, taking products to a certified recycling facility, or specifically avoiding throwing them in the regular trash can be included in this. • Room for nature to thrive: Increased resource consumption is putting a strain on the environment and depleting its natural resources. Ecosystems are under stress

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because of human activities, which have detrimental effects on biodiversity and the services ecosystems provide (such as adapting to and mitigating the effects of climate change, degrading pollutants, preventing soil erosion, and increasing soil fertility). Furthermore, the adoption of improper disposal of resource residues in the waste phase of product life can have serious consequences for the environment. Adopting a circular economy, encouraging the efficient use of resources and preventing the production of problematic residue, is in response to the rising environmental stress resulting from different anthropogenic activities such as mineral resource extraction, land use and degradation, the disposal of waste materials, and the scarcity of land and resources (Breure et al. 2018). We must resort to creating natural capital rather than perpetually destroying nature. Therefore, regeneration of nature is the circular economy’s third major goal. A circular economy, as opposed to the concept of “take-make-waste” in a linear economy, supports natural processes and creates more space for nature to flourish (Fig. 3.1). By adopting a more circular model for economic activity, we may redirect resources from extraction to renewal. The goal of the circular economy is to completely eliminate waste by reusing and recycling everything possible. Long-term, effective (re)use of resources is central to the circular economy. In this light, the (renewable) biobased materials’ utilization as manufacturing elements is considered crucial to the circular economy (De Baan et al. 2013). However, possibilities for applying biobased resources in various ways could lead to increased competition for scarce land.

Fig. 3.1 Linear v/s Circular economy

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3.3 Circular Economy in the Agricultural Sector In order to meet the demand for food in 2050, studies show that agricultural production around the world needs to rise by 70% (Aznar-Sanchez et al. 2020). In a typical business scenario, there are two ways to reach this goal: either by expanding the amount of land used for agriculture, which in 2017 accounted for about 37% of the total available surface (FAOSTAT 2020), or by increasing production in the areas that are already being farmed, which could increase the amount of land used for agriculture by up to 38% while increasing global water consumption by 53% (Alexander et al. 2015). Therefore, such rising agricultural demand has imposed a disequilibrium between production and environmental preservation, concomitant with a significant obstacle to the sustainable long-term management of natural resources (Rufi-Salis et al. 2020; Vanhamäki et al. 2020). For these reasons, the concept of the “circular economy” has emerged as a viable option for maximizing economic output while simultaneously minimizing the detrimental effects of agricultural activities on the environment (Stegmann et al. 2020). Resource efficiency is the core axis of decision-making and economic practices, as stated by Canales et al. (2019), in order to guarantee higher added value and keep resources inside the production system for as long as possible. To maximize productivity in circular agriculture models, it is important to optimize procedures so that resources are used as efficiently as possible and no unnecessary by-products are created (Sherwood 2020). Sustainability is a key concept when addressing the adoption of a circular economy in agriculture. Since the circular economy strives to promote sustainable development by fostering economic and social prosperity and environmental protection through the prevention of pollution (Burgo-Bencomo et al. 2019), instead of being a subsidized industry, circular agriculture should become a cornerstone of the economy to ensure its long-term viability (Bos and Broeze 2020). Additionally, it must guarantee the sustainability of biodiversity and production efficiency in its agroecosystems over time, thereby ensuring environmentally sustainable practices (Jun and Xiang 2011), and generally contribute to social sustainability (Burgo Bencomo et al. 2019) by ensuring food security, alleviating poverty, and strengthening living conditions and public health. Last but not least, it is commonly acknowledged that circular agriculture requires regenerative practices, which are considered strategies that preserve and improve ecological services (Morseletto 2020). As circular production models are established in agroecosystems, agriculture must advance to include regenerative technologies that seal nutrient loops, reduce leakage, and enhance each loop’s durability in terms of its value (Morseletto 2020). However, adopting circular models in agriculture necessitates a paradigm shift in the production and use of agricultural goods. Value chains must be reorganized to improve local product marketing and create business models that allow materials to cascade until they are assimilated into the ecosystem, preventing the loss of priceless nutrients. Consumers must adopt a more environmentally conscious mindset and

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support the growth of this type of business model through their purchase decisions (Velasco-Munoz et al. 2021).

3.4 How Circular Economy Supports Sustainable Development Since the circular economy and sustainable development are related ideas, circular economy might be used as a useful instrument to support sustainable development (Corona et al. 2019; Millar et al. 2019; Skvarciany et al. 2021). The circular economy’s guiding principles have numerous advantages for the environment and society, including limits on energy use, waste production, and resource use, and they directly support the possibility of sustainable growth (Fellner et al. 2017; Gregson et al. 2015). As a result, the circular economy might be a powerful tool for resource conservation and reducing needless environmental exploitation. The following are some instances of how the circular economy can help advance sustainable development.

3.4.1 Cradle-to-Cradle In 2001, Michael Braungart and William McDonough developed a new method based on the concept of eco-effectiveness in manufacturing in which everything is intended for reuse (Braungart and McDonough 2001). All products should be easily disassembled into their component parts for reuse in the creation of new items. The primary objective is to manufacture components that can be retrieved and reused. They were attempting to reduce waste to zero. Cradle-to-cradle design, positive lists, intelligent materials pooling, and other techniques contribute to eco-effectiveness and the development of cycle material flow metabolisms (Van Dijk et al. 2014). Eco-effective material flow systems not only enable materials to keep their position as resources but also enable a continuous accumulation of knowledge that serves as the foundation for real upcycling by creating a coherent network of information flows among participants in the material flow chain (Berndtsson 2015). This ongoing accumulation of knowledge is a constant source of added value for goods and services and establishes a positive link between environmentally friendly industrial systems and long-term economic development. Beyond achieving zero emissions, the goal is to use resources in a way that preserves or boosts their value and production over time. Coherent biological and technical metabolisms ensure the availability of raw materials for industrial processes. Industry performs material recycling as part of its technical metabolism, which results in more jobs and economic activity (Braungart et al. 2007). Ecological processes inside the biological metabolism recycle materials, which leads to the

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renewal and replenishment of natural systems. The favorable association between biological metabolism and natural system health is the cornerstone for a constructive recoupling of the interaction between ecology and economy.

3.4.2 Performance Economy In 1981, Stehle and Rede-Mulvey proposed that closed loops favor the reuse, repair, and remanufacture of goods over the manufacture of new goods and have positive effects in terms of job creation, economic competitiveness, resource savings, and preventing waste. This was part of a study that looked at the possibility of substituting manpower for energy. The circular economy strives to accomplish the following four basic goals: the extension of product life; the provision of services rather than goods; the development of a “functional service economy”; and a performance economy (Stahel 2020). This concept suggests that the circular economy needs to function within a framework in order to be efficient.

3.5 Challenges in Circular Economy In recent years, scholars and institutions have widely investigated the concept of a “circular economy” as a possible approach to improving the sustainability of our economic system. Reuse, repair, and recycling are becoming increasingly important in a variety of industries. At the same time, businesses are becoming more interested in this new economic model (Elia et al. 2017). However, the framework for the circular economy still does not provide any precise criteria to support the selection of actions, nor does it provide any explicit guidance on how to put the concept into effect. In spite of all of these obstacles, the concepts that are implemented by the circular economy offer a great deal of potential (Bianchini et al. 2019). It enables a synthesis of environmental stewardship and commercial concerns by asserting that value creation is still possible within robust planetary constraints. Proponents of the circular economy, who drew inspiration from ecological principles, have turned the concept’s many advantages into tangible market niches (Whicher et al. 2018). As the idea still has some problems, it is important to study it from both an academic and a practical point of view (Merli et al. 2018) to understand how the ideas and principles of circular economy can be used in modern business practices. Even though the circular economy is mostly about managing waste, it is important to think about the following things when getting ready to use it:

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3.5.1 Waste Treatment Infrastructure In addition to the appropriate regulations, adequate personnel and infrastructure are very important components in order to achieve the prospects of the circular economy concept, in which the amount of money, work, and time that are required to prepare everything that is necessary are of utmost significance (Van Buren et al. 2016). For example, in the world’s lands, rivers, and oceans, nearly one-third of all plastics are left behind because they are not collected by a waste management system and end up as litter (Rosenboom et al. 2022). This challenge is especially acute in developing countries since those countries usually lack sufficient infrastructure for garbage handling (Nnorom and Osibanjo 2008). China, Indonesia, the Philippines, Thailand, and Vietnam account for more than half of all plastic litter; thus, enhancing waste management and recycling infrastructure in these nations might significantly reduce the amount of plastic that enters our protected environments.

3.5.2 Convenience-Oriented Recent studies on the circular economy have shown that cultural hurdles, notably a lack of user or customer acceptance, are a substantial impediment to the spread of so-called “circular” business models. Johnson (2013) suggests adopting techniques like bringing linen bags to the grocery store and buying rice, beans, and other staples from bulk bins to live a waste-free life. The study concluded that there is more plastic garbage today than there was in the 1960s when it compared current plastic consumption trends with those of the time (Johnson 2013). Before people use a lot of single-use, disposable plastic products and packaging, there needs to be a change in how people live (Müller and Schonbauer 2020).

3.5.3 The Current Recycling Technology From a recycling standpoint, closed-loop recycling is severely hindered by the complexity of the products and the variety of the waste. The majority of waste is made up of mixtures of several different materials, making it impossible to recycle them without first separating them, which is frequently not yet practicable. Additionally, a variety of contaminants may make a material more difficult to recycle, depending on the recycling technology. Since there are lengthy supply chains, accurate information is needed but is currently impossible to obtain. The phase of sorting is crucial to closing the material loop from a recycling perspective (Karell and Niinimäki 2019). According to the sorting perspective, automation is seen as a necessary future development because hand sorting is unable to do so at

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this time with the required efficiency and precision. The internal issues raised by the experts are related to the state of technology today. Recycling experts concur that it is too soon to provide explicit instructions to designers and sorters because chemical recycling technologies are still in their infancy (lab or pilot) (Gloeser-Chahoud et al. 2021). Only 2–3% of recycled plastics are transformed into goods with the same or comparable level of quality; the majority of recycled plastics are simply shredded and reprocessed into lower-value uses, such as polyester carpet fiber. This is mostly due to the limitations imposed on the methods by which plastics can be characterized according to their chemical composition and cleaned of additives. In order to encourage makers of consumer goods to make use of recycled plastics, we require improved recycling technology that is capable of preserving the material’s quality and purity (Awasthi et al. 2022). When this technology is implemented on a broad scale, we will be able to begin reclaiming the economic worth of plastics, which will encourage the recycling and recovery of these materials.

3.5.4 The Business Frameworks The global population is projected to surpass 9.5 billion by the year 2050, with a significant decrease in the number of people living in poverty compared to today, which means that a lot more people have an interest in purchasing a lot more goods. Developing countries like China, Brazil, and India are the main concern here. This is a huge step forward for human development, but it poses a serious risk to the health of our planet unless the companies that manufacture and trade goods can completely reform the way they conduct business. Companies should consider recovery and recycling when designing new products. For example, if manufacturers of lithium-ion batteries for smart phones developed their goods with identical chemical compositions, it would make it possible for more recycling since recyclers would be able to standardize their procedure (Mossali et al. 2020). This would enable more recycling. Instability, such as international conflict implementation, requires ensuring programs match the local context and including the political will to translate development programs into long-term, sustainable practices.

3.5.5 Energy System Transformation There are many obstacles standing in the way of effective mitigation and sustainable development (Fatimah et al. 2020), and the first and most important is ensuring that people and policymakers learn from scientific and factual evidence and modify their perspectives and current consumption patterns accordingly (Maitre-Ekern and Dalhammar 2019).

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3.6 Challenges to Implementing Circular Economy in India India has one of the fastest-growing economies, and it is expected to become the major economy with the fastest growth rate (Sharma 2021). Coupled with rising household incomes, this strong economic growth has led to more spending by consumers, which is expected to reach USD 4 trillion by 2025. With 1.3 billion people, or 18% of the world’s population, living on only 2.4% of the earth’s surface, India is poised to face significant resource constraints (Chawla and Kumar 2022). India must start a model of development that is positive, includes everyone, and is environmentally sustainable (Akadiri and Adebayo 2021). There is more demand for land, soil, water, and materials mined from the earth. Between 1970 and 2010, India got about 420% more of its raw materials from the ground (Sharma 2021). India depends on the international market to get access to important resources like rare earth minerals and other things because its reserves are shrinking and it can’t get them any other way (Verma et al. 2022). The key to leading this change toward building a low-carbon, resource-efficient economy is to find ways to use the circular economy. The way India’s manufacturing sector has grown in the past isn’t compatible with the planet’s ability to provide and replenish resources (Dey et al. 2022). Also, the traditional approach to a linear economy creates a lot of waste at all stages of a product’s life cycle. A circular economy based on sharing, leasing, reusing, repairing, refurbishing, and recycling can help decouple economic growth from resource use. This is done in a (almost) closed loop to keep as many resources from going to waste as possible. There is huge potential for the circular economy in India. The estimated size of the recycled polyethylene terephthalate (PET) business in India is $400–550 million. According to the National Chemical Laboratory and PET Packaging Association for Clean Environment, India has a 90% recycling rate of PET, which is higher than Japan’s (72%), Europe’s (48%), and the United States’ (31%) (Singh et al. 2022). PET waste in India is recycled by the organized sector (65%) and the unorganized sector (15%) and reused at home (10%). However, there are various difficulties in fully implementing circular economy in India. A circular economy has global issues, such as uncertainty in product supply, quality, and return time. However, these issues are exacerbated in India due to the extended life and inadequate maintenance of the products. The first technical stage in a circular economy after product collection is the disassembly of used goods, which presents a significant challenge (Rejeb et al. 2022). Unfortunately, a lot of study has been done on the simplicity of assembly, and as a result, various tools and approaches for cost-effective assembly have been developed (Dey et al. 2021). The design for disassembly study has also begun, but the findings are not yet developed enough for industry use (Pervez 2022). The circular economy faces institutional, technical, managerial, and societal challenges (Sohal et al. 2022). The role of the government or government agencies is crucial to easing the challenges. The government must prepare for infrastructure needs, build it, and, if necessary, invest in technology development. Important

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choices include the number and location of recycling facilities, the usage of recycled materials, etc. (Aarikka-Stenroos et al. 2021). In India, the majority of the designated or authorized waste electrical and electronic equipment (WEEE) recycling facilities are inoperable. However, the unorganized sector recycles a significant volume of WEEE (Jeyaraj 2021). With the right technology, the idea of urban manufacturing should be investigated. The lack of legislation, proper enforcement of legislation, and uncertain future legislation are important governmental challenges leading to a lack of top management commitment at the industry level (Bhatia and Jakhar 2021). At the planning stage, the government should not undermine the importance of technology creation, particularly indigenous technology. Technological challenges are huge in the recycling sector if recycling is to become socially acceptable, environmentally friendly, and economically viable. The government should plan proper buyback laws that clearly mention the collection, refurbishing, remanufacturing, recycling, and disposal methods for the product. This may force businesses to partner with the government for recycling technology development. There is a scarcity of circular economy managers and advisors who can plan reverse logistics or integrated logistics activities. Even developed countries like Germany are facing a human resource crunch in this sector (Manniche et al. 2017). India can take the lead if there are proper technical courses in this sector. Proper courses can be designed for all three tiers of technical education. Two important social challenges are the lack of awareness and the lack of public pressure. Additionally, the public needs to be made aware of the unscientific disposal of CFLs, LEDs, WEEE, and other items as municipal waste. To avoid creating obsolete plans and wasting public money, government authorities should be well aware of the latest technologies and possibilities for recycling hazardous items. To develop and implement circular economies for various sectors, the government should bring together various stakeholders, including non-profits, social scientists, and technology professionals. The benefits of a “circular economy” must be considered in terms of both environmental and social as well as economic benefits.

3.7 Limitations of Circular Economy The circular economy is a synthesis of scientific and semi-scientific concepts (Korhonen et al. 2018). Circularity has over 300 definitions; therefore, it means various things to different individuals (Kirchherr et al. 2017). Policymakers, enterprises, business consultants, business groups, and business foundations have developed and used the theory and its implementations (Korhonen et al. 2018). Circular economics research communities differ greatly (Korhonen et al. 2018). The circular economy is fragmented conceptually (Blomsma and Brennan 2017) and lacks paradigmatic strength (Inigo and Blok 2019). The circular economy is a new way of manufacturing and using things in industry (Korhonen et al. 2018).

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It’s a multiplicity (Corvellec et al. 2020), an umbrella notion that excites people since it can address many problems. When put into practice, individuals have doubts about what it implies (Blomsma and Brennan 2017). Circular economy has many connotations, which may be why it’s popular (Velis 2018), but it’s hard to explain. “Circular economy” ignores many facts. It ignores the thermodynamic concept that one cannot create or destroy matter; consumed resources must end up in the environmental system; they can only be converted and dissipated (Giampietro and Funtowicz 2020). A future without waste, closed material loops, and infinite recycling is impossible. Material characteristics and manufacturing and reprocessing processes limit material loop closure (Velis and Vrancken 2015). Dissipation, pollution, and material wear limit the circular economy (Parrique et al. 2019). The circular economy doesn’t fully address waste’s complexity (Mavropoulos and Nilsen 2020) and underestimates the difficulties of connecting waste streams to production and substituting secondary goods for primary goods (Zink and Geyer 2017). Waste as a resource may increase demand rather than reduce waste volumes (Greer et al. 2021). A true circular economy approach should take massive stocks and secondary materials into account (Mavropoulos and Nilsen 2020). Supporters of the circular economy and circular business models have been found to have a simplified view of consumption as buying and recycling (Casson and Welch 2021), of citizens as consumers, and of consumers as users (Hobson 2020). This means that citizens are expected to accept or reject practices that designers, engineers, economists, and policymakers have made for them (Hobson 2016). Circular strategies also don’t take into account the large amounts of used materials and objects that are stored in homes, businesses, and infrastructures (Fellner et al. 2017). The circular economy is a way of doing business and doing research that focuses on flows instead of stocks. And yet, the potential rebound effect, also called Jevon’s paradox, is an unsolved problem for the circular economy. This is because efficiency improvements at the level of individual products are offset by a rise in consumption and use of materials (Schroder et al. 2019). Eventually, these effects could be especially noticeable in developing economies (Zink and Geyer 2017). Also, the way goods move around may keep hazardous substances in the economy that should be phased out, which would increase the spread of dangerous elements (Johansson et al. 2020). Circular economic techniques have been used without explicit system constraints (Inigo and Blok 2019). Its technocentric view bridges a gap between a comprehensive approach and end-of-pipe strategies that focus on growth and competitiveness rather than social and environmental concerns (Friant et al. 2021). Policy instruments are offered to get things moving, not to stop the linear economy. In the waste industry, implementation attempts adopt a top-down approach that favors a single, centralized waste treatment technology, ignores how hard it is to anticipate the future, and makes it difficult to adapt. Unknown system boundaries, the unpredictability of the waste industry, and imprecise governance make it impossible to evaluate, appraise, and enhance economic circularity (Schroder et al. 2019). This increases the possibility of less-than-ideal practices (Webster 2013) and

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makes it difficult to determine what type of circular future is being built (Volker et al. 2020). A linear business model is validated when a certain number of products or services are sold; a circular model is validated when recirculated products are sold (Linder and Williander 2017). Technical barriers include insufficient technology or a lack of technical support and training; economic barriers include high initial costs or uncertain returns and profits; institutional and regulatory barriers include a deficient legal system or an inadequate institutional framework; and social and cultural barriers include consumer rigidity. Companies lack the skills needed to adapt innovative business models for the circular economy (Pieroni et al. 2021), so the concept is rarely implemented (Khan et al. 2021). The circular economy promises “green growth” and the decoupling of economic and environmental growth. Building circular material flows is considered by some as a way to decouple but not as an objective in itself (Blum et al. 2020). Circular economy and sustainability are often confused, despite the latter’s comprehensive nature. The dubious conceptual link between the two conceptions has yet to be adequately described (Millar et al. 2019). There is a clear need for conceptual coherence about definitions, plans, implementations, and modes of evaluation before the circular economy can become mainstream and move beyond the realm of sustainability and circular economy professionals. This is because, in the absence of coherence, the expansion of new knowledge could be obstructed by deadlocked debates or collapse entirely (Kirchherr et al. 2017).

3.8 Recent Initiatives in Circular Economy In a large country like India, 1.2 billion people live in urban areas. Together, they make about 62 million metric tons of municipal solid waste (MSW) every year. By 2030, this amount should reach 165 million metric tons per year (Cheela et al. 2021). Because of this, the already huge amount of greenhouse gas (GHG) emissions from municipal solid waste (MSW) is expected to double by 2030, adding up to 41 million metric tons of CO2 emissions (Sharma and Sinha 2023). The NAMA (Nationally Appropriate Mitigation Actions) Support Project (NSP), “India—Waste Solutions for a Circular Economy,” has the goal of achieving a low-carbon transformation of the Indian waste sector. This will be accomplished by increasing and de-risking investments as well as strengthening the regulatory framework. This will ensure uptake of the Reduce, Reuse, and Recycle concept as well as leverage the strengths of the informal recycling sector. In addition, the NAMA Support Project (NSP) makes it easier to carry out extended producer responsibility (EPR) by providing channels that promote the coordinated engagement of a variety of stakeholders (Khatri-Chhetri et al. 2021). The project is expected to result in direct GHG emission reductions of more than one million metric tons during project execution

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and approximately seven million metric tons cumulatively 10 years after project completion. AAKAR Innovations is the sole manufacturer of entirely compostable and biodegradable sanitary napkins. Access to sanitary napkins is crucial for the social inclusion of women, and the biodegradable design eliminates the enormous environmental impact of commercial plastic pads. They are also attempting to increase awareness about Menstrual Health Management (MHM) and intend to educate communities about the significance of feminine hygiene. Women are also empowered during the manufacturing process, which takes place in villages across India and Sub-Saharan Africa (Zhongming et al. 2021). PlastiCircle, which is funded by the European Union’s Horizon 2020 research and innovation program, is introducing advanced techniques for garbage collection, transportation, sorting, and recycling with the goal of converting plastic packaging waste into valuable products (Roche Cerasi et al. 2021). They are developing smart containers to boost the collection rate of plastic rubbish, cost-effective waste transport systems linked to IoT cloud platforms, breakthrough optical sorting technologies to improve sorting, and innovative recycled plastic commodities with added value. They are also attempting to redefine business ideas and promote replication of recommended solutions through training and awareness-raising actions for individuals, institutions, and private businesses. They are doing so throughout Europe, most notably in their three pilot cities: Alba Iulia, Romania; Valencia, Spain; and Utrecht, the Netherlands (Habek and Villahoz 2018). The German government has set a target of 15 million electric vehicles on the road by 2030 in order to meet its climate goals (Sun et al. 2020). Consequently, the growth of electromobility will continue to accelerate over the next few years. The demand for lithium-ion batteries for the vehicle’s drive system (traction batteries) is increasing as the number of electric vehicles increases. Since lithium-ion batteries are a crucial component of electric vehicles, it is becoming increasingly important that these batteries are produced, utilized, and recycled in an environmentally responsible manner. The primary objective of the Battery Pass project is to contribute to an internationally accepted battery passport by the end of 2024 (Zhao et al. 2021). The project encompasses content-related and technological standards, cooperation with stakeholders, demonstration, and analytic benefit evaluation. The creation of scientifically sound material, co-created by industrial partners and approved by actors in civil society, will maximize acceptability and benefit. The Battery Passport promotes the circular and sustainable management of vehicle traction batteries by providing a digital infrastructure for the documentation and exchange of fundamental information and up-to-date technical data (Schaarschmidt et al. 2022). In particular, statistics that exhaustively characterize the sustainability and accountability of the supply chain are documented, including the GHG footprint, working conditions in raw material extraction, and battery condition determination.

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3.9 Conclusions By 2050, the annual amount of waste produced globally is projected to increase dramatically, from 2.01 billion metric tons per year to 3.4 billion metric tons per year. Loss of biodiversity, air, soil, and water pollution, resource depletion, and unsustainable land use are all increasing threats to Earth’s ability to sustain life. The concept of a “circular economy” may prove to be an efficient method of waste disposal. The minimization of waste and the maximization of resource utilization are essential tenets of this system. It explains how we can protect our natural resources by implementing a set of social and economic policies in tandem with advances in science and technology. Principles of the circular economy include reducing resource use, waste production, and energy needs, all of which have positive effects on the environment and society. The agricultural industries’ adoption of the circular economy appeared to be a promising one to seal nutrient loops, prevent leakage, and raise the value of each loop. Circular systems, such as cradle-to-grave and performance economies, have a lot to offer the cause of sustainable development, and this is brought to light by the connection between the circular economy and sustainable development. Waste treatment facilities, recycling technology difficulties, a profitdriven corporate model, and other obstacles all stand in the way of a more circular system. There are still problems with the circular system paradigm. It’s impossible to conceive of a world without garbage, closed material loops, and endless recycling. Considering the intricacy of waste, the circular economy falls short. However, with the goal of creating a more sustainable and environmentally friendly society, many new circular system-based projects have been launched, including the NAMA Support Project (NSP), AAKAR, and PlastiCircle. Furthermore, the government should work with non-profit organizations, social scientists, and technology experts to expand opportunities for the implementation of the circular economy concept in various commercial and domestic sectors, taking into account the environmental, social, and economic benefits of such a paradigm. Acknowledgments AS is grateful to the Head of Department of Botany, Mount Carmel College (Autonomous), Bengaluru, India. AG is thankful to Head of Department of Life Sciences, Central University of Jharkhand, Ranchi, India. AG is also thankful to Department of Science & Technology, INSPIRE, India, for providing financial assistance in the form of DST-INSPIRE Faculty Fellowship. BP and SS also acknowledge the Director, CSIR-CIMFR, Dhanbad, Jharkhand, India.

References Aarikka-Stenroos L, Ritala P, Thomas LD (2021) Circular economy ecosystems: a typology, definitions, and implications. In: Research handbook of sustainability agency, pp 260–276 Abad-Segura E, Fuente ABDL, González-Zamar MD, Belmonte-Ureña LJ (2020) Effects of circular economy policies on the environment and sustainable growth: worldwide research. Sustainability 12(14):5792

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Chapter 4

Green Human Resource Management and Circular Economy Abhay Punia, Ravindra Pratap Singh, and Nalini Singh Chauhan

Abstract The term “green human resources management” refers to the application of human resources management techniques to support environmentally sound behaviour and heighten employee dedication to environmental sustainability. The circular economy, green human resource management, and the push for “zero waste” have all received a lot of attention in the previous 10 years as major approaches to addressing environmental challenges. Furthermore, without being impacted by outside variables like market demand, competitor commitment, or technical support for circularity, green human resource management helps the move to a circular economy. Business is crucial to this change, and an increasing number of organizations have made sustainability commitments that include waste reduction goals. The various green human resource management techniques, including green hiring, green training and engagement, and green performance management and rewarding, all have a unique impact on an organization’s success. Tools for sustainable consumption and production have been cited as both supporters of circularity and the accomplishment of sustainable development objectives. The highlighted practices included green employee empowerment and involvement, green incentive and compensation, green performance management and appraisal, green training and development, and green management of organizational culture. However, little research has been done on how green human resource management might aid in the shift to a more circular economy. Therefore, research is required to evaluate how green human resource management affects the circular economy, economic strength, and environmental reputation of a business. Keywords Environmental sustainability · Green job · Circular economy · Zero waste · Sustainable development

A. Punia Department of Zoology, DAV University, Jalandhar, Punjab, India R. P. Singh Central Public Works, New Delhi, India N. S. Chauhan () P.G Department of Zoology, Kanya Maha Vidyalaya, Jalandhar, Punjab, India © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Singh et al. (eds.), Green Circular Economy, Circular Economy and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_4

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4.1 Introduction Sharing, employing, reusing, repairing, and recycling of already-existing commodities and services are prioritized in a circular economy (CE), a production and consumption paradigm (Geissdoerfer et al. 2017). The three main principles of the concept are focused on in CE, which aims to address challenges like pollution, waste, and the loss of biodiversity as well as climate change. The three fundamentals required for the switch from the traditional linear economy to a circular economy are eliminating waste and pollution, reusing goods and resources, and renewing nature (Sillanpaa and Ncibi 2019). Worldwide awareness of environmental challenges has increased in the twentyfirst century, regardless of related industries like government, the public, or trade. The growing interest in sustainability throughout the world is due to specific global climate change conventions (Kyoto 1997; Bali 2007). The degradation of environmental resources and its negative impacts on people and civilization in general have been slowed down, and in some cases even reversed, by NGOs and government organizations around the world. This is because of poisonous chemicals and other adverse impacts of industrial pollution and waste materials (Christmann and Taylor 2002; Shrivastava and Berger 2010). In light of the current circumstances, companies need to develop strategies for dealing with ecological footprint minimization in addition to financial difficulties. Organizations nowadays must focus on social and environmental elements in addition to financial and economic considerations in order to achieve success within the corporate world and to make it easier for stockholders to achieve profit (Camilleri 2017). Strong leadership and a clear procedure are both necessary for the effective implementation of these sustainable business strategies inside a company (Zu 2019). As the business community becomes more aware of the benefits of implementing “green” practices into strategic planning, the sustainability problem is quickly rising in significance. However, most human resource professionals feel uncomfortable discussing the subject (Wirtenberg et al. 2007). The human resource management unit is the most significant contributor to the implementation of any company’s environmental programme among the many organizational units, including HR, Marketing, IT, Finance, and so on. Without a question, the business community is a significant player in the debate over environmental concerns and as such, conforms to be a crucial component of the solution to the environmental threat. Employee commitment to and satisfaction with businesses that actively promote becoming green is a strong indicator that a significant portion of the workforce in the business sector cares deeply about the environment. Green management perspectives were also made possible by the business sector’s active implementation of environmental management methods (Lannelongue et al. 2014). Human resource management (HRM) is an essential component of management since people are a company’s most important resource. In the context of HRM, sustainability is currently being investigated on all fronts. In addition, we contend

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that green human resource management is the key element of sustainability. This chapter’s exclusive focus is on the subject of green human resource management (GHRM), in which human resource management (HRM) is involved in managing the environment within an organization. Rani and Mishra (2014) define green HRM as the adoption of HRM policies to support the sustainable use of resources inside commercial organizations and advance environmental concerns, further increasing employee morale and satisfaction. Some define “Green HRM” as the use of HRM policies, attitudes, and practices to promote the effective use of corporate resources and prevent any unintended repercussions brought on by environmental challenges in organizations (Zoogah 2011). An aspect of more comprehensive corporate social responsibility programmes is green HRM. The two primary elements of green HR are the protection of intellectual property and environmentally responsible HR practices (Mandip 2012). The primary building blocks of every business inside an organization, whether it be a successful or sustainable one, are human resources and their processes. They are in charge of planning and implementing these eco-friendly activities to promote a green atmosphere. The CE is the basis of the concept of “green civilization and green jobs”, which is defined by coexistence of people and the environment, peaceful social growth (Sulich and Sołoducho-Pelc 2022). The CE evolves both qualitatively and quantitatively with new processes and jobs being created to span material cycles (Gottwald 2012). Green HRM is directly related to the generation of green jobs, and green jobs will ease the transition from linear to the circular economy. A more long-lasting and sustainable economic model is proposed by the CE (Castillo and Angelis Dimakis 2019). Additionally, the CE has established procedures that complete resource loops (e.g., through recycling) and work to minimize material losses through landfill and incineration (Mishra et al. 2018; O’Connor 2021). The “green recovery” is an area of economic and social growth that is supported by the circular economy and green human resource management (Hao et al., 2020). Thus, the present chapter focuses on the relationship between green human resource management and circular economy.

4.2 Circular Vs. Linear Economy The “take-consume-throw away” economic model that governs linear economy utilizes resources inefficiently (Gubeladze and Pavliashvili 2020). Because of this, the issues of resource scarcity and environmental degradation are getting worse every day. Use of non-renewable resources; prioritizing sales of new items; a lack of cooperation; and an inability to develop or adapt are characteristics of linear commercial activity (Jeyanthan and Ilankumaran 2019). An alternative to the takemake-dispose-based linear economy is the circular economy. The supporters of this economic model claim that it’s a practical way to attain high levels of sustainability without affecting the company’s profitability or the range of goods and services it offers (MacArthur 2013). In other words, a circular economy offers a systematic

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transition that fully alters the economic system rather than only attempting to correct the flaws of a linear economic system (Sariatli 2017). The primary distinction between linear and circular economies is that the former is largely focused on products, while the latter is oriented on services (Bonviu 2014). In a circular economy, biodegradable components are used to create items that can be recycled or returned to the environment. The circular production system is environmentally friendly, but the linear method is not since it feeds the market and is not sustainable (Morone 2020). In a circular economy, the vitality of the final product is used as fundamental resources throughout the production process, as opposed to a linear economy where the life of the finished product ends when the customer utilises it. While the circular economy prioritises services, the linear economy’s business model stresses both goods and services (Bocken et al. 2016). Many ecologists and environmentally conscientious economists believe that the circular economy is an important paradigm for the twenty-first century (Morone 2020). The entire process is not only ethical and sustainable, but also good to the environment. One of many difficulties that must be overcome before the adoption of this circular system is the absence of formal laws or a specific implementation guide for the circular economy (Homrich et al. 2018). Without it, the implementation of the circular economy might easily give rise to worries and issues, since the unexpected consequences of a badly managed process could dramatically raise product costs and obstruct efficient waste disposal.

4.3 Circular Economy and Green Jobs The concept of the “Circular Economy” has grown in popularity since the 1970s (MacArthur, 2013). Pearce and Turner (1989) are acknowledged in a number of articles, including Andersen (2007), Ghisellini et al. (2016), and Su et al. (2013) for introducing the idea. They describe how natural commodities have an impact on the economy by acting as sinks for outputs in the form of waste as well as inputs for production and consumption, thereby illuminating the linear and openended characteristics of contemporary economic systems. This draws inspiration from Boulding’s (1966) theory, which contends that as the earth is a closed, circular system with a limited capacity for absorption, the economy and the environment should coexist in harmony. Stahel and Reday (1976) explored certain elements of the circular economy with a focus on industrial economics. To explain industrial waste reduction, regional employment growth, resource efficiency, and dematerialization programmes, they devised the concept of a loop economy. According to Stahel (1982), selling use rather than product ownership is the most suitable sustainable business model for a loop economy. This strategy enables businesses to generate revenue without externalizing waste-related expenses and risks. The Circular Economy as it is currently understood has developed to encompass many components and contributions

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from several ideas that share the concept of closed loops in economic systems and industrial processes. MacArthur (2013) provided the most well-known description of the Circular System, defining it as “an industrial economy that is restorative or regenerative by intention and design”. The Circular Economy is similarly defined by Geng and Doberstein (2008), who concentrate on the Chinese application of the idea, as the “realization of a closed loop material flow in the whole economic system”. A circular economy is one that is restorative by design and seeks to maintain goods, parts, and materials at their greatest usability and value at all times (Webster 2021). The “core of the Circular Economy” is thus defined as the circular (closed) flow of materials and the utilisation of energy and raw materials over a number of phases (Yuan et al. 2008). The Circular Economy is defined as having “design and business model strategies that are delaying, shutting, and decreasing resource cycles”, according to Bocken et al. (2016). The Circular Economy is often described as a cycle of continuous improvement that delays, seals, and expands energies and material loops to reduce resource input and waste, emissions, and energy leakage (Heesbeen and Prieto 2020). This can be achieved through durable design, maintenance, repair, reuse, remanufacturing, refurbishing, and recycling. There is an urgent need to transition to more sustainable socio-technical systems (Weber 2003). Environmental issues include biodiversity loss, water, air, and soil pollution, resource depletion, and excessive land usage pose a growing threat to the planet’s life-support systems (Stokstad 2005; WWF 2014). Social expectations are not being met as a result of issues like high unemployment, unfavourable working conditions, social vulnerability, the poverty trap, intergenerational equity, and escalating inequities (Prahalad 2004; Banerjee and Duflo 2013). Microbusinesses and entire economies are affected by financial and economic instability as a result of economic problems such as supply risk, shaky ownership structures, unregulated markets, and flawed incentive systems (Palley 2012). Although not entirely new, the Circular Economy concept has recently gained importance on policymakers’ agendas in order to address these and other environmental concerns (Urbinati et al. 2017). The Circular Economy has also grown significantly as a field of academic research over the past 10 years, as seen by the steep increase in publications on this topic. In addition, businesses are starting to recognise the opportunities presented by the circular economy and the potential advantages it may have for both themselves and their stakeholders (Park et al. 2010). Inconsistent, varied, and not always applicable to the same types of activities, the terminology used to describe work in the environmental sector. As a result, it would be challenging to list all of the professions that will be impacted by the switch from a linear to a circular economy. The structure of the labour market will be significantly impacted by the shift from a linear to a circular economic model. Reuse, services, and open-loop recycling will capillarize, whereas remanufacturing, bio-refining, and closed-loop recycling processes will polarize (Larrain et al. 2020). The circular economy’s “green” and “greening” effects will significantly increase the need for workers with specialized

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knowledge across all economic sectors, educational levels, and professions, which will help the battle against regionalization and structural unemployment. However, if there aren’t many new jobs created (Horbach et al. 2015). As the economy changes towards green jobs, workers will need to develop long-term ecological and sustainable thinking to carry out their operations. According to research in green supply chains, green accounting, green marketing, and green management (Peattie and Charter 1992; Bebbington 2001; Jayaram and Avittathur 2015), all disciplines are pertinent (Haden et al. 2009). For example, in the marketing sector, new trade types, such as bulk commerce, are emerging. The circular economy will affect the availability of financial and insurance products, as well as the terms and conditions of bank loans and hedging contracts, at the level of banking and insurance. Sellers will need to incorporate the circular economy’s concepts into their sales pitches, and marketers will need to do the same with their marketing strategies (product, price, communication, and distribution) (Tian 2018). In terms of development and research, engineers, designers, and other innovators will need to specialize in ecodesign (Cicconi 2020). It will be their responsibility to design a product that is environmentally friendly during its entire life. Therefore, increased transversality and employability will benefit both green vocations and jobs that are greening (Auktor 2020).

4.4 Green Thinking for Circular Economic Growth Sustainable development is seen as a branch of the “triple bottom line” accounting philosophy, which combines social, ecological, and financial considerations (Elkington 2006). Triple bottom-line analysis looks at organization effectiveness from multiple perspectives rather than just the bottom line. According to Daily and Huang (2001), Ramus (2002), and Sroufe (2003), the environmental sustainability refers to maintaining a balance between growths of the company and safeguarding natural resources for the next generation. Although environmental sustainability is emphasized as a key goal, there is no agreement on the methods that the organizations use to accomplish this. Investigating the steps that agencies have taken to prevent environmental disruptions and achieve sustainable growth is crucial. Given the lack of research in this area, it is important to identify any gaps and potential solutions (Renwick et al. 2013; Clark et al. 2018). According to research, certain human activities frequently lead to environmental disruptions. The human behaviour that causes these disruptions should be identified and changed for environmental sustainability (Ones and Dilchert 2012). Few organizations investigate internal factors, such as how human behaviour affects environmental change (Ones and Dilchert 2012), as the majority of them focus on ecological sustainability projects that take place outside of their limits (Uzzell and Moser 2009). Research findings on green human resource management (GHRM) are important because this branch of the green management philosophy examines how human behaviour influences environmental management and sustainable growth (O’Donohue and Torugsa 2016;

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Al Ghazali and Afsar 2021). GHRM, in the words of Opatha and Arulrajah (2014), refers to an organization’s green initiatives, practises, and systems that encourage its staff to think in terms of society, the environment, and business. Using a variety of human resource techniques, such as recruiting and selection, performance evaluation, compensation and benefits, and training, an organisation can build a staff that understands and promotes green behaviour (Mathapati 2013; Mishra 2017). Green HRM, often known as “green HR”, is the incorporation of ecological sustainability into human resources management policies (Ullah 2017). From the worker’s integration until his or her exit, it impacts the whole HR function (Renwick et al. 2013). According to a review of the literature, there are five major concerns for green HR (Cherian and Jacob 2012a, b): a decrease in the business’s environmental impact; an enhancement of the company’s branding; a rise in the industry’s attractiveness (number of applications); a boost in employee retention; and a higher level of performance. According to data, staff participation in environmental initiatives increases the “efficiency” of the business’s general effective conservation policy (Bangwal and Tiwari 2015). This efficiency is based on how closely employees commit to the company’s core values for sustainable growth (Lok and Chin 2019). In other words, a team’s ability to interact effectively determines the quality of the outcome (Collier and Esteban 2007). To be more precise, discretionary behaviours are equally relevant to organizational outcomes as in-role or non-discretionary behaviours since “both lead to organizational success through value creation” (Dumont et al. 2017). It is customary or non-discretionary to refrain from smoking in public spaces. The employee does not exercise “discretion” in doing so. It results from a general rule. The law, the job contract, and the company policies all forbid it. Off-duty or discretionary conduct, however, is up to the individual employee. It is the outcome of one person taking the initiative. Because work and personal lives interact, some authors even go so far as to make an argument that human resources could perhaps play a role in encouraging ethical behaviour both inside and outside of the workplace, in accordance with a logic of ecological balance between work and personal life (Muster and Schrader 2011). Because of this, there is a link between individual involvement and general green business practices (Kim et al. 2019; Lok and Chin 2019). Particularly, this connection is highlighted in the research on hiring, training, and compensation (Kothiswari 2018).

4.5 Employee Participation in Green HR Practices for Circular Economy Growth Employees at any company are a diverse group with unique backgrounds, passions, and perspectives. As a result, they engage in a variety of daily behaviours that have varying impacts on the environment (Daily and Huang 2001; Soderholm 2010). Some people adopted activities that harm the environment, while others adopted ecologically sustainable practices. Employees that are passionate and

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actively involved in environmental management may play a significant influence in developing and implementing more desirable or successful environmental strategies for circular economy growth. Promoting human resource policies that offer more appealing or satisfying prospects for improvement connected to waste depletion may give employees the ability or capacity to embrace certain environmental management principles (Cherian and Jacob 2012a, b). Participation of employees in green projects increases the likelihood of effective ecological sustainability. Employee involvement in green HR practices has improved environmental management systems at work, such as effective and efficient resource usage, reduction of waste, and minimization of pollutants that have harmful or toxic effects from workplaces (Florida and Davison 2001). Employee involvement is crucial to the successful implementation of policies and practices in every organization. To this end, innovative green ideologies, Green awareness initiatives, and ecofriendly concepts should be welcomed by the staff in order to pique their interest in environmental issues, best utilize their practices, and encourage or increase their willingness to adopt such concepts (Wehrmeyer 1996; Ishaq and Di Maria 2020). This means that the achievement of green targets by effort, talent, or bravery and the procurement of those targets will be significantly dependent on employees’ desire to work together (Collier and Esteban 2007). Consumers’ perceptions of value, knowledge, and real benefits have a significant impact on employee involvement (Rothenberg 2003; Fisher and Vallaster 2010). Forman and Jrgensen (2001) discuss employee involvement in environmental activity inside the firm. The examples help identify those circumstances when environmental work is being shaped in an organization and alternatives are being made with regard to employee participation: (1) The need for management to include individuals in the ecological work; (2) the development of personal skill; and (3) the normalization of ecological work into forms and practices.

4.6 Green Human Resources Management and Sustainable Business Solution Ullah (2017) focuses at environmental adaptability in HR and green HR and found that implementing green HR in an organization is likely to produce efficiencies, practical resource utilization, reduced waste, better job-related demand, or improved work/private life, lower costs, improved professional execution, and assistance that aid the organization in ensuring a friendly environment, asset positive working and socially conscious work environment. Employee involvement in environmental management frameworks has a favourable impact on ecologically responsible attitudes and behaviour in an employee’s private life (Al-Shami and Rashid 2022). Deepika and Karpagam (2016) found that HR professionals may make a significant contribution to the organization’s green growth and play a significant role in motivating, inspiring, and empowering staff to create new trails

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in environmentally friendly business sustainability. According to Rana and Jain (2014), many organizations are openly moving toward putting green practices into practice. In this process, green HR practices support an organization and its staff by enhancing employee retention, improving transparency, enhancing sustainable asset usage, and expanding commercial opportunities (Bangwal et al. 2017). It is obvious that sustainability issues are essential to how modern organization function (Bateh et al. 2014). Environmental practices boost business performance and provide it a competitive edge (Asiaei et al. 2022). Given that it is a component of sustainable human resource management (SHRM), green human resource management may be crucial to sustainable development (Bombiak and MarciniukKluska 2018). Its nature is to integrate ecological objectives into all HRM sub-areas, from employment planning through recruiting, selection, employee motivation and development, to their assessment and influence on working conditions. This is a novel method for realizing the HR function. In order to provide stakeholders with additional value, it is necessary that the HR function be designed to focus on both ecological and economic interests (Kramar 2014). Thus, Green HRM reflects the degree to which human resource management practices have been made more environmentally friendly (Ahmad 2015), whereas its implementation necessitates that specific phases of human resource management be changed and tailored in order to become green, or environmentally friendly (Jyoti, 2019). The primary goal of initiatives carried out as part of green human resource management is the creation of an ecological workplace and environmentally conscious employee attitudes (Jyoti 2019; Farooq et al. 2022). Green HRM, which refers to the use of HR policies to encourage the sustainable use of company resources and to assist ecology (Rani and Mishra 2014; Ahmad 2015), is therefore a component of a larger framework of corporate responsibility (Sharma and Gupta 2015). Its main goal is to increase employees’ ecological awareness and help them understand how their actions may impact the environment. This is about inspiring people and making them feel good about taking part in environmental projects. In this approach, Green HRM aids in the development of a green workforce that comprehends, values, and engages in ecological activities (Sabokro et al. 2021). The use of personnel practices to enhance environmental performance is occasionally included in the definition of “green HRM” (Roscoe et al. 2019; Nisar et al. 2021). This is because the establishment of a global sustainable culture (Mishra 2017) and the effective implementation of sustainable development policies both heavily rely on HR processes (LabellaFernández 2021). Green HRM unquestionably strengthens the role of HRM in bringing the idea of sustainable development to life (Aust et al. 2020). It emphasizes how important HR departments are to the establishment of a sustainable workplace culture (Dupont et al. 2013) and the effective execution of environmental policies (Jabbour et al. 2019). Organizations can benefit from implementing Green HRM, fostering a green organizational culture, and encouraging employee behaviour that is environmentally responsible (Al-Swidi et al. 2021). Today’s businesses depend more and more on their reputation to succeed in the market. Given the foregoing, adopting voluntary environmental initiatives rather than only abiding by legally enforceable environmental protection requirements is turning into a

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way to achieve a competitive advantage (Suharti and Sugiarto 2020). Consumers look for environmentally friendly items, while corporate partners are interested in environmental certifications. Companies are compelled to adopt an environmentally conscious outlook in order to keep their market dominance. Because of this strategy, businesses are increasingly adopting a new management philosophy in which spending on ecological protection is no longer just considered as an expense but rather as an investment in the growth of the company.

4.7 Green Human Resources Management Techniques for Circular Sustainable Economy 4.7.1 Selection and Hiring According to research, job applicants frequently are informed about the corporate strategy for environmental sustainability and consider it when deciding whether or not to accept a position (Stringer 2010). Implementing a green human resources strategy effectively through the employee’s integration in accordance with a general direction of “zero paper, zero fuel”, green recruitment and selection rely on sustainable procedures (Saini and Shukla 2016). In other words, hiring talent who is conversant with sustainability and conservation principles is known as “green recruiting” (Bangwal and Tiwari 2015). More precisely, effective adoption of a sustainable performance management strategy inside the organization depends on new hires’ awareness of techniques that support such an approach (Wehrmeyer 2017). An online advertising will signal the start of the green recruiting process. Online applications are encouraged for decreasing the quantity of paper and gasoline utilized for travel during the pre-selection process and interviews are also performed over the phone or through video. The job descriptions used to create the interview questions during the selection process contain characteristics of responsible conduct (Saini and Shukla 2016). During the pre-selection stage, HR managers can also evaluate these traits. They are able to evaluate how closely the applicant aligns on environmental responsibility. As a result, the effectiveness of implementing a sustainable performance management plan will be determined by the employment descriptions that identify and act as a benchmark for sustainability in the workplace (Mandip 2012).

4.7.2 Training and Growth Training is the second most important green HRM component. In terms of productivity, the main difficulties are creativity and development. According to Upadhayay and Alqassimi (2018), the transition from a linear to a circular economy

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will lead to employment transfers, and it is crucial to invest heavily in training to support these transfers. To put it another way, technical and management expertise are both necessary for the effective implementation of green projects in businesses (Callenbach et al. 1993). Technical skills are business abilities are necessary for green occupations because they help to monitor, prevent, regulate, and restore the harm that human activity has caused to the environment. It is crucial to include employees in resolving environmental issues in order to reverse the loss by adopting sustainable development through knowledge, expertise, skills, and attitudes (Zoogah 2011). To improve how its staff members consume alcohol, Nestlé partnered with CleanCup, a fresh start-up, in May 2019. Eliminating the usage of throwaway cups is the goal of CleanCup. They have installed machines for this purpose. The machine is easy to operate; after depositing one euro, the customer receives a clean glass bearing the company’s emblem. After finishing their drink, they return their glass to the machine, get their money back, and the system generally cleans the glass on site. A green training policy’s effectiveness would thus depend on participatory and strengthening management practices that support ecointrapreneurship, in addition to the technical and group training that is technically outlined in the training programmes.

4.7.3 Pay and Benefits When there is a salary and benefits approach is provided after fulfilling a duty, employees are more likely to take it seriously (Forman and Jorgensen 2001). To promote the development and use of green skills at work, companies may provide both monetary and non-monetary benefits. Financial incentives can take the form of bonuses tied to environmental goals or outcomes, for instance. Nonmonetary benefits might take the form of gifts, proactive internal communications, or a connection between career progression prospects and an employee’s level of environmental responsibility (Jabbar and Abid 2014). These programmes go beyond recycling activities. They may entail voluntarily working from home or embracing flexible schedules, which would help to lower pollution peaks (Jackson and Victor 2011). As a result, remuneration and benefits are still another powerful tool for advancing a green HRM strategy and assisting in the achievement of the company’s sustainable development goals (Milliman and Clair 1996). Therefore, the right green recruiting would be the first step in a management policy.

4.8 Conclusion and Future Perspectives Exploring green HRM techniques that are currently being used and will be used by businesses and other organizations will make a substantial intellectual and practical contribution to the global circular economy. It is essential to align GHRM with

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the circular economy to assist the transition from the linear to circular model. According to Marrucci et al. (2021), GHRM makes a positive difference on how well an organization performs in the circular economy. However, while focusing on the individual GHRM activities, only hiring and involvement had a direct impact on circular performance. Unexpectedly, training is not significantly related to circular economy growth. This may be due to the fact that circular economy concepts and practices are still in their beginnings and that organization has not yet designed training modules to improve staff members’ skills and expertise on circular economy. So, more focus should be on training programs that will help in shifting from linear to circular economy. The training programmes for new workers may be structured to aid their integration into the organization’s green culture. Employee environmental training alleviates the impact of environmental ethics on environmental performance (Singh et al. 2019). Joshi and Dhar (2020) revealed that green training boosts an organization’s green innovation, while Pinzone et al. (2019) showed that green training raises employee work satisfaction. All university students, high school students, residents, and aspiring businesspeople must be educated on critical global concerns, according to UVED.

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Chapter 5

Economies of Scale in Green Circular Economies Vicent Hernández-Chover, Lledó Castellet-Viciano, and Francesc Hernández-Sancho

Abstract The benefits of the transformation towards a CE model should be analysed through a social, environmental, and economic perspective. The application of tools capable of measuring the efficiency of this model could help to identify the best practices and, consequently, maximize the recovery of products to obtain non-conventional resources. There exist different efficiency models capable of identifying the number of resources needed in the processes, and the residues (subproducts) generated could be recirculated or used in the same or other processes. Increasing the obtention of other by-products that could be reintroduced in the loop giving a secondary use in other sectors would generate beneficial results both environmentally and economically. According to the principle of economies of scale, in economic terms, the cost of recirculating the sub-products of the processes will progressively decrease the more sub-products are reused. Moreover, from the social and environmental point of view, the benefits of implementing a circular model in a particular sector will extend to other dimensions: from economic, to social and environmental spheres or from local, to regional, national, and even global levels. Keywords Wastewater · Efficiency · Economies of scale · Non-conventional sources · Circular economy

5.1 Introduction The increase in world population generates a series of consequences associated with the increased demand for water and food, mainly. Numerous authors (Oberle et al. 2019; Allan and Ojeda-García 2022) claim that the increasing exploitation of natural resources to satisfy production and consumption demands has now reached

V. Hernández-Chover · L. Castellet-Viciano () · F. Hernández-Sancho Inter-university Institute for Local Development (IILD-WATER). Water Economics Group, University of Valencia, Valencia, Spain e-mail: [email protected]; [email protected]; [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Singh et al. (eds.), Green Circular Economy, Circular Economy and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_5

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unsustainable levels. The economic model that governs our society is a linear and unidirectional one, in which natural resources are extracted from the environment and then used as raw materials for different products that will be consumed and finally discarded. The premise of this “extract-produce-use-dispose” model was that natural resources are abundant, easily accessible, and affordable to manage as waste (Lieder and Rashid 2016). In order to minimize the environmental impact that the current economic system is generating, the European Commission has been working for several years on the development of plans, packages and proposals aimed at moving towards a circular, rather than a linear, economic model. The first step towards the transition to a circular economy model by the European Union began in 2014 with the communication “Towards a circular economy: a zero-waste agenda for Europe” with the aim of reducing the waste generated. This publication was followed by the “Action Plan for a circular economy in Europe” published in 2015 in which the European Commission proposed a series of measures that go beyond the reduction of waste and affect all stages of the life cycle of products. In 2018, the “Circular Economy Legislative Package” was presented in which the “European Strategy for Plastics in a Circular Economy” and the “Sustainability Strategy for Chemicals” stand out. In order to mainstream the implementation of the circular economy, the “New Circular Economy Action Plan for a cleaner and more competitive Europe” was recently published in 2020 and is a key element in the European Green Deal, Europe’s new programme for sustainable growth. The “green economy” synthesizes all those actions aimed to reduce the consumption of energy, raw materials and water, minimizing the generation of pollution and greenhouse gases, and encouraging the reduction of waste reuse. In a green economy, economic sector investments focus on reducing carbon emissions while increasing efficiency in production processes, reducing energy and non-renewable resource consumption. As a result, investments generate employment growth while avoiding the loss of biodiversity and ecosystem services. Green economy and circular economy are closely linked. The circular economy aims to reduce the consumption of non-renewable resources and to use waste as a new source of sustainable resources. In order to achieve this goal, the green economy takes into account the environmental impact generated, for example by monitoring the carbon emissions generated by production processes. The combination of both concepts implies generating new forms of supply and production with less environmental impact, as well as ensuring sustainable economic growth. In Spain, for example, there is the Spanish Circular Economy Strategy, Spain Circular 2030, which lays the foundations for the promotion and implementation of the circular economy in the following axes: production, consumption, waste management, secondary raw materials and water reuse. This last aspect, the reduction and reuse of waste is based on considering waste as resources and integrating them into the production chain, this concept is defined by Circular Economy whose objective is to keep materials and products as long as possible in the loop, converting waste into resources, improving the efficiency of processes and extending the useful life of products (Zajac ˛ and Avdiushchenko 2020).

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While global policies are essential to make the transition to the circular economy, cities have a key role to play. Firstly, because they are centres that concentrate a great amount of human activity, and are consequently large consumers of resources and producers of waste. And secondly, because although cities are complex socioeconomic and political-administrative systems (Turcu and Gillie 2020), from an administrative and legislative point of view, they have the required competences to promote some actions within the framework of the circular economy. Currently, more than half of the human population is concentrated in urban centres, and this number is expected to increase when cities in developing countries reach the rate of urban residents in advanced industrialized countries. So, not only for sustainability reasons, but for economies of scale, it is much more realistic to reuse, recycle and recover post-consumer materials on a large scale. It should be kept in mind that one of the main limitations to the implementation of circular models is the high cost of investment in technology and systems that enable the recovery, reuse and recycling of products and materials (Grafström and Aasma 2021). One way to address this barrier is to maximize the amount of products recovered and to improve the efficiency of product and material recovery, reuse and recycling processes. To demonstrate how advantageous could be the economies of scale in the implementation of circular economy actions, the following sections of this chapter will use as an example the urban water cycle, focusing on the wastewater treatment sector.

5.2 Status of Water Resources One of the most vulnerable resources is water. Water is a very valuable resource that is not only essential for human life and organisms, but also for many economic sectors. Water pollution affects health, the economy and the environment, while it also represents a risk to the sustainability of resources (Damania 2020). The main causes of contamination of water bodies are determined by inadequate sanitation; in a large number of population centres there are no connections from the sanitation networks to the treatment plants, and there are no separate networks, which increases the volume of water to be treated and often exceeds the treatment capacity of the plants. This is aggravated by runoff from farmland, which may contain high concentrations of fertilizers. This scenario can be further complicated if we take into account the rapid increase in population. This increase in population implies an increase in the resources consumed (Swilling et al. 2018). According to the FAO (Food and Agriculture Organisation of the United Nations), water consumption in the last century was twice as high as population growth. According to the United Nations World Water Development Report, current world water consumption is approximately 4600 km3 and is expected to increase by 20–30% in the coming decades due to population growth and, consequently, waterintensive agricultural and energy production. Taking this projection into account, global water consumption in 2050 is estimated to be 5500–6000 km3 . Figure 5.1

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Fig. 5.1 Evolution of water availability in line with population growth. (Source: Prats-Rico 2016)

shows a graph representing population growth and water resources availability per capita. Simultaneously, by 2025, agricultural and energy production are expected to increase by approximately 60% and 80%, respectively. However, given the imminent population growth, it is expected that water use will not be as high as in the previous century due to the development of more efficient techniques and technologies that allow greater use of water. Water availability is one of the main risks worldwide; it is estimated that by 2030 there will be a 40% global water shortage if the current water resource management model is maintained (Voulvoulis 2018). The main reasons that will lead to this situation are the pressure exerted by humans on this resource, together with a climate scenario in which average global temperatures will rise, the presence of longer periods of drought and more frequent extreme phenomena, thus changing the dynamic water cycle. Generally speaking, water scarcity occurs when water is not available in sufficient quantity or quality, or when there are no adequate mechanisms or technology for its use, such that human needs cannot be met. Therefore, the transition to a circular economic model is key to water resource management. Water is essential for maintaining life and the sustainability of ecosystems, but also for economic development. It is estimated that only 1% of the existing water on our planet can be used for human and productive activities. This scarcity of water in terms of quantity and quality has consequences for the environment and the economic and social sphere. The role of the CE is particularly important in the context of the water sector. The availability of freshwater, both in quantity and quality, is a key element for generating and sustaining economic development. However, this economic development has come at the cost of overexploitation and pollution of water bodies. Moreover, water availability is worsening year after year due to increasingly

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frequent and prolonged periods of drought attributed to climate change (Eurostat 2009; Gössling et al. 2012; Hof and Schmitt 2011). Due to the increasing demand for water and the high levels of pollution of water bodies, Wastewater Treatment Plants (WWTPs) play a fundamental role within the framework of the circular economy. In this new management model, WWTPs are no longer only focused on wastewater treatment to protect people’s health and minimize the environmental impact of wastewater disposal, but also become a source of non-conventional resources with a high economic and environmental value. Wastewater reuse is an alternative water resource that ensures water availability while reducing pressure on water bodies, guaranteeing their sustainability. The possibilities of using waste as a resource make the water sector a high potential within the CE framework. Wastewater treatment is a source of clean energy production and is also rich in substances that could have a secondary use (Sfez et al. 2019). For example, nitrogen and phosphorus, and organic matter could be recovered and valorized as fertilizers and biogas for profitable gain (GuerraRodriguez et al. 2020; Verstraete and Vlaeminck 2011). In May 2014, phosphate rock was listed as a critical raw material by the European Commission (Ferro and Bonollo 2019), so alternative sources of phosphorus have gained importance. Recent estimates show that phosphorus reuse within the EU using established technologies and practices will be able to replace about 30% of the mineral used in agriculture by 2030 (Tonini et al. 2019). Similarly, the use of nitrogen recovered from WWTPs has great potential to be used in agriculture, as it is removed in the same way as it is used through nitrogen fertilizers, which are obtained through energy-intensive industrial processes. Nutrient recovery from WWTPs coupled with more efficient agricultural and food management practices could help transform the current economic system into a more circular one (Schneider et al. 2019; Withers et al. 2018). In this sense, WWTPs could become essential in the implementation of the CE in urban areas, whose aim will be guaranteeing the sustainability of water resources by adapting the quality of the effluents discharged into the environment, reducing the concentration of pollutants in the effluent and ensuring adequate quality of water bodies. Therefore, addressing the production of resources in WWTPs, from an economic perspective, would allow identifying the best practices in wastewater treatment in order to obtain the largest possible amounts of resources in the process. This fact implies increasing the resources generated in the treatment of wastewater while minimizing the environmental impact of discharges. In this sense, those infrastructures that perform better in terms of removing pollutants or obtaining other products, such as biofuels, bioplastics, adsorbents, ashes, proteins, enzymes, and nutrients (Gherghel et al. 2019), can be understood as bio-factories capable of providing more resources to the society. In short, these infrastructures are capable of generating feedback loops and reducing the use of non-renewable resources (Furness et al. 2021). Obtaining these resources implies a significant change at a strategic level in these infrastructures. Directive (91/271/ECC) regulates environmental criteria on effluent quality. Furthermore, in order to carry out an efficient management, it

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implies adopting an approach that minimizes the costs generated by the wastewater treatment process. However, in the framework of the Circular Economy, all the resources that the WWTP is able to offer to other sectors can be valorized, implying an economic benefit. In this sense, these infrastructures represent, like any other industry, a productive process that requires a series of inputs to produce a series of resources. Therefore, monitoring the different WWTPs and identifying which ones are capable of obtaining the largest amounts of resources using the minimum inputs is doubly beneficial from an environmental and economic point of view. To measure the efficiency of the WWTPs, the use of the Data Envelopment Analysis methodology allows to compare the different infrastructures under the same criteria, offering as a result an efficiency index that permits to identify which are the most efficient units. In addition, the subsequent analysis of the results allows to relate the physical characteristics that may influence on a better performance and, consequently, to establish action plans that help to set strategic objectives. This chapter analyses the efficiency of the wastewater treatment plants and, ultimately, the optimal management of the process, not only considering the characteristics of the WWTP but also the amount of pollutants that the facilities are capable of removing, reinforcing the benefits that this fact has on the environment.

5.3 Assessing the Economies of Scale in the Wastewater Treatment Sector 5.3.1 Existing Methodologies to Assess the Existence of Economies of Scale In order to carry out the wastewater treatment process, WWTPs require a series of resources (energy, staff, reagents, maintenance, etc.) to extract the pollutants contained in the wastewater. In this sense, the quality parameters of the effluent are defined in the Directive 91/271/EEC. The quality requirements established in this Directive depend on various factors relating to the organic load, volume of wastewater treated and place of discharge, among others. Like any other industry, WWTPs must obtain a sufficient effluent quality while minimizing the use of resources necessary for wastewater treatment (Ostrom and Wilhelmsen 2012). To achieve this criterion an efficient management of the WWTPs is crucial. Efficiency, in the context of CE, is defined by the maximum elimination of contaminants that can be valorized, minimizing the use of resources used in the process. In addition, higher pollutant removal will generate a higher volume of treated water of higher quality for other uses. Therefore, the most efficient process will be defined by the lowest use of resources and the highest amount of products generated. Different methodologies can be used to assess the efficiency of processes. Parametric methods require the establishment of the production frontier, whereas non-parametric methods allow efficiency to be assessed without establishing the

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production frontier a priori, thus being more flexible. In the latter case, data envelopment analysis (DEA) has been widely used. Data Envelopment Analysis (DEA), developed by Charnes et al. (1978), is the most commonly applied method. This methodology has been used in different sectors, from the water sector (Carvalho et al. 2012; Díaz et al. 2004; Gupta et al. 2012; Kulshrestha and Vishwakarma 2013) to transport or financial firms (Stewart et al. 2016; Sueyoshi and Goto 2012). To evaluate the efficiency of the wastewater treatment, these authors have considered as inputs the economic costs of the different resources used in the process, such as energy costs, costs derived from the use of reagents, costs linked to maintenance tasks, costs associated with waste management, and administrative costs, among others. While the outputs used have been, mainly, the volume of wastewater treated, and the quantity of pollutants removed from the wastewater in the process. In order to obtain the efficiency level for each input and output used by the decision-making units (DMUs), in this case the WWTPs, and to be able to generalize the results in any direction that may be considered, a non-radial data envelopment analysis (DEA) model will be used. In particular, a modified version of the weighted Russell directional distance model (WRDDM) will be used (Fuentes et al. 2020), which improve the quality of the results by limiting the amount of pollutants to be eliminated to the existing level in the influents, thus increasing the options for data analysis even more (Chen et al. 2010). Being the set of positive real numbers with i dimension, there exists k .∈ RK + DMUs that use several inputs represented by the vector x .∈ RN to produce several + desirable outputs defined by the vector y .∈ RM + though the use of a technology given by the set: T = {(x, y) : x can produce y}

(5.1)

  ∀ (x, y) ∈ T ∧ y ≤ y ⇒ x, y ∈ T

(5.2)

.

For which: .

which assumes that there is free availability of outputs, that is, it is possible to obtain a lower amount of output using the same level of resources. In turn, the directional distance function that would aim to increase the outputs by reducing the inputs would be:     − → D (x, y; g) = sup θ : x + θgx , y + θgy ∈ T

.

(5.3)

where the directional vector g = (gx , gy ) = (−x, y) establishes the direction in which the level of inputs and outputs will be modified in the aforementioned sense. If a DMU (WWTP) were just above the efficiency frontier, it would be efficient and − → with . D (x, y; g) = 0. In case of being inefficient, it would be below the frontier, for − → which, . D (x, y; g) > 0 and θ would be the distance from the assessed DMU to the frontier (Fuentes et al. 2020).

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With the above, the WRDDM that would calculate the level of inefficiency of the assessed DMU (DMU0 ) would be: ⎛ ⎞ N M J     − → . D x0 , y0 , b0 ; g = θ0 = Max ⎝ ωn0 βn0 + ωm0 βm0 + ωj 0 βj 0 ⎠ n=1

m=1

j =1

s.t. K λ y ≤ x + β g , ∀m : 1, . . . .N k=1 k nk n0 n0 xn K k=1 λk xmk ≥ xm0 + βm0 gym , ∀n : 1, . . . .M K  . λk = 1

(5.4)

k=1

βm0 ≤ Y s m0 , ∀m : 1, . . . .M λm0 ≥ 0, ∀k : 1, . . . .K where K, N and M dimensions are the set of positive real numbers and β n0 and β m0 would be the specific inefficiency levels for each of the n inputs and m outputs of the DMU0 respectively and would be the weights obtained as a solution to the programme which express the weight of each DMU in the peer group of the DMUo. The closer their values are to zero, the less efficiency level they will present. On the other hand, ωnk and ωmk are the weights or the level of importance that each of the inefficiency values of the inputs and outputs has when calculating the total inefficiency of the DMU0, that is, θ0 . Since there is no justification to optimize one resource or pollutant removal at the expense of another (Fuentes et al. 2020, Molinos-Senante et al. 2016), in the present paper, predefined values given by the model are used for these weights ωnk and ωmk, giving them the same importance in the computation of θ0 , so that, by using N inputs to produce M outputs, the input weights would have a common value equal to 1/N and those of outputs of 1/M.

5.3.2 Empirical Approach To demonstrate the existence of the economies of scale and how they affect in the process and subproduct recovery in the wastewater treatment process we use as an example 133 WWTPs placed in the Valencian Community (east of Spain), that use the same treatment technology: extended aeration with nutrients removal (nitrogen) but have different sizes in terms of equivalent inhabitants treated (p.e.). Therefore, the sample is divided into three groups as follows: (i) the first group is made up of those infrastructures that treat less than 20,000 p.e./year, (ii) the second is composed by plants that treat between 20,000 and 50,000 p.e./year, and (iii) the third group includes all those WWTPs that treat more than 50,000 p.e./year. To carry out the wastewater treatment process, similar to any other industrial process, some resources (inputs) are required. The variables used as inputs are the

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Table 5.1 Characteristics of the wastewater treatment plant analysed. Source: data facilitated by the Valencian Wastewater Treatment Agency (EPSAR) in 2018

Inputs

Outputs

p.e. Energy (kWh/year) Staff (A C/year) Maintenance (A C/year) Waste management (A C/year) Other (A C/year) SS (kg/year) COD (kg/year) N (kg/year)

Group 1 4758 110,393 42,740 9960 4664 1826 37,201 87,240 7646

Group 2 33,566 554,473 175,517 33,676 24,667 16,176 249,205 575,970 40,770

Group 3 120,673 1,510,284 342,979 85,638 65,483 42,845 1,036,427 2,088,894 140,388

following: energy consumption, personnel, reagents, maintenance (involve repair and maintenance tasks to keep the equipment and the infrastructures performing in optimal conditions), waste management (large volumes of waste that should be managed are generated) and other (administrative issues, for instance). It should be noticed that apart from the energy consumption, the remaining resources used in the process are expressed in economic terms (Hernández-Sancho and Sala-Garrido 2009). To measure the performance of the wastewater industries analysed and the opportunity that the process offers to recover nutrients we are going to measure the quantity of pollutants that the wastewater treatment plants are capable of removing. To this end, the outputs of the process are represented by the number of suspended solids (SS), carbon oxygen demand (COD), and nitrogen (N) removed. As it can be observed in Table 5.1, the costs of the process are mostly explained by the energy consumption, staff costs and maintenance. The facilities in group 1 require on average 110,393 kWh per year for wastewater treatment, the infrastructures in group 2 require approximately 554,000 kWh and finally those in group 3 reach 1,510,000 kWh per year. Similarly, the personnel requirements are approximately 42,700 A C, 175,500 A C and 342,000 A C per year for groups 1, 2 and 3, respectively. Maintenance costs refer to preventive and repair work on the assets that make up these infrastructures, amounting to 9960 A C, 33,676 A C and 85,638 A C per year for groups 1, 2 and 3, respectively. Waste management and other expenses, mainly administrative, account for the smallest amounts, on average per year. If we analyse the costs involved in the process per unit of wastewater treated it can be observed that there are great variations depending on the size of the facilities. The treatment costs of small WWTPs (group 1) per unit of wastewater treated are usually higher than medium and large WWTP (group 2 and group 3). Figure 5.2 shows that the greatest differences among the groups are related with personnel costs, according to the sample small WWTPs (group 1) spend 0.55 A C/m3 3 3 in personnel costs, compared to 0.20 A C/m and 0.11 A C/m for group 2 and 3 plants, respectively. As for maintenance costs, there is a downward trend as the volume of treated water increases, ranging from 0.13 A C/m3 (group 1) to 0.02 A C/m3 (group 3). The costs incurred for waste management are very similar in the 3 groups analysed,

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0.60

0.55

Cost (€/m3)

0.50 0.40 0.30 0.20 0.10

0.16

0.13

0.20

0.03

0.03 0.02

Group 1

Group 2

0.06

0.11 0.02 0.02 0.03

0.00 Personnel

Maintenance

Waste

Group 3 Other

Fig. 5.2 Expenses per volume of wastewater treated

0.70

0.64

Energy consumpon (kWh/m3)

0.60

0.60 0.49

0.50 0.40 0.30 0.20 0.10 0.00 Group 1

Group 2

Group 3

Fig. 5.3 Energy consumption per volume of wastewater treated

at around 0.03 A C/m3 . Finally, the costs of others fluctuate between 0.16, 0.06 and 3 0.03 A C/m for groups 1, 2 and 3, respectively. Regarding the energy consumption, a similar pattern is observed. Energy consumption stands at 0.64 kWh/m3 for group 1, while the consumption of group 2 is 0.60 kWh/m3 , and 0.49 kWh/m3 for group 3. These consumptions imply a reduction of approximately 24% for the larger facilities (Fig. 5.3).

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Table 5.2 Pollutants removed by the WWTPs of the sample

Group 1 Group 2 Group 3

Pollutants removed that the Directive requires (kg/year) SS COD N 31,531 67,412 6025 216,004 465,370 32,272 919,802 1,707,804 112,301

Extra number of pollutants removed (kg/year) SS COD N 5670 19,828 1621 33,201 110,600 8498 116,625 381,090 28,087

It should be mentioned that the quantity of pollutants that WWTPs remove is related with the parameters established by the Directive 91/271/EEC on urban wastewater treatment. However, it has been observed that the facilities assessed are removing more quantity of pollutants than the required by the legislation (Table 5.2). Regarding the average removal of SS beyond the requirements of the Directive, group 1 removes 5670 kg/year, while group 2 and group 3 remove 33,201 kg/year and 116,625 kg/year, respectively. According to the extra quantities of COD removed by the plants are 19,828 kg/year, 110,600 kg/year and 381,090 kg/year, for groups 1, 2 and 3, respectively. When the amount of nitrogen removed beyond the Directive reaches 1621 kg/year, 8498 kg/year and 28,087 kg/year for groups 1, 2 and 3, respectively.

5.3.2.1

Efficiency Analysis of Wastewater Treatment Plants

Although the ratio between the costs and the volume of wastewater treatment plants gives some clues about the economies of scale in the wastewater treatment process, it is necessary to apply an efficiency analysis as explained in the previous section in order to analyse the efficiency considering several variables at the same time: resources used in the process, volume of wastewater treated, and pollutants removed. Therefore, making use of the efficiency method mentioned before we can obtain an efficiency index of the process for each one of the facilities of the sample. The higher the index is, the more efficient the plant is. Accordingly, those WWTPs that get lower efficiency indices imply that have a greater capacity for improvement, that is, a reduction in the resources used in the process as well as a greater removal of contaminants. Concerning pollutants removal, a higher removal rate of pollutants results in several benefits. On one hand, there is a positive environmental impact since lower concentrations of pollutants in the effluent help to protect water bodies. On the other hand, WWTPs could obtain a direct economic benefit if they can remove more pollutants that could have a secondary use in other fields such as the use of nutrients (N and P), to produce fertilizers in the agriculture. These results can be expressed as percentages of overall reduction required by the inputs to achieve efficiency in the process. The efficiency indices obtained for each of the analysed groups explain that

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0.91 0.82 0.72

GROUP 1

GROUP 2

GROUP 3

Fig. 5.4 Global Efficiency Index

the improvement capacity for smaller facilities is lower (0.72), followed by 0.82 for group 2and 0.91 for group 3 (Fig. 5.4). The results show that the WWTPs of group 1 ( 0 and .θ7 < 0. The differential impact of trade on emission in case of poor and rich countries implies that there exists some threshold level of income at which the magnitude ( and/or sign) of the coefficient associated with trade to GDP changes. We can write the above regression specification as log (yit ) = θi + θ1 log (P CYit ) + θ2 (log (P CYit ))2

.

+ θ3 log (DCGDPit ) + θ4 log (P CEit ) + θ6 F DI GDPit + (θ5 + θ7 × log (P CYit )) log (T GDPit ) + it (9.6)

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which can be written as log (yit ) = θi + θ1 log (P CYit ) + θ2 (log (P CYit ))2

.

+ θ3 log (DCGDPit ) + θ4 log (P CEit ) + θ6 F DI GDPit + (θ (log (P CYit ))) log (T GDPit ) + it

(9.7)

where we have assumed that the coefficient associated with .T GDPit is a function of .P CYit or depends upon .P CYit . The above model can be estimated using the threshold regression framework. log (yit ) = θi + θ1 log (P CYit ) + θ2 (log (P CYit ))2

.

+ θ3 log (DCGDPit ) + θ4 log (P CEit ) + θ6 F DI GDPit + θ5,1 log (T GDPit ) (log (P CYit ) < ω) + θ5,2 log (T GDPit ) (log (P CYit ) > ω) + it

(9.8)

where .θ5,1 and .θ5,2 are coefficients associated with .T GDPit in two regimes based on .P CYit . .ω is the threshold level of income at which the magnitude ( and/or sign) of the coefficient associated with trade to GDP changes. We estimate the panel threshold model with fixed effect using Stata package xthreg. In case of regression with trend, we also include time trend.

9.5 Results and Analysis 9.5.1 Pooled Mean Group Estimator (Panel ARDL) As explained before, we bifurcate countries in high- and low-income countries using world bank classification.5 The pollution haven hypothesis suggests that increase in trade should increase pollution in low-income countries and not in high-income countries. Results from pooled mean group estimation of Eq. 9.2 are given in Table 9.6 in the Appendix. Error correction terms are negative and significant in all cases, thus giving us a long-run relationship. Figure 9.9 gives the long-run coefficient from these estimations. These are long-run elasticity of emission with respect to particular variable except in case of FDI to GDP ratio. As we can see, EKC hypothesis does not hold for rich countries but holds for poor countries. For rich countries, the per capita GDP term does not come significant because of the large standard error associated with the estimate. But the sign of coefficient is as expected by EKC hypothesis.

5 https://datahelpdesk.worldbank.org/knowledgebase/articles/906519.

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Fig. 9.9 Long-run coefficient from pooled mean group estimation: .CO2 emission from liquid fuel consumption

FDI to GDP ratio is not significant for any country grouping. Long-run elasticity of liquid fuel emission with per capita energy consumption is significantly lower in rich countries than poor countries. This suggests that in rich countries fewer polluting sources of liquid energy are likely to be used. Domestic credit decreases emission in both poor and rich countries in the long run, but the coefficient is higher for rich countries. Short-run effect of domestic credit is opposite and is significant for rich countries (Table 9.6 in the Appendix). Long-run elasticity of .CO2 emission with trade to GDP is negative and significant for rich countries. In case of poor countries, long-run elasticity of .CO2 emission with trade to GDP is not significant. Short-run coefficient of trade to GDP ratio is positive and significant for poor countries as shown in Table 9.6 in the Appendix. The shortrun coefficients are not significant for rich countries. This allows us to conclude that the effect of trade on emission depends upon the income, and at higher level of income the relationship is either not significant or reversed in sign. This result thus provides evidence for pollution haven hypothesis. We conduct several robustness exercises to substantiate this result.

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9.5.2 Quantile Regression Liquid fuel emission is not normally distributed and EKC regression at mean and other quantiles of distribution give significantly different coefficients (Table 9.5). Using the methodology of Machado and Silva (2019), we estimate equation 9.5 by panel quantile regression with fixed effects. Tables 9.7 and 9.8 in the Appendix give the estimates without and with time trend, respectively. Figures 9.10 and 9.11 give the estimates without and with time trend, respectively. Without time trend, there is not much difference in per capita GDP (it slightly increases at higher quantiles) and per capita GDP square coefficient across various quantiles. This implies that turning point is the same across different quantiles. Turning point depends upon the coefficient of per capita GDP and per capita GDP square. As we can see, EKC hypothesis continues to hold at all quantiles. Elasticity of per capita emission with per capita energy consumption (credit to GDP) decreases (increases) at higher quantiles. This implies that at higher quantiles fewer polluting sources of energy are being used. Elasticity of per capita emission with trade to GDP ratio decreases at higher quantiles. This substantiates our evidence of pollution haven hypothesis from the previous section. As argued before, higher conditional quantiles of emission are expected to be at higher per capita

Fig. 9.10 Panel quantile fixed effect estimator for .CO2 emission from liquid fuel consumption without time trend. These are not unconditional quantiles of emission. But since there is a strong positive correlation between per capita emission and per capita income, higher conditional quantile of emission conditioned on per capita income should be at the higher unconditional quantile of per capita income, and therefore the coefficients at higher quantile should be at higher income quantile too

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Fig. 9.11 Panel quantile fixed effect estimator for .CO2 emission from liquid fuel consumption with time trend. These are not unconditional quantiles of emission. But since there is a strong positive correlation between per capita emission and per capita income, higher conditional quantile of emission conditioned on per capita income should be at the higher unconditional quantile of per capita income, and therefore the coefficients at higher quantile should be at higher income quantile too

income quantile, and therefore the coefficient from quantile regression suggests that as income increases the impact of trade on liquid fuel emission decreases. Foreign direct investment to GDP does not turn out to be significant at any quantile. Elasticity of fuel emission with domestic credit to GDP increases at higher quantiles, and this is in line with our results from pooled mean group estimator. With time trend, all variables show a similar pattern as explained above except per capita GDP and per capita GDP square. Now, per capita GDP coefficients increase at higher quantiles in case of both total emission and emission form liquid fuel consumption.

9.5.3 Panel Fixed Effect Regression Results obtained so far in this chapter suggest that the marginal effect of trade on emission depends upon the level of per capita income. We provide additional evidence on this using a panel fixed effect regression with interaction of trade to GDP and per capita GDP given by Eq. 9.5. Table 9.9 in the Appendix gives the estimates without and with time trend. Figure 9.12 plots these coefficients. As we can see, EKC hypothesis continues

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Fig. 9.12 Fixed effect panel regression with and without time trend

to hold for. Domestic credit to GDP, per capita energy consumption, and trade to GDP ratio have positive elasticity with liquid fuel emission. Foreign direct investment does not turn out to be significant as in The previous results. We are interested in interaction of per capita GDP and trade to GDP ratio. In both cases without and with trend, this coefficient is negative. This implies that the marginal effect of trade on liquid fuel emission depends upon per capita income, and as per capita income increases the marginal effect decreases. Thus, our panel fixed effect regression corroborates our findings about the relationship between per capita emission and trade to GDP ratio obtained from pooled mean group estimator and quantile regression of the previous section.

9.5.4 Threshold Panel Regression with Fixed Effects Since the marginal effect of trade on liquid fuel emission depends upon per capita income, it is likely that there exists threshold (one or more) level of per capita income at which the marginal effect of trade on emission changes (either in sign, magnitude, or significance). We estimate the model given by Eq. 9.8 to estimate the threshold using fixed effect panel threshold regression. Since this requires strongly balanced sample and we have 24 observations on FDI missing in our sample (see Table 9.1). Therefore, we lose few countries to obtain a strongly balanced sample for the time period 1980–2013, and therefore threshold regression is done with a slightly smaller sample in comparison to previous regressions. Table 9.10 in the Appendix gives the estimates with and without time trend. The threshold per capita GDP estimated is 3.2825 with and without time trend. This is close to 90th percentile

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Fig. 9.13 Parameters of emission from liquid fuel consumption with and without time trend: = 0 is per capita GDP below threshold and ._cat = 1 per capita GDP above threshold

._cat

Table 9.4 Distribution of country: per capita .CO2 emission from liquid fuel consumption Country Low income High income All

Below income threshold 3.2825 1326 334 1660

Above income threshold 0 176 176

Total 1326 510 1836

of per capita income in our sample. This threshold is significant (we test for more than one threshold, but that does not turn out to be significant). Figure 9.13 gives estimates with and without time trend. As we can See, EKC hypothesis continues to hold for both total emission and emission from liquid fuel consumption. Domestic credit to GDP and per capita energy consumption have positive elasticity. Without trend, regression suggests that elasticity of liquid fuel emission with trade above threshold turns negative but is not significant. With trend, elasticity of liquid fuel emission with trend above threshold remains positive but is significantly lower than the elasticity below threshold. This gives evidence that there exists a threshold level of income at which the elasticity of liquid fuel emission with trade changes. Foreign direct investment does not turn out to be significant. These are in line with the previous results, table 9.4 shows country year observation based on income threshold. As expected, Table 9.4 shows that above threshold countries are high-income countries.

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Fig. 9.14 Fixed effects panel regression with time trend for high-income countries during the time when their income was comparable to low-income countries

9.5.5 High-Income Countries When They Had Low Income Results obtained from pooled mean group estimator using world bank current classification of countries suggest high-income countries have negative elasticity of liquid fuel emission with trade. Other regressions done in the chapter also suggest that this elasticity is lower at a high level of income. Although, we have controlled for country fixed effects, but we want to rule out the possibility that our results are driven by classification of countries in high and low income as explained before. We estimate a subsample fixed effect panel regression (Eq. 9.5) with and without time trend. Table 9.11 in the Appendix gives these estimates. Figure 9.14 plots these estimates. As we can see, when today rich countries were poor, they satisfied EKC predictions of inverted U-shaped relationship between liquid fuel emission and per capita income. But this subsample has significantly higher coefficient of per capita income, suggesting that elasticity of liquid fuel emission with per capita income has fallen over time for high-income countries. Domestic credit to GDP and per capita energy consumption have positive elasticity although the coefficient of domestic credit to GDP is not significant without time trend. Foreign direct investment does not turn out to be significant. These are in line with the previous results. The coefficient of interest is the coefficient associated with trade to GDP ratio. This turns out to be positive and significant. Also, this coefficient is significantly higher than the estimates given by threshold regression (above threshold coefficient) and quantile regression at the highest quantile. This substantiates our result that at lower and higher levels of income the elasticity of liquid fuel emission with trade to GDP

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ratio changes and this result is not driven by some unobserved factor in countries classification as high- and low-income countries. It is more like income effect than industry shifting because at that time also these countries were rich in comparison to other countries and could have shifted polluting industry. But we observe a very high positive coefficient of trade to GDP ratio. Therefore, we conclude that as income increases the elasticity of liquid fuel emission with respect to trade to GDP ratio decreases, and this is mostly due to the effect brought in by higher income.

9.6 Concluding Remarks Our regression results suggest that EKC hypothesis holds for liquid fuel emission for a panel of 62 countries for the time period of 1980–2013. This relationship is robust to the inclusion of additional covariates. For high-income countries, using pooled mean group estimator, we get a positive coefficient of per capita income but with large standard errors and thus not satisfying EKC predictions. The main focus of this chapter is to test pollution haven hypothesis using trade to GDP ratio. Pollution haven hypothesis predicts that polluting industries would relocate from high-income to low-income countries, and thus higher FDI in low-income countries should be associated with higher emission. But, if polluting industries shift to low-income countries, then that should be reflected in their trade as most of these products of newly shifted polluting industries would be exported to high-income countries. Therefore, we argue that increase in trade to GDP ratio should have different impact on liquid emission based on per capita income (the marginal effect of trade on emission should decrease with increase in per capita income). We use an extended EKC model in which we use per capita GDP, square of per capita GDP, per capita energy consumption, domestic credit to GDP (a measure of financial development), and FDI (foreign direct investment) to GDP as control. Our main variable of interest is trade to GDP. Panel ARDL (pooled mean group estimator) suggests that high-income countries have negative long-run elasticity of liquid fuel emission with respect to trade. The short-run relationship between emission and trade is found to be positive and significant for poor countries. It suggests that the marginal effect of trade on liquid fuel emission changes with income. We use quantile regression to estimate the coefficient of trade to GDP at higher conditional quantiles of liquid fuel emission. These estimates suggest that at higher quantiles the elasticity of liquid fuel emission with respect to trade decreases. There is a strong positive correlation between liquid fuel emission and per capita income, and therefore, higher conditional quantiles of liquid fuel emission are expected to be coinciding with higher income quantiles. Thus, our quantile regression substantiates the results that marginal effect of trade on liquid fuel emission decreases with income. The interaction of trade to GDP and per capita income in fixed effect panel regression turns out to be negative and significant and that gives clear evidence that marginal effect of trade on liquid fuel emission depends upon per capita income as suggested by panel ARDL and

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quantile estimations. Using a threshold panel regression with fixed effects, we find a threshold level of income at which the effect of trade to GDP ratio on liquid fuel emission declines significantly. Since we are using current classification to group countries in high and low income, we want to rule out that some unobserved factor in high-income countries is giving a low elasticity of liquid fuel emission with trade to GDP. We estimate a subsume regression using country– year pairs from high-income countries when their per capita income was comparable (less than the maximum value of per capita income in poor countries in our sample). This subsample regression gives a significantly higher elasticity of liquid fuel emission with trade (higher than the elasticity found for below threshold per capita income). Therefore, we conclude that the differential impact of trade to GDP on emission is not driven by country grouping but the level of income. These results give favorable evidence in favor of our hypothesis that marginal effect of trade to GDP ratio depends upon the level of per capita income. The elasticity of liquid fuel emission with per capita energy consumption decreases with higher level of per capita income, suggesting that at higher income fewer polluting sources of income are used. We do not find a significant impact of FDI to GDP ratio on per liquid fuel emission in any of the regression. There is also evidence that the marginal effect of financial development on liquid fuel emission depends upon per capita income, and at higher income financial development leads to more emission as argued by Sadorsky (2010) and Sadorsky (2011).

Appendix List of Countries (1) Antigua and Barbuda, (2) Australia, (3) Burundi, (4) Benin, (5) Bangladesh, (6) Bahrain, (7) Belize, (8) Bolivia, (9) Central African Republic, (10) Switzerland, (11) Chile, (12) Cameroon, (13) Costa Rica, (14) Dominica, (15) Denmark, (16) Dominican Republic, (17) Algeria, (18) Ecuador, (19) Gabon, (20) Gambia, (21) Guatemala, (22) Honduras, (23) Indonesia, (24) India, (25) Iceland, (26) Israel, (27) Jamaica, (28) Jordan, (29) Japan, (30) Kenya, (31) Sri Lanka, (32) Madagascar, (33) Mexico, (34) Mali, (35) Malawi, (36) Malaysia, (37) Niger, (38) Nigeria, (39) Nicaragua, (40) Norway, (41) Nepal, (42) Pakistan, (43) Peru, (44) Paraguay, (45) Rwanda, (46) Saudi Arabia, (47) Sudan, (48) Senegal, (49) Singapore, (50) Sierra Leone, (51) El Salvador, (52) Sweden, (53) Seychelles, (54) Chad, (55) Togo, (56) Thailand, (57) Tunisia, (58) Turkey, (59) Uruguay, (60) United Kingdom, (61) the United States, and (62) Vanuatu.

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High-Income Countries Based on World Bank Classification Country Names: (1) Antigua and Barbuda, (2) Australia, (3) Bahrain, (4) Switzerland, (5) Chile, (6) Denmark, (7) United Kingdom, (8) Iceland, (9) Israel, (10) Japan, (11) Norway, (12) Saudi Arabia, (13) Singapore, (14) Sweden, (15) Seychelles, and (16) the United States

Results

Table 9.5 Regression at mean and three quartiles for CO2 emission from liquid fuel consumption

Per capita GDP Per capita GDP sqaure Constant R2 N

Linear CO2 emission 1.163∗∗∗ (89.58) −0.137∗∗∗ (−27.71) 6.187∗∗∗ (369.85) 0.858 2108

Quartile 1 CO2 emission 1.176∗∗∗ (67.84) −0.132∗∗∗ (−20.04) 5.799∗∗∗ (259.67)

Quartile 2 CO2 emission 1.138∗∗∗ (69.05) −0.138∗∗∗ (−22.02) 6.237∗∗∗ (293.81)

Quartile 3 CO2 emission 1.162∗∗∗ (83.70) −0.155∗∗∗ (−29.30) 6.638∗∗∗ (371.14)

2108

2108

2108

Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All variables in log

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Table 9.6 Pooled mean group estimator: emission from liquid fuel

Per capita GDP square Domestic credit to GDP Per capita energy consumption Trade to GDP FDI to GDP Short run Error correction D. Per capita GDP D. Per capita GDP square D. Domestic credit to GDP D. Per capita energy consumption D. Trade to GDP D. FDI to GDP Constant Observations

(1) All countries −0.0648∗∗∗ (−13.35) −0.0400∗∗∗ (−3.24) 0.249∗∗∗ (7.85) 0.0278 (0.75) −0.00748∗∗∗ (−2.73)

(2) Poor countries −0.0959∗∗∗ (−8.84) −0.0664∗∗∗ (−3.18) 0.797∗∗∗ (18.02) −0.0281 (−0.89) −0.000801 (−0.24)

(3) Rich countries −0.0388 (−1.53) −0.0577∗∗ (−2.05) 0.129∗∗∗ (3.09) −0.465∗∗∗ (−7.39) −0.00169 (−0.63)

−0.269∗∗∗ (−9.56) 0.00883 (0.07) −0.0911∗∗ (−2.12) 0.0348 (1.03) 0.276∗∗∗ (4.02) 0.0690∗∗ (2.13) 0.00202 (0.79) 1.373∗∗∗ (9.20) 2017

−0.281∗∗∗ (−10.36) 0.00746 (0.08) −0.0827 (−1.55) 0.0310 (0.83) 0.137∗ (1.92) 0.0760∗∗∗ (2.61) −0.000358 (−0.10) 0.601∗∗∗ (8.93) 1492

−0.297∗∗∗ (−5.87) 0.324 (0.74) −0.0317 (−0.38) 0.105∗ (1.69) 0.496∗∗∗ (2.87) 0.127 (1.47) 0.00198 (0.48) 2.787∗∗∗ (5.85) 525

Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All variables except FDI to GDP in natural logarithm

(2) 25 percentile 0.140∗∗∗ (6.00) −0.0548∗∗∗ (−9.45) 0.0189 (0.87) 0.478∗∗∗ (13.18) 0.0883∗∗ (2.42) −0.00331 (−1.18) 2084

(3) 50 percentile 0.146∗∗∗ (8.34) −0.0533∗∗∗ (−12.28) 0.0554∗∗∗ (3.38) 0.447∗∗∗ (16.46) 0.0642∗∗ (2.34) −0.00378∗ (−1.79) 2084

(4) 75 percentile 0.152∗∗∗ (6.55) −0.0517∗∗∗ (−8.98) 0.0943∗∗∗ (4.37) 0.415∗∗∗ (11.53) 0.0386 (1.06) −0.00428 (−1.53) 2084

(5) 90 percentile 0.157∗∗∗ (4.82) −0.0505∗∗∗ (−6.26) 0.124∗∗∗ (4.11) 0.391∗∗∗ (7.75) 0.0190 (0.37) −0.00466 (−1.19) 2084

Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All variables except FDI to GDP in natural logarithm. These quantiles are conditional on covariates. These are not unconditional quantiles of emission. But since there is a strong positive correlation between per capita emission and per capita income, higher conditional quantile of emission conditioned on per capita income should be at the higher unconditional quantile of per capita income, and therefore the coefficients at higher quantile should be at higher income quantile too

Observations

FDI to GDP

Trade to GDP

Per capita energy consumption

Domestic credit to GDP

Per capita GDP square

Per capita GDP

(1) 10 percentile 0.136∗∗∗ (4.29) −0.0558∗∗∗ (−7.11) −0.00784 (−0.27) 0.499∗∗∗ (10.17) 0.106∗∗ (2.14) −0.00296 (−0.78) 2084

Table 9.7 Fixed effect quantile regression: emission from liquid fuel consumption

194 B. N. Gopalakrishnan and A. Sinha

(2) 25 percentile 0.228∗∗∗ (6.00) −0.0537∗∗∗ (−6.92) 0.0114 (0.39) 0.483∗∗∗ (9.92) 0.133∗∗∗ (2.63) −0.00129 (−0.33) −0.00622∗∗∗ (−3.10) 2084

(3) 50 percentile 0.266∗∗∗ (10.63) −0.0495∗∗∗ (−9.72) 0.0372∗ (1.94) 0.475∗∗∗ (14.92) 0.125∗∗∗ (3.75) −0.00109 (−0.43) −0.00915∗∗∗ (−6.92) 2084

(4) 75 percentile 0.305∗∗∗ (11.02) −0.0449∗∗∗ (−7.95) 0.0645∗∗∗ (3.03) 0.467∗∗∗ (13.17) 0.115∗∗∗ (3.12) −0.000886 (−0.32) −0.0123∗∗∗ (−8.38) 2084

(5) 90 percentile 0.334∗∗∗ (8.53) −0.0417∗∗∗ (−5.20) 0.0844∗∗∗ (2.80) 0.460∗∗∗ (9.18) 0.108∗∗ (2.07) −0.000735 (−0.18) −0.0145∗∗∗ (−7.02) 2084

Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All variables except FDI to GDP in natural logarithm. These quantiles are conditional on covariates. These are not unconditional quantiles of emission. But since there is strong positive correlation between per capita emission and per capita income, higher conditional quantile of emission conditioned on per capita income should be at the higher unconditional quantile of per capita income, and therefore the coefficients at higher quantile should be at higher income quantile too

Observations

Trend

FDI to GDP

Trade to GDP

Per capita energy consumption

Domestic credit to GDP

Per capita GDP square

Per capita GDP

(1) 10 percentile 0.199∗∗∗ (3.80) −0.0570∗∗∗ (−5.34) −0.00861 (−0.21) 0.489∗∗∗ (7.30) 0.140∗∗ (2.01) −0.00144 (−0.27) −0.00394 (−1.43) 2084

Table 9.8 Fixed effect quantile regression with time trend: emission from liquid fuel consumption

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Table 9.9 Fixed effects panel regression with time trend

Per capita GDP Per capita GDP square Domestic credit to GDP Per capita energy consumption Trade to GDP Per capita GDP × Trade to GDP FDI to GDP

(1) Per capita emission 0.313∗∗∗ (5.76) −0.0476∗∗∗ (−11.63) 0.0517∗∗∗ (3.59) 0.456∗∗∗ (20.99) 0.0670∗∗∗ (2.80) −0.0424∗∗∗ (−3.20) −0.00353∗∗∗ (−2.26)

Trend Constant Observations

3.398∗∗∗ (24.29) 2084

(2) Per capita emission 0.416∗∗∗ (7.67) −0.0443∗∗∗ (−11.03) 0.0339∗∗∗ (2.39) 0.483∗∗∗ (22.52) 0.127∗∗∗ (5.23) −0.0385∗∗∗ (−2.97) −0.000900 (−0.58) −0.00906∗∗∗ (−9.64) 3.100∗∗∗ (22.10) 2084

Notes: *, **, and *** gives significance at 1, 5, and 10% significance level, respectively. All variables except FDI to GDP in natural logarithm

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Table 9.10 Panel threshold regression with fixed effects and time trend

Per capita GDP Per capita GDP square Domestic credit to GDP Per capita energy consumption FDI to GDP _cat=0 × Trade to GDP _cat=1 × Trade to GDP

(1) Per capita emission 0.136∗∗∗ (8.36) −0.0272∗∗∗ (−5.67) 0.0684∗∗∗ (4.17) 0.404∗∗∗ (17.04) −0.00263 (−1.61) 0.0741∗∗∗ (2.88) −0.00907 (−0.34)

Trend Constant Observations

3.622∗∗∗ (24.03) 1836

(2) Per capita emission 0.263∗∗∗ (12.64) −0.0245∗∗∗ (−5.23) 0.0463∗∗∗ (2.87) 0.427∗∗∗ (18.36) −0.000145 (−0.09) 0.141∗∗∗ (5.42) 0.0632∗∗ (2.30) −0.00958∗∗∗ (−9.45) 3.325∗∗∗ (22.10) 1836

Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All variables except FDI to GDP in natural logarithm. Cat=0 is per capita GDP below threshold and Cat=1 is GDP per capita above threshold

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Table 9.11 Fixed effects panel regression with time trend for high-income countries during the time when their income was comparable to low-income countries

Per capita GDP Per capita GDP square Domestic credit to GDP Per capita energy consumption Trade to GDP FDI to GDP

(1) Per capita emission 0.599∗∗∗ (3.62) −0.0748∗ (−1.74) 0.0497 (0.85) 0.235∗∗ (2.18) 0.434∗∗∗ (6.36) −0.00731∗∗∗ (−2.83)

Trend Constant Observations

3.498∗∗∗ (4.94) 238

(2) Per capita emission 0.654∗∗∗ (4.01) −0.0616 (−1.45) 0.174∗∗ (2.48) 0.415∗∗∗ (3.42) 0.341∗∗∗ (4.64) −0.00600∗∗ (−2.34) −0.0141∗∗∗ (−3.05) 1.973∗∗ (2.30) 238

Notes: *, **, and *** give significance at 1, 5, and 10% significance level, respectively. All variables except FDI to GDP in natural logarithm. These are rich countries in our sample during the time period when their income was less than the maximum income of poor countries in our sample. This regression allows us to conclude the coefficient of trade to GDP in EKC regression is not country specific, but it depends upon the per capita income

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Chapter 10

The Development Practice and Reform Optimization Path of Green Circular Economy in Erhai Lake of China Tang Xuebing, Cai Jun, and Zhang Shoulei

Abstract Erhai Lake, as a cross-regional ecological wetland in China, needs to coordinate the upstream and downstream to establish an innovative development mechanism for the development of green circular economy. At present, there are many defects existing in the development of green circular economy in Erhai Lake, such as large gap of governance funds, lack of governance efficiency, and insufficient governance linkage, which must be optimized by means of innovation linkage mechanism, selection of market-oriented tools, adjustment and optimization of industrial structure and upgrading. Keywords Erhai Lake · Cross-regional · Green circular economy

10.1 Introduction Cross-regional ecological goods have significant externalities. First of all, the definition of property rights is vague. For example, the Erhai Lake basin spans two administrative regions, Dali and Eryuan County. The upstream is Eryuan County and the downstream is Dali. Erhai Lake is a complete river basin that is not divided into two due to administrative division. Second, ecological governance and ecological pollution are fluid and transferable. The pollution discharge from Eryuan County in the upstream can be diffused to Dali in the downstream through the fluid, resulting in substandard domestic and production water. Finally, ecological pollution has negative externalities, while ecological governance has positive externalities. The treatment of sewage discharge in the upstream Eryuan County produces negative externalities, while it produces external economy for the downstream Dali, so it is difficult for green circular economy to achieve the optimization of Pareto effect.

T. Xuebing · C. Jun · Z. Shoulei () School of Economics and Business Administration, Nanhu Campus of Central China Normal University, Wuhan, Hubei Province, China © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Singh et al. (eds.), Green Circular Economy, Circular Economy and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_10

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The transaction costs of cross-regional ecological protection and environmental governance mainly include coordination costs, information costs, monitoring costs, and so on. And cross-regional green circular economy can help reduce these transaction costs. 1. Coordination costs. Cross-regional upstream and downstream local governments coordinate on issues such as governance planning and ecological compensation, as well as governance conflicts and coordination among various departments within the government. Different regions have different governance demands, which inevitably leads to coordination costs. However, the cross-regional green circular economy has broken through administrative barriers, built a crossregional cooperation platform, strengthened inter-governmental linkage, alleviated governance conflicts, and greatly reduced coordination costs. 2. Information costs. The upstream and downstream governments across regions lead to information asymmetry due to different locations. Information costs will be incurred in acquiring, processing, and processing information. Information barriers among regions increase information costs. However, the cross-regional green circular economy strengthens the exchange and sharing of information between regions, eliminates information barriers, and reduces transaction costs. 3. Monitoring costs. Local governments pursue economic development, and in cross-regional governance, the self-interested behavior of local governments is likely to lead to “moral hazard” undermining cooperation, so it is necessary to add monitoring and restraint mechanisms to cross-regional governance. The establishment of the regional governance linkage mechanism and the design of the ecological compensation mechanism provide incentives for the upstream and downstream green circulation linkages. It is conducive to promote self-discipline cooperation and reducing monitoring costs. The essence of cross-regional green circular economy is a transaction activity characterized by ecological products. From the perspective of transaction cost theory, cross-regional green circular economy is essentially the establishment of governance linkage relationship among government, enterprises, people and other subjects. The application of market tools, technology upgrading and informatization can reduce negative externalities and information asymmetry, and ultimately reduce the transaction costs of cross-regional green cycle economy. In cross-regional green circular economy, alliances are formed for governance linkage. However, due to the different interests of different regions, ecological governance has externalities. Local governments pursue the maximization of their own interests, resulting in the redistribution of interests among local governments within the alliance, which is non-economic and even falls into the situation of prisoner’s dilemma. At the same time, in the cross-regional green cycle interconnected marketization, the government is concerned about the source of funds and project security, capital is concerned about risk control and investment returns, environmental protection enterprises are concerned about obtaining orders and winning market competition, and residents are concerned about their family income and the living environment. These subjects are involved in both interests and risks,

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so it is necessary for all parties to reach cooperation on a cross-regional community first, and then play games in the cooperative alliance.

10.2 Introduction to Erhai Lake Basin 10.2.1 General Situation of Natural Environment in Erhai Lake Basin Erhai Lake basin is the “mother lake” of Dali Bai nationality, located in Dali Bai Autonomous Prefecture. It is a national nature reserve and the core area of Cangshan Erhai Lake scenic spot. The upstream of Erhai Lake is Pyrene Lake in Eryuan County, and the downstream is Dali Ancient City, which provides water for production and living for Dali Ancient City and surrounding towns. Figure 10.1 shows the vertical governance of Erhai Lake basin. In Eryuan County, there are mainly three river sources, the Miju River, the Luoshi River, and the Yong’an River, which enter the Erhai Lake, and the water volume accounts for about 70% of the total runoff. There are also 117 large rivers, such as Cangshan Eighteen Streams, in Dali. The total runoff area of Erhai Lake is 2565 square kilometers, the lake area is about 251 square kilometers, and the average water depth is about 11.5 meters. The only natural water course of Erhai Lake is the Xi’er River, 22 kilometers long, which flows into the Yangbi River and finally drains

Erhai Lake basin Eryuan County

Dali

In the upper reaches of Erhai Lake, agricultural counties are mainly based on planting and aquaculture, and the economy is backward, which is the source of agricultural pollution.

In the lower reaches of Erhai Lake, tourism cities and cultural tourism industries are the main industries, which have high requirements on the environment. At the same time, the excessive growth of the tourist population has brought about domestic pollution.

Fig. 10.1 Vertical governance of Erhai Lake basin

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into the Lancang River.1 Erhai Lake is a typical inland faulted lake with certain characteristics of sealing and semi-sealing. The ecological environment has become a bottleneck restricting the sustainable development of local economy and society. The cross-regional green cycle linkage between Eryuan County in the upstream and Dali prefecture in the downstream is of great importance to the ecological environmental protection and governance of Erhai Lake.

10.2.2 General Situation of Social and Economic in Erhai Lake Basin The Erhai Lake basin spans 16 townships, as well as 1 industrial park and 170 administrative villages in Dali and Eryuan County. “Eryuan County is clean, Erhai is clear, and Dali is prosperous”, which expresses the linkage between the upstream and downstream of Eryuan County, Erhai Lake, and Dali succinctly. Erhai Lake has the main functions of water supply for domestic production, agricultural irrigation, power generation, and tourism. According to statistics, in 2015, the total population of Erhai Lake basin was 914,000, and the agricultural population accounted for about 65%. Nearly 20 million tourists visit Erhai Lake every year. The regional GDP is 448.38 billion yuan, of which the output value of the primary industry is 46.36 billion yuan, the output value of the secondary industry is 208.57 billion yuan, the output value of the tertiary industry is 193.45 billion yuan, and the tourism income is 139.36 billion yuan, accounting for 81.5% of the tertiary industry and 31.1% of the regional GDP.2 The output value of the secondary industry in the Erhai Lake basin is the highest, and its economic development is still in the stage of industrialization. The Erhai Lake basin has rich tourism resources, but the tertiary industry accounts for a relatively low proportion, which indicates that the development of tourism products is still in the low-end primary stage and needs further industrial upgrading. In the aspect of developing green and circular economy, Erhai Lake basin has made phased achievements, and some measures are worthy of reference and promotion, but there are still some problems that need to be improved. Through the analysis and comparison of foreign cases, the current situation and problems of Erhai Lake basin are sorted out, from the perspective of cross-regional governance mechanism, market-oriented tools, and industrial structure, this paper puts forward countermeasures and suggestions such as the design of cross-regional green circulation linkage mechanism, the selection of market-oriented tools, and the optimization of industrial structure.

1 Interactive

encyclopedia, http://www.baike.com/wiki/erhai lake, 2016. State Bureau of Statistics, Dali Bai Autonomous Prefecture Statistical Yearbook (2005– 2016). China Statistics Press, 2006–2016. 2 Dali

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10.2.3 The General Situation of Green Circulation Development in Erhai Lake Basin With the support of the national government, since the 1970s, after nearly half a century of treatment, the water quality of Erhai Lake has been significantly improved through the process of water quality deterioration to gradual improvement. The specific implementation of a series of treatment projects is shown in Table 10.1.

10.3 The Main Problems Existing in the Development of Green Circular Economy The implementation of the above-mentioned five-year planning treatment projects has improved the water quality of Erhai Lake basin to a certain extent, and the water quality is in the development process from protection III to II. However, with the passage of time, the population gathering, the whole area development, in the new governance stage, Erhai Lake basin governance is faced with new conditions and problems.

10.3.1 Large Gap in Local Governance Funding During the “Twelfth Five-Year Plan” period, the construction of green circular economy and environmental protection in the Erhai Lake basin involves 20 projects with a total of 49 sub-projects. The total planned investment is 39.21 billion yuan, and the completed investment is 28.24 billion yuan, with an investment completion rate of 72.03%. Among them, 660 million yuan will be invested by the state, 250 million yuan from provincial government funds, 210 million yuan from state matching funds, and 128 million yuan from self-raised funds by counties and cities. The local fiscal revenue is limited. In 2016, the general public budget revenue of Dali was only 30.07 billion yuan, which is a drop in the ocean for the huge amount of funds required for the long-term and complex governance project of Erhai Lake basin. As can be seen from Fig. 10.2, with the economic development, the economy of Dali Bai Autonomous Prefecture in the Erhai Lake basin has increased every year, but its per capita GDP is lower than that of Yunnan Province and even lower than that of the national per capita GDP, which is close to half of the national per capita GDP, and its economic growth rate is also the lowest. It shows that the Dali Bai Autonomous Prefecture in the Erhai Lake basin is quite backward in economy, which is in the stage of pursuing economic development as the core, and needs the adjustment of industrial structure. The capital input of green circular economy is

Direction Water quality assessment and monitoring Pollution source investigation and treatment Urban sewage and fishery

Priority 1. Set up the “three wastes” leading group. 2. Establish an environmental monitoring station in Dali Prefecture to carry out routine water quality monitoring and evaluation. 1. Charge key polluters for discharge of pollution. 2. Urban life pollution system treatment, the construction of Xiaguan sewage pipe, Dali Dayutian sewage treatment plant. The ninth 5-year 1. Construction of sewage pipe from Dali Ancient City to Xiaguan. plan period 2. Cancel cage farming and motor fishing boats. 3. Carry out the pollutant discharge permit system. Stage of comprehensive The tenth 5-year Town 1. Carry out the trial excavation project of polluted bottom mud. watershed management plan period 2. Return pond to lake, return farmland to forest, return house to wetland. 3. Ban phosphorus, ban white, ban grazing. The eleventh Six major projects of 1. Urban environment improvement and infrastructure construction project: regional 5-year plan period Erhai Lake protection pollution interception in towns around the lake, 3 garbage treatment plants in Dali and and management Eryuan County, and 13 sewage treatment plants in total. 2. Water environment control project of lake and river. 3. Rural non-point source pollution control project: “soil testing formula, balanced fertilization”, “one pool and three reforms”, promotion of village sewage treatment system, sewage treatment facilities in farmers’ yards, and rural garbage treatment in the whole basin. 4. Lake ecological restoration and construction project: 7 wetland parks will be built. 5. River basin soil and water conservation project. 6. Environmental management and capacity-building projects. The twelfth Basin ecological With 2 years, 3 billion investment, the implementation of three major projects, to achieve 5-year plan period civilization construction the water quality of class II Erhai Lake The thirteenth Protection and 1. The watershed “two violations” remediation action. 5-year plan period management of Erhai 2. Villages and towns “two pollution” remediation action. Lake seven actions 3. Non-point source pollution reduction action. 4. Water-saving and water-controlling ecological restoration actions. 5. Speed up the action of pollution interception and control project. 6. Watershed law enforcement and supervision actions. 7. Comprehensive protection of Erhai Lake.

Governance phases Period Initial preparation stage 1970s and 1980s

Table 10.1 Summary of Erhai Lake basin governance process

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60000 50000 40000 30000 20000 10000 0

China

Yunnan

Dali Bai Autonomous Prefecture

Fig. 10.2 Per capita GDP of China, Yunnan Province, and Dali Bai Autonomous Prefecture

insufficient, which needs the participation of market subjects and the helping hand of social capital. The government financial input in the green circular economy of Erhai Lake basin is limited, and most of the input is related to project construction, and few of the input is project operation. Erhai Lake basin lacks environmental protection capital operation platform, environmental protection financing ability is weak and financing means are relatively single. Although the PPP mode is introduced in the pollution interception and anti-pollution project to use market power to finance, it is estimated that Erhai Lake needs about 30 billion yuan of ecological compensation funds every year. As the Ministry of Finance issued a notice to standardize the PPP project pool in 2017, more than 2000 projects were cleared out of the project pool, making it more difficult for PPP projects to obtain loan financing. Moreover, most projects of green and circular economy have little profit, so it is difficult to attract market funds, which leads to insufficient funds and affects the progress of some green and circular economy projects in Erhai Lake. In order to solve the problem of lack of funds, it is necessary to further reduce the market threshold, establish a certain incentive mechanism, guide more social capital to join, give full play to the participation function of enterprises in the allocation of green circular economy resources, and improve the investment and financing efficiency of green circular economy.

10.3.2 Local Government Governance Is Inefficient At present, most cross-regional green circular economy are short-sighted and emergency. Under the influence of the political achievement concept of “GDP as a hero” in the past, in order to develop the local economy, local officials often ignored the

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objective laws of ecological nature and blindly carried out large-scale development projects, causing irreversible damage to the ecology. Even in some areas, in order to complete the task of energy saving and emission reduction, there have been forced production restrictions, power outages, and other mandatory control of pollutant emissions, sprinting the goal of green circular economy with short-term behaviors. With the departure of local officials, the green circular economy plan launched during their tenure may also face the situation of “Power gone, adulation done”, lack of follow-up supervision and promotion, policy continuity, and even ecological damage. These activities and emergency pursuit of short-term results and the difficulty of continuing the “half-pull” project have led to the difficulty and repetition of the cross-regional green circular economy among local governments in China. Therefore, it is necessary to promote the marketization of the green circular economy, make the green circular economy sustainable and long-term, and form a complete and stable industrial chain, rather than a short-lived policy product. Lack of government governance efficiency, departmental functions overlap. Governance departments have traditional means of building and operating a green circular economy without providing an incentive mechanism for operation, resulting in a lack of awareness of competition, blind investment, and repeated construction. Pollution control departments pay attention to form, do not pay attention to technological development and innovation, treatment technology level is low. For the same administrative matter, the problem of overlapping management functions is prominent. Taking the protection and governance of Erhai Lake as an example, from the horizontal perspective, local law enforcement agencies include multiple functional departments such as environmental protection, urban management, land, planning, public security, and industry and commerce. From the vertically perspective, the law enforcement agencies of Dali City and Eryuan County coexist. Due to the large number of law enforcement subjects, the functions of each subject overlap, and the phenomenon of multiple law enforcement or prevarication in law enforcement are prominent.

10.3.3 Green and Circular Economic Linkage Is Insufficient Due to the differences in political economy, social development, and location, the local governments in neighboring regions have different environmental governance objectives and form cooperative game relations. Cross-regional water pollution has the ability of transregional flow and transfer of pollutants. Green circular economy requires governance linkages between upstream and downstream adjacent regional governments to form a complete closed-loop green circular economy system for the entire basin to avoid repeated construction and governance conflicts. However, the administrative division has torn the integrity of the whole watershed. Different administrative sections have equal status, and there is no subordination and dispatching relationship between superiors and subordinates in the traditional bureaucratic system, which makes it difficult to interact with cross-regional envi-

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ronmental governance. Economic benefit is the key to the performance evaluation of the government, which makes the local government over-exploit and utilize the ecological resources in its area. There is no communication platform among local governments in China, and there is information asymmetry, coordination cost, and information cost. In the cross-regional green circular economy, there are even cross-regional pollution and pollution transfer events, which have a serious impact on the cross-regional green circular economy. Eryuan County and Dali belong to the upstream and downstream of Erhai Lake, belong to the county and city of Dali Prefecture, and belong to the level government. Dali has a high degree of social development, rich tourism resources, and a high demand for environment. The ecological and environmentally friendly Erhai Lake is more in line with the goal of Dali. The urbanization rate of Eryuan County is low, and the regional economic and fiscal income is much lower than that of Dali. Starting from the interests of the region, Eryuan County gives priority to economic development, and makes use of the advantages of the geographical location of the upstream to maximize the development of water resources, which causes ecological damage to the basin, and then transfers to the downstream to form cross-regional water pollution. This kind of behavior will affect the domestic and production water of Dali in the lower reaches of Erhai Lake basin, and will cause a great negative impact on Dali’s tourism industry. To make Eryuan County government carry out ecological governance and environmental protection, it needs to pay a cost far higher than the fiscal revenue, and the Eryuan County government lacks this motivation. Moreover, Eryuan County and Dali belong to the same level government, which does not have the administrative power to make Eryuan County clean up pollution. The difference of environmental governance objectives will inevitably affect the enthusiasm of local governments to participate in cross-regional green circular economy, so there is a problem that the upstream and downstream linkages of green circular economy in Eryuan County and Dali are not enough.

10.3.4 Low Degree of Marketization Ecological protection and environmental governance belong to the field of public goods, so the construction, governance, and operation are mainly led by the government. Marketization can activate the vitality of social capital, technology, and talents in governance linkage. The marketization of Erhai Lake basin governance is in its infancy and has not yet formed scale and driving effects. At present, the Erhai Lake basin is mainly invested by the government, and also participates in pollution interception and pollution prevention projects in the PPP model, and a quasi-market model in which a small number of market players such as ecological agriculture companies participate. In addition, the threshold for participation in the PPP model is relatively high, and many small and medium-sized enterprises cannot participate. The government has not innovated the governance system to guide the participation of market subjects in governance, and governance is still traditionally biased towards

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industrialized operations. The market model is too simplistic, the market stock is not activated, and there is no participation of diversified market players. Market-oriented mechanisms such as water rights trading, emission trading systems, and river basin ecological compensation mechanisms that effectively supplement government governance have not yet been effectively established and operated. Only by establishing a cross-regional green circular economy linkage mechanism with the goal of market-oriented profit and breaking the low-profit status of the green circular economy can we attract more market players to participate, solve the lack of local government funds, and form a long-term green circular economy mechanism. At the same time, marketization can eliminate externalities, form certain constraints to upstream and downstream, and strengthen the linkage of upstream and downstream. The government’s excessive dominance in the green circular economy has inhibited the establishment and growth of the market mechanism, resulting in the dilemma of marketization. A reasonable linkage mechanism should be designed to realize the effective interaction between the government and the market, so that the administrative mechanism and the market mechanism can be organically combined to contribute to the green circular economy in the Erhai Lake basin.

10.3.5 The Tourist Market Is in Chaos With the vigorous development of tourism in the Erhai Lake basin, hotels and restaurants in the Erhai Lake basin have grown explosively and savagely. There are more than 2500 inns in total, most of which are based on farmer residences, providing nearly 90% of the beds. Due to the confusion of early management and lack of scientific planning, hotels and hotels in the Erhai Lake basin lack corresponding sewage treatment facilities, which is an important source of pollution in Erhai Lake. However, the current management method for market entities in the basin is biased towards “No overall plan for a fundamental transformation”, a crude one-size-fits-all short-term mechanism, and there is a lack of clear business management system standards. In April 2017, more than 2000 inns around Erhai Lake basin were closed for a long time, without clear rules and regulations to guide market subjects to participate in the rectification and management of Erhai Lake, but a rough one-size-fits-all approach, which damaged local economic interests and frustrated the enthusiasm of market subjects in the Erhai Lake basin. The government should plan scientifically, create a good investment atmosphere, guide social capital to participate in the green circular economy in the Erhai Lake basin, make the Erhai Lake tourism market bigger, and play a positive role in the joint governance of the government, market entities and the public.

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10.3.6 Agricultural Non-point Sources and Domestic Pollution Are Serious Although Erhai Lake basin has done a lot of work on agricultural non-point source pollution and achieved phased results, there is still a certain gap with the construction of eco-friendly agriculture. Rural infrastructure is still weak, and sewage networks in villages are lagging behind. Many villages do not have sewerage and drainage systems, public toilets, and garbage disposal stations. They are generally simple stinky gutters and open-air toilets, which are prone to leakage and easily produce a large amount of domestic sewage, domestic garbage, and feces. The farming applied a large number of fertilizers and pesticides, with the rainwater flowing into Erhai Lake, the situation is serious. Traditional farming still accounts for a large proportion, and the promotion of characteristic ecological agriculture needs to be strengthened. There are more than 90,000 cows in the Erhai Lake basin, and more than 90 percent of them are kept free range by small farmers with two or three cows per household. Smallholder free-range farming usually does not install fecal waste treatment facilities, resulting in aquaculture wastewater and feces will cause non-point source pollution in Erhai Lake. Public awareness of environmental protection is weak, and waste water is discharged into the river unconsciously in production and life. A large amount of funds and manpower are focused on the construction of pollution reduction and control facilities in cities and towns, while the input of agricultural non-point source pollution and farmers’ living pollution is not enough, resulting in prominent shortcomings. There is a lack of market-oriented entities to participate in guiding farmers’ large-scale breeding and planting, and lack of large-scale pollution treatment.

10.4 Innovative Ideas to Further Enhance the Green Circular Economy in Erhai Lake Basin 10.4.1 Design of Linkage Mechanism Based on Cross-regional Green Circular Development Firstly, innovative basin coordination mechanism. Establish a new mechanism for cross-regional green circular economy linkage. Set up a cross-regional green circular economy government agency to manage cross-regional green circular economy matters, with clear functions and full responsibilities. Scientifically coordinate global governance planning, strengthen governance linkages between governments across regions, and reduce information costs and linkage costs. Establish a crossregional green and circular economy company to conduct market-oriented allocation and development of resources in the whole region, clarify the property rights of ecological resources, privatize part of public products, and reduce transaction costs.

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Establish a cross-regional investment and financing platform for green circular economy, lower the threshold for market subjects to participate in green circular economy, absorb more funds to participate in green circular economy, and diversify governance subjects. Professional governance by more efficient professional firms. With Dali University as the center, establish a cross-regional green circular economy scientific research base based on the Erhai Lake basin, develop and upgrade green circular economy technologies, and reserve technical strength for Erhai Lake governance. Secondly, scientific planning and perfecting the system. Establish a negative list of green circular economy in the Erhai Lake basin, and define the categories that market subjects cannot participate in. Make overall arrangements for the whole basin, carry out scientific and reasonable planning, and formulate a clear reward and punishment system for enterprises, people, and other subjects. Standardize the installation of sewage equipment and sewage standards for hotels and hotels in thee Erhai Lake basin, the fertilization and pesticide spraying and sewage standards for ecological farms, and the manure treatment and sewage standards for livestock and poultry farms. A large number of homestay hotels built on farmers’ land in the Erhai Lake basin are unable to obtain legal double certificates and are free from legal supervision. We should strengthen supervision, carry out fiscal and tax reform, and levy environmental resource use tax. Avoid the simple and rude one-size-fitsall governance method, protect the confidence of market players, and have more motivation to participate in the cake of the tourism market in the Erhai Lake basin, and linkage with the green circular economy in the Erhai Lake basin. Thirdly, merger of upstream and downstream administrative regions. The Erhai Lake basin is 2565 square kilometers, while the downstream basin under the jurisdiction of Dali is only 1815 square kilometers. The pollution in the basin of Eryuan County outside the jurisdiction of Dali cannot be effectively controlled across regions. The Erhai Lake basin is divided into two parts in terms of administrative division, but the Erhai Lake basin is an indivisible whole. The upstream and downstream administrative regions are merged to internalize the externality of cross-regional ecological governance so as to reduce the transaction cost. In 2004, Shuanglang Town and Shangguan Town, formerly belonging to Eryuan County, were assigned to Dali and entered the category of Erhai Lake basin governance of Dali, which played a positive role in the green circular economy of Erhai Lake. In order to achieve better cross-regional green circular economy linkage effect, administrative barriers should be broken through, and a feasible plan to merge Eryuan County into the administrative division of Dali can be put forward, so as to win national policy support. It can be foreseen that one administrative division is more in line with the interests of the green circular economy of Erhai Lake basin. From the perspective of the whole river basin, more systematic and comprehensive planning and governance can reduce the transaction costs of inter-regional linkage, and achieve the goal of “Eryuan County is clean, Erhai is clear, and Dali is prosperous” sooner. Fourthly, scheduling mechanism to divert tourists. Through the scientific method to calculate the human flow of each area of towns and villages in Erhai River basin,

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the number of residents that hotels, homestays, and inns can carry is controlled in this number range. Yunnan Provincial Tourism Development Committee and Tencent jointly created the Yunnan global tourism intelligence platform “One Mobile Tour Yunnan”,3 and launched the “Yunnan Tour” app. Visitors to the Erhai Lake are encouraged to reserve accommodation and scenic spots tickets in advance through the “Yunnan Tour” app, and form a price gradient based on big data. The price of the earlier reservation is the normal price or slightly lower, and a red envelope with a certain probability will be rewarded through Tencent payment or Ali payment. When the reservation is relatively late and the number of tourists in the Erhai Lake basin exceeds the carrying capacity, the price is higher than the normal price, and the marginal price is greater than or equal to the marginal ecological governance cost. Tourists who exceed the carrying capacity pay a higher price gradient, and through peak regulation, the tourists are diverted to other places and the environmental pressure of the local area is relieved.

10.4.2 Selection of Cross-regional Green Circular Economy Linkage Marketization Tools Firstly, establish a trading system for emission rights and water rights. Give full play to the leverage of the market, establish a platform for water rights trading and pollution discharge trading, improve the water market system, and guide market players to participate in the paid use and trading of water rights and pollution discharge rights in the Erhai Lake basin. By reflecting the real price of aquatic products in the market, reducing administrative interference, and distorting the price of aquatic products, the governance body can grow up spontaneously and participate in the green circular economy. The establishment of emission trading platform can encourage enterprises to trade emission rights, promote the cost of pollution control to be reflected and compensated through trading, and give enterprises more power to develop high-end pollution control technology. The trading of emission rights has formed a benign linkage between government agencies and enterprises and among enterprises, and the emission demands of different entities have been purchased through more channels, which promotes the optimal allocation of water resources in the basin and realizes the benign green and circular development of the basin. Moreover, water rights transaction is also helpful to alleviate the water resources tension in the Erhai Lake basin, promote the sustainable development of water resources in Erhai Lake, and then promote the comprehensive management, development, and utilization of water resources. Secondly, build Erhai brand and ecological label. Combined with the image of the “Mother Lake” in the hearts of the Bai people, build the Erhai Festival, strengthen the belief in the holy lake of Erhai Lake, and

3 Source:

xinhua, http://www.xinhuanet.com/tech/2018-03/03/c_1122480364.htm

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enhance the awareness of the residents of Erhai Lake to protect the sacredness and purity of Erhai Lake. Relying on the huge tourism market of Erhai Lake, it will become a well-known brand in Dali and even a well-known national brand. The Erhai Lake brand naming rights are commercialized to promote the cooperation between tourism enterprises and Erhai Lake specialty enterprises, and conduct brand investment and naming to obtain commercial premiums. Build brand ecological markers for Erhai Lake, and give ecological markers to ecological products that meet the green circular economy standards of Erhai Lake basin. Ecologically labeled products are green products, which should be sold at a corresponding premium to meet Chinese people’s demand for green products and consumption upgrading needs, so as to make up for the decline in output caused by ecological planting and motivate people to carry out ecological planting with low pollution. Hotels, restaurants, and other businesses conform to ecological production and operation. Government agencies can also supervise and judge whether they are ecological markers, so as to increase consumers’ recognition of businesses. Thirdly, strengthen the Internet operation in the Erhai Lake basin. Introduce the operation mode of Internet ecological products, strengthen the cooperation with Alipay, take Ant Forest as the model, and create a small game to protect Erhai Lake basin. Users’ environmental behaviors, such as green travel, water saving, and mobile payment, are converted into small water drops in the app after calculation by big data algorithm. Users collect small water droplets like ant forest energy, store to a certain size, which can be exchanged for a virtual water area of Erhai Lake basin, receive the beauty of Erhai water area, and get a sense of accomplishment. It not only carries out advertising marketing for Erhai Lake, improves the popularity of Erhai Lake tourism, but also enhances the participation and awareness of individual people in Erhai Lake protection. It also obtains the sponsorship of environmental protection funds from third-party enterprises cooperating with small games. Make full use of new media such as Wechat, Weibo, and Douyin, which are very popular in China, strengthen the operation and publicity of Erhai Lake basin, so as to make people realize the beauty of Erhai Lake basin, attract more people to come to Erhai Lake, voluntarily protect the beauty of Erhai Lake basin, and warn people to protect the beauty of Erhai Lake basin, because the beauty of Erhai Lake is fragile. At the same time, the ecological behavior of Erhai Lake pollution is exposed, and the media supervision function is played. The new media of Erhai Lake can be built into the new media with the most spreading degree and credibility in the Erhai Lake basin, and the advertising profit of new media can be obtained through cooperative marketing with shops and tourism products. Fourthly, establish a diversified investment and financing system. Cross-regional green circular economy is a complex and long cycle project, which needs a huge amount of capital and technical support. At present, the financial input of Chinese green circulation economy is limited, but the social capital is not fully applied. The spillover of public goods in ecological governance leads to insufficient incentive mechanism and high financing threshold in environmental protection

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industry, which excludes a large amount of active social capital. Diversification of investment entities should be pursued. Firstly, apply for government financial subsidies as much as possible, including the special governance funds of various ministries and commissions and the transfer payments from the central finance. Local financial input should also be stable for a long time, and cross-regional ecological compensation should be continuously promoted. With the help of the investment and financing platform of Erhai Valley Investment Company, it obtains preferential loans from policy banks, commercial banks, and financial institutions. Set up green circular economy fund, green development fund, environmental protection fund, and water fund in the Erhai Lake basin; Develop green credit tailored to local conditions, simplify approval procedures, and speed up the issuance of green bonds; Erhai Lake basin tourism company and environmental protection company package listing, absorb capital market funds. Build a multi-level environmental protection investment and financing system to attract social funds to participate in the green circular economy. Adopt BT, BOT, PPP, TOT, TBT, and other methods to raise funds for the construction and operation of cross-regional ecological projects, and absorb state-owned funds, private funds, and foreign funds. Learn from the existing lottery issuance system, issue the Erhai Lake basin water resource environmental protection lottery with the approval of the civil affairs department of the state, establish a drainage system and a sales system, and raise funds for the development of a green and circular economy in the valley.

10.4.3 Optimize the Industrial Structure of the Basin Firstly, vigorously develop tourism. At present, the proportion of heavily polluted primary industry and secondary industry in the Erhai Lake basin is high. The industrial structure of Erhai Lake basin should be upgraded to enhance the market value of cultural and tourism industry and service industry in the Erhai Lake basin. Cannot be satisfied with the current status of class II, III water quality, Erhai Lake basin as a pearl on the plateau, positioning should be lofty, against the plateau “Bali”, vigorously develop the whole region tourism. Erhai Lake is not only a natural lake for sightseeing, but also integrates a large number of high-quality scenic spots in Yunnan with the location advantages of the surrounding Cangshan “Scenery, flowers, Snow and Moon” to develop allround tourism such as wedding, adventure tourism, ecological education, hot spring health and sports, high-end pension, and so on. The tourism market stock of Erhai Lake basin should be activated and new market increment should be introduced, so that all the main bodies of the river basin can share the benefits brought by protecting the ecology of Erhai Lake basin, so as to be motivated to actively participate in the protection and governance of Erhai Lake basin. It expands the industrial chain and market of Erhai Lake basin, and also increases the tertiary industry of Erhai Lake basin.

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Taking Dali Movie City as a fulcrum, expand and strengthen the film and television performance industry in the ancient city of Erhai Lake. The mature highend cultural and tourism industry model of “Impression of Sanjie Liu” is introduced to create “Impression of Erhai Lake”. Through a real landscape program, the natural landscape of Erhai Lake basin is added with cultural connotation. Combined with local characteristics, cultural and tourism performance projects have promoted the employment of local people, transferred the liberated primary industry population to a greener tertiary industry, reduced the pollution from non-point agricultural sources, and solved the paradox between ecological environmental protection and economic development. To further expand and strengthen the cultural and tourism industry in the Erhai Lake basin, let more residents and enterprises participate in the cultural and tourism industry, bind the water ecological environment health of Erhai Lake basin with individual economic interests, form a governance linkage, and have more motivation to participate in the construction and development of green circular economy in the Erhai Lake basin. Secondly, Upgrading ecological agriculture. Further promote ecological farming, upgrade and adjust the agricultural industrial structure, and optimize the industrial structure of river basins. Reduce the cultivation of agricultural products with high pollution and high pesticide, and promote the commercial crops suitable for the water and soil environment of Erhai Lake basin. Promote land transfer, introduce new farmers or market entities, reform traditional planting patterns, and develop large-scale scientific planting. Further promote blueberry, lavender, tobacco ecological planting estates, these crops belong to the production process without the application of a large number of fertilizers, pesticides, etc. Environment friendly, high economic benefits, with ornamental value to expand the Erhai Lake tourism, improve the proportion of characteristic ecological agriculture. Develop the agricultural fine processing industry and extend the chain of the agricultural industry. Examples include lavender essential oil, dried blueberries, blueberry sauce, and blueberry wine. The introduction of market entities, rational distribution of livestock farms, improves the construction and management of waste water discharge facilities. Take the road of green ecological livestock and poultry breeding, develop the advantages of large-scale breeding, and enhance the economic benefits of livestock and poultry industry. Build ecological homes, strengthen the reconstruction and construction of rural garbage recycling stations, sewage collection facilities, biogas digesters and ecological public toilets, carry out interesting ecological protection teaching, and cultivate residents’ good awareness of ecological protection. Take the form of “company + base + farmer” or other main market linkage, give full play to the leading role of the company, expand organic fruits and vegetables, ecological poultry and livestock, ecological fishery, and make a comprehensive development project integrating characteristic agricultural production, processing and sales, leisure and tourism. Encourage industrial transformation and upgrading and the Internet revolution, cultivate new entities, and expand rural e-commerce platforms. Promote the characteristic agricultural products of Erhai Lake basin to

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force the transformation and upgrading of agricultural industry in the Erhai Lake basin. Thirdly, Build new countryside. According to the location, economy, culture, and characteristic industry of the village provide the guidance of the appropriate local development route. Some rural areas will be transformed into beautiful villages, while others will follow the path of rural urbanization. The countryside close to the edge of the expanding city will be gradually merged into the town by taking advantage of its location. Carry out urbanization and upgrading of our infrastructure, integrate it into the sewage disposal system, strengthen waste and sewage discharge management, upgrade corresponding industries, and promote integrated urban and rural development. The countryside with characteristic historical culture and scenic spots is suitable for the development of beautiful countryside. Under the guidance of government departments, the protection of historical buildings and the protection, upgrading and transformation of characteristic scenic spots should be carried out. The planning should be scientific and systematic, the construction of infrastructure should be strengthened, the facilities of sewage discharge and pollution interception should be improved, and a beautiful countryside with beautiful environment should be created. Give full play to our advantages in tourism resources, strengthen operations to attract tourists for pleasure and consumption, develop the rural service industry, and increase the endogenous driving force for rural development. Upgrade the mode of production in rural areas, reduce pollution from non-point agricultural sources, and change our lifestyle of indiscriminate sewage discharge. Explore local rural characteristics, develop rural service industries, make scientific planning and orderly operation and treatment, build new rural areas, and reduce rural non-point source pollution and domestic pollution.

10.5 Conclusion Establishing and improving a green, low-carbon, and circular development economic system is an inevitable choice for building a modern and powerful country. The development of green circular economy is an important direction for future economic development, and Erhai has unique advantages in developing green circular economy. Combined with the current economic development status and existing problems of Erhai Lake, we put forward innovative ideas for further promoting the development of green circular economy in the Erhai Lake basin. First of all, it is necessary to strengthen the top-level design, enhance the linkage between the upstream and downstream of Erhai Lake basin, and coordinate the interests of governments in different jurisdictions. Then it is necessary to use market-oriented tools to promote the development of cross-regional green circular economy and improve development efficiency. Finally, it is necessary to optimize the industrial structure of the Erhai Lake basin, increase the proportion of the tertiary industry, reduce the proportion of the secondary industry, and promote the development of

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a green circular economy by developing ecological agriculture and building a new socialist countryside. With a multi-pronged approach, the establishment of a sound and efficient green circular economy in the Erhai Lake basin is just around the corner.

Bibliography Bohan L (2020) Analysis on the construction ideas of green low-carbon circular development economic system. China Logist Purch 8:54–55 Fanqi Z, Tinghui L (2022) The impact of agricultural ecological capital investment on the development of green circular economy. Agriculture 12(4):461 Haiyan X (2020) The current situation and direction of circular economy under green development. Macroecon Manag 1:14–21 Hao Z, Ziyang Z (2021) Research on the endogenous power mechanism of the construction of green low-carbon circular development economic system. Bus Exhib Econ 8:40–42 Jian Y, Dan D, Chunli H, Jia L, Chen Y, Tao W (2021) Agricultural social ecological response under Erhai Lake protection and governance policy. Chin Agric Sci Bull 37:158–164 Quanliang D, Yan W (2018) Research on ecological compensation in Erhai Watershed of Yunnan. J Liaoning Adm Inst 5:92–96 Sixi D, Ze Y, Yanlan L, Bo H, Jianchun S, Weizhi S (2021) Research progress on agricultural non-point source pollution in Erhai Basin. J Ecol Rural Environ 37:279–286 Wei M, Rucheng J, Zhou Yun S, Jianguang XL (2021) Research on water environment problem diagnosis and water quality protection measures in Erhai Basin. People’s Yangtze River 52:45– 53 Wenliang P (2018) Comparison of Erhai Lake protection concept and Tibetan sacred lake concept. J Dali Univ 3:43–47 Wentao S (2021) Analysis of ecological civilization construction and high-quality economic development. Financ Econ 19:26–27 Yakun D, Guo Yuxin W, Bilan ZW (2021) Analysis on the temporal and spatial dynamic characteristics of land use in the upper reaches of Erhai Basin from 2005 to 2019. Sci Technol Eng 21:15340–15347 Yingzhuo G, Xianrong L, Xiaolei L, Yeqing Z, Jichen S (2021) Research on Erhai Lake protection and green transformation innovation and sustainable development model in the new era. China Water Resour 20:74–77 Zhenhua Y, Yong Q, Xiaojing Y, Xiaojia Y (2020) Research on the development significance of water culture journey based on Erhai Lake protection and management. Environ Dev 32:196– 197 Zhiguang Z (2021) The evolution of green economic model and the trend of super circular economy. China Popul Resour Environ 31:78–89

Chapter 11

Recent Trends in Biohydrogen Economy: Challenges and Future Perspectives Ekta Mishra, Shruti Kapse, and Shilpi Jain

Abstract Global urbanization and population increase are major factors driving up energy usage. Conventional fossil fuels are unable to supply this demand because of the unrestrained production of greenhouse gases, which causes price inflation and significant environmental harm. The emphasis has shifted to more cost-effective, sustainable, renewable energy sources like hydrogen in order to relieve this bottleneck. Interest in the development of biohydrogen has always been sustained by its immense promise as a clean energy source. Instead, the “grey hydrogen” produced by the current method of creating hydrogen has been the main contributor to carbon emissions. Therefore, developments in green hydrogen (biohydrogen) production technology in the transition to a decarbonized energy sector have the potential to significantly contribute to the need for future renewable energy. As the flexible fuel of the future that can replace fossil fuels, biohydrogen is currently seen as an essential part of a sustainable global power supply. This chapter attempted to describe the key challenges faced when using biohydrogen on a commercial scale and also evaluate its future commercialization prospects by evaluating its economics while taking into consideration the numerous processes including production, storage, transportation, and delivery to the customer. Keywords Biohydrogen · Green circular economy · clean energy · Biowaste · Sustainable development

11.1 Introduction Energy is one of the substantial factors of a country’s economy. It is a key derivative of human living standards of any country. Since industrial revolution, there has been a major focus on fossil fuels as a source of energy to the world. They are

E. Mishra · S. Kapse · S. Jain () Department of Environmental Studies, The Maharaja Sayajirao University of Baroda, Vadodara, Gujarat, India © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Singh et al. (eds.), Green Circular Economy, Circular Economy and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_11

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non-renewable resources and take millions of years to be produced again and are not environment friendly. The utilization of fossil fuels is associated with Greenhouse Gas (GHG) emission, mainly consisting of CO2 , the production of which has increased more than 40% since the industrial revolution (Moreira and Pires 2016). The increase in CO2 emissions is affecting the natural climatic patterns of the earth such as changes in temperature and patterns of precipitation, which are imposing negative impacts on human lives (Costello et al. 2009). For resolving these increasing problems of climatic changes, the use of carbon dioxide neutral fuel systems must be encouraged as suggested in the Copenhagen Climate Conference, 2009 (Christiansen et al. 2018). The increasing population along with pollution and the fast depletion of non-renewable fossil fuels have forced the world to shift to renewable energy sources (Mona et al. 2020). Renewable energy production and utilization is one of the most attentive topics and currently seems to be potential alternative to replace fossil fuels (Rosen and Koohi-Fayegh 2016). In this context, biofuels are suggested to be highly potential and green alternative as the renewable energy sources, and may be capable to compete with the global energy crises, originated due to the various limitations of fossil fuels (Majid 2020). Moreover, biofuels production using biomass is considered as a potential solution to overcome these challenges (Ahorsu et al. 2018; Ben-Iwo et al. 2016). Biomasses are one of the most versatile carbon-rich, renewable, and low-cost resources, being employed to produce various kinds of biofuels like biodiesel, bioethanol, biobutanol, biogas, and biohydrogen (Beschkov 2017). Among these, biohydrogen is known to be an excellent renewable energy source and has received enormous attention because of its unique properties like being inexhaustible, renewable, pollution-free, and low cost (Hroncová et al. 2016). Additionally, it also acknowledges to carry the highest energy density and no carbon dioxide is generated since the combustion of H2 produces only water vapor as the by-product (Cannone et al. 2021; Billaud et al. 2016). The consumption and need for hydrogen as an alternative energy source is continuously increasing and expected to contribute 8–10% in the energy market by year 2025 (Kumar Gupta et al. 2013). Hydrogen can be produced using different techniques such as physical, chemical, and biological processes (Raghulchandrana et al. 2020). Among these, biological process of hydrogen production presents significant advantages over the other processes due to the various advantages, e.g., can work at ambient temperature and pressure which makes it viable option for large-scale production, less energy-intensive, less cost-intensive, use of diverse organic substrates and microorganisms, meanwhile being the renewable in nature and eco-friendly (Singh et al. 2021). Hydrogen production through photosynthetic and fermentative processes by green algae, cyanobacteria, and anaerobic bacteria is popularly known as biohydrogen and has gained momentum during the last few decades (Mathews and Wang 2009). The global research for biohydrogen is still in its infancy, and only laboratoryscale experiments have been reported till date (Kumar Gupta et al. 2013). Optimization strategies are in progress to overcome the challenges and to obtain the desired biohydrogen levels, find new and alternate resources, design hydrogen

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storage vessels, and finally to improve its contribution to the present energy demand (Bockris 2002). Biological hydrogen production presents a possible avenue for the large-scale sustainable generation of hydrogen needed to fuel a future hydrogen economy (Lamb and Lien 2020). In this chapter, efforts have been made to outline the main difficulties encountered when using biohydrogen on a commercial scale and to assess the likelihood of its commercialization in the future by analyzing its economics while taking into account the various processes involved, such as production, storage, transportation, and customer delivery.

11.2 Sources for Biohydrogen Production The rate of production of biohydrogen depends upon the kind of substrates and conversion technologies utilized (Singh et al. 2022). For cost-effective biohydrogen production, the substrate should be cheap and renewable. Substrates including algal biomass, agriculture residue, and wastewaters are readily available. Moreover, substrates rich in starch and cellulose such as plant stalks or agricultural waste, or food industry waste such as cheese whey are reported to support dark- and photofermentation. However, their direct utilization as a substrate is not recommended due to their complex nature. Therefore, they must be pretreated before use to release fermentable sugars (Singh et al. 2022). Substrate pretreatment is one of the significant steps in the successful utilization of biomass for biohydrogen production. Sometimes, the pretreatment of the inoculum also enhances the rate and yield of the biohydrogen. Biomass from industries and algae could be a viable source for biohydrogen production, especially in cases where waste treatment and energy production are combined. Carbohydrate-rich, nitrogen-deficient solid waste such as starch residues may be used for hydrogen production using suitable bioprocess technologies. Sugarcane bagasse contains high cellulose, hemicellulose, and lignin, making it a suitable substrate for producing value-added chemicals and fuels via a biorefinery approach. Because of the complicated structure of cellulose present in bagasse, pretreatment is carried out to improve enzymatic hydrolysis. Thus, substrate pretreatment is essential before it is subjected to hydrolysis or fermentation (Rai et al. 2014). Algal biomass can be used as a substrate for biohydrogen production. The utilization of algal biomass has dual benefits as algae sequestered carbon dioxide, which contributes toward the global reduction of harmful greenhouse gases concerning climatic changes, and secondly, it releases oxygen (Rai et al. 2014).

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11.3 Key Technologies for Biohydrogen Production Numerous studies have investigated H2 production via (direct and indirect) biophotolysis, (dark and photo-) fermentation, and microbial electrolysis cells (MECs). An overview of various available technologies is shown in Fig. 11.1.

11.3.1 Fermentation Fermentation is a biochemical process where microorganisms produce alcohols, acetone, H2 , and CO2 from organic substrates (starch, lignin, cellulose, etc.) either in the presence or in the absence of O2 (anaerobic).

11.3.1.1

Photofermentation (PF)

In photofermentation, purple nonsulfur photosynthetic bacteria (Rhodobacter, Rhodobium, Rhodopseudomonas, and Rhodospirillum strains) capture light energy and convert organic acids generated during anaerobic fermentation to H2 and CO2 in a nitrogen-deficient environment (Ferraren-De Cagalitan and Abundo 2021). These photosynthetic microorganisms exist in the natural environment and are able to process a wide range of substrates over a broad spectrum of light (Das et al. 2014). Purple non-sulfur bacteria are very efficient for hydrogen production because of the following reasons (i) having a good efficiency of substrate conversion, (ii)

Fig. 11.1 An overview of various biohydrogen production technologies

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being anaerobic, they can manage the issue of oxygen sensitivity, which affects the [Fe-Fe] hydrogenase, the hox EFUYH [NiFe] -hydrogenase, and nitrogenase enzymes (iii) the ability to utilize both visible and near-infrared regions of the spectrum, (iv) the potential to use a variety of substrates (Das and Veziroˇglu 2001). But unlike biophotolysis, this photofermentation does not produce O2 that inhibits H2 production. Photofermenters either capture light energy from the sun or use artificial light. Although the sun is a cheap source of energy, it limits the biohydrogen production to daytime only. On the other hand, the use of artificial light, such as tungsten lamps, to provide the light energy allows the production to proceed through the night. However, this will require additional investment (photofermenter), and operating costs (energy requirement) as well (Weber and Lipman 2019), similar to biophotolysis. H2 yield for this light-driven process depends on several factors including light intensity, design of the photofermenter, type of microorganism and medium, and organic substrate, among others (Sa˘gır and Hallenbeck 2019). Its yield is comparable to that of biophotolysis (Łukajtis et al. 2018).

11.3.1.2

Dark Fermentation (DF)

Biological fermentation mode of H2 production in the absence of light is regarded as dark fermentation which is known to be the simplest H2 production methods at ambient condition while using organic substrates (Singh et al. 2021). This is the very commonly used biological method of H2 production using versatile range of organic and cellulosic wastes (Rosa and Silva 2017; Hajizadeh et al. 2021). Apart from the substrate versatility and simple operation mode, H2 production rate is much higher in this mode when compared to other known fermentative methods along with the feasibility to utilize various fermentative microorganisms (Usman et al. 2019; Sivagurunathan et al. 2017). This process is carried out by either obligate or facultative anaerobic fermentative bacteria such as Clostridia, Escherichia coli, Enterobacter, Citrobacter, Alcaligenes, and Bacillus strains (Ghimire et al. 2015).

11.3.1.3

Integrated Dark and Photo Fermentation

In spite of being the most advantageous and sustainable method, both the fermentative biohydrogen production methods (DF and PF) suffer from certain drawbacks which create main hurdles in the way of sustainable and economic biohydrogen production technology (Singh et al. 2021). Low yield, unavailability of the potential substrates, and the high production cost are the main drawbacks of DF process whereas poor H2 production rate is the main constrain of PF process. In this reference, integration of both the processes while using lignocellulosic biomass (LCB) as the substrate may help to overcome these challenges (Cheng et al. 2011). The maximum conversion of substrate into H2 can be achieved directly by combined DF and PF process at minimum physicochemical changes. Moreover, the highest

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theoretical hydrogen yield up to 12 mol H2 /mol glucose can be achieved via this integrated approach (Patel et al. 2018). The integrated biohydrogen production can be operated in a single batch system or in a sequential two-step batch system.

11.3.2 Biophotolysis Selected microorganisms have the ability to use light energy to split water molecules and produce H2 . This light-driven process is called biophotolysis and can be further classified as either direct biophotolysis or indirect biophotolysis. Both green algae and cyanobacteria play important roles in biophotolysis (Ferraren-De Cagalitan and Abundo 2021).

11.3.2.1

Direct Biophotolysis

In this process, solar energy is transformed into chemical energy. Microorganisms performing this activity are species of different green algae (photoautotrophic organism) and cyanobacteria. Chlamydomonas reinharditi is the most commonly used microalga, besides Scenedesmus obliquus and Chlorella fusca for hydrogen production. It is an attractive way to produce hydrogen as it uses water and sunlight as an energy source (Sen et al. 2008). Microalgae such as green algae (Chlamydomonas reinhardtii) or cyanobacteria (Synechocystis) convert water (substrate) into H2 and oxygen (O2 ) in the presence of light and carbon dioxide (CO2 ) during photosynthesis.

11.3.2.2

Indirect Biophotolysis

Indirect biophotolysis differs from direct photolysis in that O2 evolution occurs in a separate stage from H2 production (Kossalbayev et al. 2020). The first stage involves photosynthesis of cyanobacteria, where CO2 and H2 O are converted to organic substances and O2 . This is followed by a light-independent reaction where the organic materials from the first stage are further broken down by the cyanobacteria into H2 , CO2 , and other soluble metabolites (Weber and Lipman 2019). The separation of the O2 -evolution phase from the H2 -production phase eliminates two of the challenges associated with direct photolysis, which are O2 inhibition and the formation of the H2 –O2 mixture (Huesemann et al. 2010). Despite this, H2 production by indirect biophotolysis is still quite low. This may be attributed to the consumption of H2 by the hydrogenase enzyme (Sinha and Pandey 2011).

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11.3.3 Microbial Electrolysis Cell Microbial electrolysis cell (MEC) technology is a promising bioelectrochemical hydrogen production technology that utilizes anodic bio-catalytic oxidation and cathodic reduction processes. MECs require a lower external energy input than water electrolysis; however, as they also require the application of external power sources, this inevitably renders MEC systems a less sustainable option. This issue is the main obstacle hindering the practical application of MECs (Yang et al. 2021). Another challenge that must be overcome by the MEC technology is the high capital cost of the cathode material and its catalyst, which contributes about 47–85% of the total costs (Rozendal et al. 2008). Conventionally, platinum (Pt), the preferred catalyst for hydrogen production, is applied at the MEC cathode. Pt is a precious metal and is quite expensive; ergo, the search for a cheaper and more environmentfriendly cathode has gained much attention (Chandrasekhar et al. 2015; Jafary et al. 2017; Kundu et al. 2013). An MEC design that can integrate both high H2 yields and low costs is very much desirable for upscale purposes (Ferraren-De Cagalitan and Abundo 2021). A comparative study on the above available technologies for biohydrogen production is discussed in Table 11.1.

11.4 Techno-economic Analysis of Various Biohydrogen Production Methods 11.4.1 Dark Fermentation The total cost of the dark fermentation comprises capital costs (equipment and maintenance costs), depreciation expense costs, and operating costs (along with administrative expenses) (Chang et al. 2011). According to Chang et al. (2011), the cost of the equipment comprises the price needed for the H2 processing unit, storage facility, purifying, and compression unit to be mounted. If the electricity is produced specifically from the obtained H2 , the cost of the fuel cell is added to the price of the machinery. In relation to the above, to assure the 99.99% of clean H2 , a dedicated H2 purifying unit is compulsory. In their study, the authors have estimated the revenue attained by H2 (63,000 m3 /year) produced while treating organic wastewater (food/beverage). The revenue generated by selling the H2 is estimated as 12,094 USD. The annual revenue and annual profit of H2 plant are calculated as 82,550 USD and 7609 USD. Therefore, the cost of H2 production cost is predicted as 1 USD per m3 which includes 0.17 and 0.23 USD per m3 for feedstock and facility investment cost respectively. The overall asking price of the H2 production through the dark fermentation process utilizing two separate substrates, including beverage wastewater and agricultural residues with a plant potential of 300 and 400 m3 , respectively, was

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Table 11.1 Comparison of various biohydrogen production technologies (Lamb and Lien 2020; Ferraren-De Cagalitan and Abundo 2021) Technology Photofermentation by non-sulfur photosynthetic bacteria

Dark fermentation

Direct photolysis

Indirect photolysis

Advantages These organisms can utilize a wide range of light wavelengths, different organic waste effluents, and are capable of both hydrogenase- and nitrogenase-based H2 evolution.

Disadvantages Light and dark cycle usage is not yet perfected, reactor design for best light penetration, and how to incorporate these into a biorefinery are all issues that need to be addressed. The fermentation process is also susceptible to contamination by H2 -consuming microbes. Can constantly Further research and manufacture H2 in development are needed the absence of light, in genetic systems and can use a range of reactor design, and carbon sources as biomass convertibility, substrates, produces H2 extraction, and the useful metabolites as presence of CO2 in the byproducts (butyric, gas mixture are all poorly understood. lactic, and acetic acid), and is fully anaerobic. Directly produces Poor light consumption hydrogen from water efficiency, difficult to and sunlight, with stimulate H2 generation, low production rate, and better solar conversion and less high oxygen sensitivity. nutrient need than those found in terrestrial plants. In many situations, they can also fix atmospheric nitrogen. Has hydrogenase H2 Poor light consumption synthesis using efficiency, difficult to carbohydrates stimulate H2 generation, low production rate, and produced through high oxygen sensitivity. photosynthetic processes, with better solar conversion and lower food requirements than those seen in terrestrial plants.

Considerations for commercialization Substrates and inocula that have been pre-treated for improved H2 recovery. Poor light conversion rates. Hydrogenase suppression by O2 .

Substrates and inocula are pre-treated for improved H2 recovery. Low H2 purity in the gaseous product mixture. Low substrate conversion efficiency. Relatively lower H2 yield; and low H2 yield. High light intensity is necessary. A bioreactor with a big surface area is necessary. Photochemical efficiency is low.

Requires a bioreactor with a wide surface area and strong light intensity. Eliminating uptake hydrogenase to stop H2 deterioration.

(continued)

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Table 11.1 (continued) Technology Microbial electrolysis cell

Advantages High H2 yield potential, reduced biochemical oxygen demand due to the use of a variety of effluents as reaction substrates, and suitability for integration with other bioprocesses.

Disadvantages These systems are challenging to scale up since microorganisms need to work at a lower pH and greater temperature, there could be losses at the cathode, delayed proton transport, and expensive ion exchange membranes.

Considerations for commercialization Methanogen suppression for higher H2 yields. Cheap electrodes. The pH gradient is eliminated.

assessed by some other researcher (Li et al. 2012). By selling H2 and CO2 , the dark fermentation of beverage wastewater produced total yearly revenue of USD 10,805,000. Similarly, through the sale of H2 and CO2 , dark fermentation of agricultural residues produced total yearly revenue of 14,408,000 USD.

11.4.2 Photobiological Hydrogen Production The photobiological H2 production was classified as direct and indirect biophotolysis (Touloupakis and Torzillo 2019). In direct biophotolysis, photosynthetic micro-organism (green algae or cyanobacteria) produce H2 from water molecules by utilizing solar irradiation under anaerobic condition. In indirect biophotolysis, the produced H2 was separated from O2 and CO2 act as an electron carrier between generated and inhibiting O2 . The photosynthetic microorganisms consumes CO2 and increase their biomass productivity. Amos (2004) has estimated the H2 selling price as 13.53 USD per kg based on three conditions (i) continuous H2 production with a reactor cost of 10 USD per m2 (ii) with a compression pressure of 20 MPa and (iii) 300 kg/d of algae. Some modifications such as H2 pipelines are connected and the production is not restricted by storage capacity were suggested in the system to drop down the H2 selling price to 5.52 USD per kg. The authors reported that by performing the process at ambient pressures and by reducing the production cost to 2.60 USD per kg, the H2 selling price can be dropped to 3.68 USD per kg. Nikolaidis and Poullikkas (2017) have reported about the economics of H2 production using water and algae by direct biophotolysis. The authors calculated the production cost and capital cost to be 2.13 USD per kg and 50 USD per m2 . Similarly in indirect biophotolysis, 1.42 USD per kg will be the H2 production cost and it demands 135 USD per m2 as capital cost. Sathyaprakasan and Kannan (2015) have documented the cost of H2 production by direct and indirect biophotolysis as 1.33 and 1.96 USD per kg respectively.

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11.5 Challenges in Commercialization of Biohydrogen Production There are a number of obstacles in the way of the H2 economy’s development and its commercialization. The H2 produced in large quantities using various processes has some technological and financial obstacles. The commercialization of H2 production is facing some obstacles such as lower production efficiency as compared to other methods and higher production costs (Ren et al. 2016).

11.5.1 Economical Barriers In biological H2 production, the DF process is very expensive and most of the research is undergone only in laboratory scale (Kannah et al. 2021). Therefore, the DF still needs large-scale studies to overcome the techno-economic barriers in order to become more competitive and feasible technology (Soares et al. 2020). The development of photo-bioreactors of low cost and the optimization of photosynthesis reactions in the biophotolysis process are the major economical challenges (Show et al. 2019). Aslam et al. (2018) investigated the bio H2 production using anaerobic membrane bioreactor and reported that the major economical barriers are the higher operating and installation cost and thus it leads to lower yield of hydrogen. The economic analysis of photobiological H2 production is highly assumptive since the biological H2 production is a cost-intensive process (Show et al. 2012). The H2 production rate is low in photobiological process and thus it cannot be recommended for large-scale process. The integration of various secondary processes to the primary process enhances the H2 production. The secondary processes such as methanogenesis, photobiological processes, microbial electrochemical cells (MECs), and microbial fuel cells (MFCs) are integrated with the DF to produce efficient hydrogen. The additional energy production in secondary process increases the economic value of the entire process (Chandrasekhar et al. 2015). The integrated dark and photo fermentative H2 production cost were estimated to be 2.5–2.8 USD per kg (Nikolaidis and Poullikkas 2017). As reported by Sharma and Kaushik (2017) about 3.70 and 18.70 USD of cost were incurred for the production of H2 in DF and PF. Compared to the natural gas reforming, the commercialization of dark fermentative H2 production is finite due to its higher cost (Hsu and Lin 2016a, b).

11.5.2 Technical Barriers The production method is a well-known obstacle to biological H2 generation, but researchers can overcome it by developing competitive H2 production (Argun et al.

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2017). Optimization of the entire process is necessary in order to commercialize any H2 method (Kannah et al. 2021). With the gradual advancement of technology, the primary stage of fermentative H2 production is still expanding (Hsu and Lin 2016a, b). To boost the yield and H2 generation rate, several genetic and fermentative adjustments must be applied. The development of strains for the generation of H2 is aided by genetic engineering. The economics of the process is improved by integrating the H2 producing operations. In the DF process, higher pretreatment costs for inoculums and increased energy use have an impact on commercialization. Before DF is commercialized, it is essential to look into the technical and economic viability of preventing large-scale processes (Bundhoo and Mohee 2016; Kumar et al. 2017). The H2 yield is restricted to 4 mol H2 /mol glucose in DF, which is again a major technical obstacle (Ghimire et al. 2015). A comparative study on various techno-economic barriers of various biohydrogen production technologies is discussed in Table 11.2.

11.6 Future Perspectives The aforementioned biohydrogen technologies are currently in the early stages of development. Finding more affordable substrates and economically sound materials for reactor design requires more study. Costs can be reduced by combining the production of biohydrogen with the treatment of wastewater. It may be possible to genetically alter the hydrogen-producing microbes and the processes that drive H2 generation in order to boost H2 yield. As of now, the H2 output and production costs of these technologies still fall short of those of the methods utilized to create H2 from crude oil, coal, and natural gas (Ferraren-De Cagalitan and Abundo 2021). Systems for producing hydrogen that combine two or more methods may increase H2 yield while also lowering production costs. One hybrid hydrogen generation method creates H2 by combining photofermentation and biophotolysis. Both methods make use of organisms that react to light to create H2 . To increase H2 yield, Melis and Melnicki devised a technique including the co-culture of green algae and photosynthetic strains that utilize various light spectral areas. In their system, the green algae, such as Chlamydomonas reinhardtii, in their system use the visible portion of the light spectrum to create H2 , whereas photosynthetic bacteria, like Rhodospirillum rubrum, use the near-infrared portion of the spectrum (Melis and Melnicki 2006). Another intriguing hybrid option is a system that combines DF with the MEC. By combining the process with MEC technology, low H2 yield from DF procedures can be increased. Japan has long advocated for a civilization that is entirely powered by hydrogen, or a “hydrogen society.” The following are only a few of Japan’s numerous attempts to promote a hydrogen society: A village entirely powered by hydrogen is depicted on the recently finished Harumi Flag. HFCs are used in the Toyota Mirai and Honda Clarity Fuel Cell electric automobiles (Hassanein et al. 2017). The Energy Saving and New Energy Vehicle Technology Roadmap that China just unveiled emphasizes

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Table 11.2 Techno-economic barriers in various biohydrogen production technologies Technology Dark fermentation

Economic barriers The main factor affecting the cost of biohydrogen is the cost of the substrate.

Photo fermentation

High energy expense with higher yield.

Dark fermentation

Costly procedure

Integrated dark and photo fermentation

The toxic nature of the wastewater treatment effluents drives up the processing costs. In a sequential reactor, the cost of running and maintaining the reactors rises. The cost of operation rises when black fermentation effluent is pretreated.

Technical barriers The design, construction, operation, and control of an appropriate bioreactor. –

Since pretreatment methods must adapt to various biomass, pretreatment before fermentation is a significant problem. A significant barrier is created by the inhibitory substances used in the pretreatment. The substrate inhibits either of the processes.

Opportunities The amount of feedback inhibition can be reduced by combining dark and photo fermentation.

References Ren et al. (2011)

Metabolic engineering can make up for the significant advancement in the biohydrogen process. To find the chromosomal genes in microalgae for increased hydrogen production, the effects of nutrient limitation and substrate utilization were investigated. It is necessary to develop photobioreactors with the best design possible. Large-scale, advanced investigations can overcome the financial and technical obstacles.

Rashid et al. (2013)

By choosing appropriate hydrogen producers, genetic or metabolic engineering used in integrated dark and photo fermentation processes can boost the efficiency of hydrogen production.

Rai and Singh (2016)

Soares et al. (2020)

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the crucial role that FCEVs play in the decarbonization of their transportation sector (Ferraren-De Cagalitan and Abundo 2021). Electrolysis has become the most common technique for creating pure hydrogen to date. However, this process needs a lot of energy input to split the water molecule into H2 and O2 molecules in an electrolyzer, with electricity accounting for 75% of the cost to produce H2 . However, if the electrolyzers are powered by sustainable sources like solar and wind energy, H2 generation costs may decrease (Samsun et al. 2022).

11.7 Conclusion The use of hydrogen as a sustainable energy source is expanding globally. Despite still being in the research and development stages, biohydrogen is a viable alternative for delivering clean H2 . The challenge is to advance the state-of-the-art biohydrogen technology to the point where mass production of the fuel is commercially feasible. However, contemporary biohydrogen production techniques are still inferior to those utilized for conventional H2 synthesis in terms of cost and output. More research is required to optimize and enhance the current production technology in order to boost H2 yield and decrease expenses concurrently. In general, creating renewable H2 for usage in industrial and commercial settings can be advanced through the use of dark fermentation.

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Chapter 12

Strategic Planning and Business Sustainability in Agribusiness: Analysis in a Model Farm in Brazil Najara Escarião Agripino, Kettrin Farias Bem Maracajá, and Janine Vicente Dias

Abstract Despite the great advances in recent years, which place Brazil among the countries with the largest and most diversified agricultural production, Brazilian agribusiness has also been associated with the negative image of the destruction of biomes and contamination by pesticides. Studies such as those carried out by Duan et al (Mathematics 9(884):1–16, 2021), Bartzas and Komnitsas (Inf Process Agric 7:223–232, 2019), and Yuan et al (Int J Environ Res Public Health 19(6572):1–31, 2022) point to the need to combine agribusiness economic strategies with socioenvironmental responsibility, in order to minimize the environmental impacts of agricultural units and build a positive image of companies with their stakeholders. This study is based on the Strategic Planning for Corporate Sustainability model (PEPSE), developed by Brazilian researcher Elisa Coral. As an objective, the study intends to obtain information about the strategic planning of a farm located in the interior of Paraíba, Brazil, in view of the variables of the internal and external environment and to identify the sustainable strategies adopted in the decisionmaking process. The study is classified as descriptive qualitative and uses the techniques of literature review, semi-structured interviews, and in loco observation to obtain the data. Content analysis with a closed grid category was applied as an analysis technique. Environmental strategies were identified as results, among others, environmental certification, dissemination of good practices, inventory of fauna and flora, hiring of local labor, partnerships with environmental preservation agencies and entities, and partnerships with teaching institutions, to deal with external variables; and knowledge of local geography, adaptation of agricultural practices to local characteristics, partnership with a selective garbage sorters association, use of non-marketed products and use of waste for composting and animal feeding, to deal with internal variables.

N. E. Agripino · K. F. B. Maracajá () Federal University of Campina Grande, Campina Grande, Brazil e-mail: [email protected] J. V. Dias State University of Campina Grande, Campina Grande, Brazil © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Singh et al. (eds.), Green Circular Economy, Circular Economy and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_12

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Keywords Corporate sustainability · Agribusiness · Environmental strategies · Strategic planning

12.1 Introduction The search for alignment between economic gains and socio-environmental responsibility has driven organizations in recent decades. Sectors considered critical for sustainable development, such as agribusiness, civil construction, and mining, have been the most required by society and that most demand governmental supervision. Regarding the agricultural sector, this is one of the largest manufacturing sectors in the world, both in terms of production value, job creation, and exports. Its main purpose is to produce and feed the population in a healthy way, and it is increasingly evident that its influence goes beyond the environmental, technological, and political fields, directly impacting people’s nutrition and quality of life (Wi´sniewska 2015). For Brazil, agribusiness has been one of the main economic activities since its discovery. In addition, its dynamism allows both domestic demand for food and raw materials to be met, also being one of the major industries responsible for the balance of the country’s external accounts (Amaral and Guimarães 2020). However, the current changes in environmental legislation and the ecological disasters of recent years related to agricultural activities – such as the record fires that occurred between 2019 and 2020 in the Cerrado, Pantanal, and Amazon, in addition to the damage caused by the release of more than 493 agrochemicals proven to be associated with rural workers illnesses, have compromised the image of Brazilian agribusiness in the world and raised internal discussions about the social role of economic activity and its negative impacts on society and the environment. Studies such as those carried out by Duan et al. (2021), Bartzas and Komnitsas (2019), and Yuan et al. (2022) point to the need to combine agribusiness economic strategies with socio-environmental responsibility, in order to minimize the environmental impacts of agricultural units and build a positive image of the companies with their stakeholders. However, since organizational and socio-environmental interests are in many ways conflicting, developing tools and methodologies to assess agricultural sustainability has been a major challenge. Based on this understanding, the Brazilian researcher Elisa Coral developed a strategic planning tool for corporate sustainability, PEPSE, combining existing environmental strategy models with traditional strategic planning models, with the aim of performing an effective analysis of sustainability in businesses. Based on the literature on environmental sustainability in agribusiness and on Strategic Planning for Corporate Sustainability (PEPSE), the study aims to obtain information on the strategic planning of a farm located in the hinterland of Paraíba, Brazil, with the internal and external environmental variables, and to identify sustainable strategies adopted in the decision-making process. The study did not intend to apply the PEPSE model in its entirety, since the researched agricultural unit has national and international certifications that attest

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to its good practices, but to apply the variables and indicators of analysis of the internal and external environment present in the PEPSE to unveil the differential that makes Tamanduá Farm a reference in agricultural sustainability. The justification for adopting PEPSE in the research is that the farm does not adopt any formal strategic planning model, making it necessary to apply a specific model for the analysis of its strategies. Based on the company’s profile, the PEPSE model is understood to be ideal for research, since it is a tool specifically designed for the analysis of corporate sustainability and is aimed at the industry. As contributions, the study identified the main variables of the internal and external environment that constitute priorities in the strategic planning of the farm and identified the main strategies adopted to achieve corporate sustainability. In addition, the study indicates strategies for solving the bottlenecks found on the farm based on qualitative research.

12.2 Brief Theoretical Considerations The growing concern of society today for the environmental and the scientific evidence of the relationship between environmental problems and production practices, especially in industrial practices, have pressured organizations to rethink their production practices and socio-environmental responsibility, which in turn have a direct impact on the image with the consumer market. In the long term, building a positive image can represent profit maximization and better brand positioning, in addition to increasing sales volume, more committed employees, and access to capital markets, among others. In this way, the promotion of sustainability in the organizational scope must start with business management, with senior management being responsible for structuring and raising awareness of the organization regarding its socio-environmental impacts, and analysis of the variables of the internal and external environment associated with the achievement of business sustainability. Based on these efforts, it is possible to improve the quality of processes and products aligned with good environmental practices (Claro et al. 2008). Several authors throughout the 1980s and 1990s developed models aimed at the development of environmental strategies to complement the deficiencies of the traditional models of Strategic Planning in terms of socio-environmental responsibility. Among the proposed models, it is possible to highlight those idealized by Shrivastava (1995), Hart (1995, 1997), Reinhardt (1998, 1999), Sharma (2000), and Stead and Stead (2000). The model proposed by Shrivastava is based on the ecocentrism environmental paradigm, which, according to the author, should follow the adoption of the anthropocentric management theory, to recognize “risk and ecological degradation as a central variable in organizational analysis” (Shrivastava 1995, p. 133). For Shrivastava (1995), companies that adopt sustainable environmental management will have the expansion of their life cycle and will contribute to a sustainable society,

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for this to happen, it is necessary to consider some essential strategic dimensions: mission; business and competitive strategies; core competencies; structures and systems; organizational culture and processes and performance criteria. Hart’s model focuses on the resource and capabilities perspective, proposing that sustainable companies should engage in proactive environmental strategies, establishing at least internal skills and managerial support. Hart (1995) relates environmental strategies to resource theory factors (RBV) and capabilities. In Hart, companies can adopt different environmental strategies depending on their stage of evolution and available resources. Thus, stage 1: pollution prevention, is an operational strategy that aims to increase production capacity while reducing the risks of causing environmental damage; stage 2: planned product, aims to integrate environmental issues, stakeholders’ perception of product design and process development; stage 3: clean technologies, aims to reduce the environmental impact of production systems in a globalized way. For Reinhardt (1999), the adoption of environmental strategies must be linked to the implementation of environmental business ethics. The author understands that corporate strategies and environmental policy must be based on business fundamentals, such as structure, position, and capabilities. Reinhardt (1999) proposed five strategies: product and process differentiation (promoting the differentiation of products based on their ecological characteristics or production process), managing competitors (promoting partnerships within the industry to establish standards or influencing governments for the creation of legislation that benefits products), reduce costs (promote the reduction of internal costs while improving environmental performance), manage environmental risks (avoid costs arising from occurrences such as industrial accidents, boycott by consumers and civil actions), and redefine markets (define new competition rules based on environmental issues). In the proposal by Sharma et al. (1999), in the period from 1980 to 1995, seven Canadian companies in the oil sector were studied to analyze the environmental response strategies of these organizations. Throughout the research, the authors attributed characteristics of strategic adaptation arranged chronologically, analyzing each phase the sector went through to find explanations for the answers that organizations gave in the face of the moment experienced. Thus, according to the authors, over the years from 1980 to 1985, the sector went through a gestation phase in relation to environmental issues; between 1986 and 1987, the sector experienced a phase of politicization, when discussions about public policies and regulatory revisions intensified and companies were limited only to complying with them; between 1988 and 1992 it was the legislative phase characterized by the several events that provoked concern with the environment; the final phase called litigation was considered from 1993 onwards, marked by the consolidation of regulations. From that point on, companies started to be considered part of the environmental problems and thus, criminally responsible for the negative impacts they caused. As for the sector’s environmental response strategies, Sharma (2000) classified them as reactive and proactive. Reactive strategies would be those used by companies that abdicate from deciding on how the company should act on environmental issues in favor of institutional coercive forces, that is, environmental actions would

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only be taken if they were imposed externally; proactive strategies refer to those used to create competitive advantages. In the model proposed by Stead and Stead (2000), the planet is considered as the main stakeholder and the process of elaborating business strategies must be based on the principles of sustainability. In the model, business strategies must be the result of the interaction of three factors: the values that support the company’s ethical system (aiming to find a balance between economic success and environmental protection); the social issues that the company faces (seeking to establish the existing relationships between environmental issues and the organization’s strategic issues, through the variables proposed by Ehrlich and Ehrlich (1991): population, consumption and technology as key factors that affect quality of life on the planet); and the green stakeholder map (cooperation between stakeholders and the development and preservation of the planet). Focus on developing sustainable strategies and restructuring organizational management to achieve corporate sustainability is noted in the models presented. Based on traditional strategic planning models, with a focus on economic factors and based on the models of formulation and implementation of environmental strategies mentioned above, Coral (2002) developed the PEPSE. The model’s differential is the incorporation of social, economic, and environmental dimensions in the strategic planning of the business for the elaboration of sustainable strategies and choice of the most appropriate tools for their implementation (Coral et al., 2003). In the PEPSE model, the stages of strategic diagnosis, elaboration of sustainable strategies, and project development are distinguished from traditional models of strategic planning due to their approach to sustainability. In PEPSE, the strategic diagnosis stage is composed of two phases: data collection and data analysis, in which the results obtained will be considered in the decision-making process; definition of objectives and goals; and elaboration of sustainable strategies (Coral et al. 2003). Figure 12.1 illustrates the representation of the bases that support the PEPSE model. As shown in Fig. 12.1, the strategic diagnosis in PEPSE begins with the collection of information about the organization, and encompasses the steps of characterizing the company, analysis of the internal and external environment, the leader’s vision, environmental conjuncture, and current strategies. After which the organizational architecture, stakeholder analysis, strategic and operational bottlenecks, and the company’s degree of sustainability are analyzed. Characterization of the company involves the collection of information regarding the company, such as the nature of its activities, main products, profitability, market positioning, sales margin, sales destination, investments in R&D and workforce training, use of productive capacity, and available technology. In this phase it is also essential to identify the vision of the company’s leaders regarding strategic factors, such as customers, materials, partnerships, and business (Coral, 2002). In the external analysis, the model proposes to identify the company’s competitive forces that act on the positioning in relation to environmental variables. In Porter (1985), the analysis of competitive forces considers the government as an actor that can influence competitiveness. Considering Porter, Coral (2002) reflects

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Fig. 12.1 Strategic planning for corporate sustainability. (Source: Constructed by the author by use of Coral (2002))

the government and adds society and the environment to the model as factors that influence all other PEPSE actors (clients, suppliers, substitute products, potential entrants, intensity of rivalry between competitors, and competitors). As an example, the author cites the environmental impacts that directly affect society, which will pressure the government for greater regulation of the economic market. In the internal analysis, information about the organization’s infrastructure, the management models adopted, and the identification of the company’s strengths and weaknesses is collected (Coral 2002). The variables to be studied in the internal environment are strategic management, human resources, process management and production technology, product development, quality assurance, information management, logistics, financial management, commercialization and marketing, and environmental management. The information obtained from the analysis of the internal environment will serve as a basis for the characterization of the organizational architecture and typology. The leader’s vision phase requires the identification of the understanding of the chief managers and their vision of organizational aspects, such as environmental legislation, responsibility for social development, and a vision of the future regarding the reduction of environmental impacts (Coral et al. 2003). The characterization phase of the environmental situation consists of collecting complementary information on the company’s environmental situation in relation its use of natural resources: water and energy consumption, fossil fuels, percentage of renewable and non-renewable inputs, balance of use of inputs, generation, classification of waste disposal from activities, effluent treatment systems, use of environmental management tools and environmental technologies for the industry (type, origin, and costs), and compliance with environmental legislation. With such

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information, it will be possible to identify the existence of strategic and operational bottlenecks, classify the degree of corporate sustainability, and the existence of new opportunities (Coral et al. 2003). The survey of current strategies requires the identification and classification of the strategies currently used by a company at the business, operational, environmental, and social levels; In the organizational typology, information on the organizational architecture (set of characteristics related to the production system, management tools, degree of computerization, organizational structure, and human resource training) must be carried out. This stage determines the company’s degree of flexibility in implementing different strategies, as well as its ability to innovate (Coral 2002). The model also works with the analysis of stakeholders. According to Sharma et al. (1999), more and more companies find themselves obliged to respond to a greater number of stakeholders due to the expansion of their activities. For this reason, identifying the most important stakeholders for the success of the business and measuring the value being created for them should be part of the company’s strategic action (Benn et al. 2016). Wegrzyn and Wojewnik-Filipkowska (2022) complement by stating that the criticality of this analysis is the path to success for any organization. In defining strategic and operational bottlenecks, it is necessary to identify bottlenecks that affect the production process of the industry, to assist in the elaboration of an action plan to eliminate or reduce their negative impacts. The degree of corporate sustainability is achieved through a quantitative analysis of the company’s sustainable performance, this is obtained through the interrelation of the variables identified in the strategic diagnosis phase, namely: “the ability to implement strategies, the environmental impact of the activities performed, resource availability, market growth, competitive position; the leader’s vision; social responsibility”. Thus, the degree of corporate sustainability will be the sum of the points acquired in each variable. From the identification of the degree of sustainability it is possible to identify which areas need improvement, as well as monitor organizational performance (Coral et al. 2003, p. 10). Table 12.1 illustrates the organization’s situation in terms of total points: According to the model, the degree of corporate sustainability will be analyzed on a scale from critical sustainable potential to potentially sustainable. Based on this analysis, the company will have a clear view of its position in terms of socioenvironmental responsibility.

Table 12.1 Degree of corporate sustainability Degree of corporate sustainability 90% Potentially sustainable

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The mission, vision, and policies still need to be defined. For authors such as Megginson et al. (1991), Kotler and Keller (2012), and Yanaze (2007) they are strategic elements of organizational management, and their formulations are essential to better the understanding about the company and better direction for the organizational management process for their stakeholders. The purpose of defining objectives and goals is to guide strategic management (Odita and Bello 2015). In the PEPSE model, this step follows the same methodology as the other traditional strategic planning models; however, it uses the analysis carried out in the strategic diagnosis step for corporate sustainability. The elaboration of the sustainable strategies phase is based on all the variables previously worked on. The strategies developed in this phase must be analyzed according to their convergence with the organizational architecture and just as their sustainability. The analysis of the convergence of strategies in relation to organizational architecture and sustainability serves as a basis for defining the most appropriate tools for the company, thus, the company must have the capacity to implement a sustainable strategy in the long term. To analyze the sustainability of the strategy, capacity to implement the strategy, the economic return, and the environmental and social impact of the strategy must be considered. Finally, the development project phase is derived from the result of the strategic planning and must provide the proposal for the elaboration of a detailed plan that enables the implementation of the strategies developed throughout the process (Coral 2002). Based on the phases of the model, it is possible to conclude that the PEPE model is an efficient tool to support the analysis of environmental positioning and the elaboration and implementation of environmental strategies, as well as a good parameter to identify and correct the possible bottlenecks that may compromise its sustainability. Regarding corporate sustainability in agribusiness, the sector occupies a strategic position in terms of social, environmental, and economic dimensions, being a reference for the development of research and technologies used for the sectors growth. In Brazil, given the complexity of the production chain and the changes that have taken place in environmental policy in recent years, Brazilian production has constantly been associated with negative environmental and social impacts, which has reflected in sanctions on national products in the foreign market (Agripino et al. 2021). Thus, even with projections of growth in the sector and expansion of production, Brazil has gone against the popular discussions on sustainability and sustainable development, requiring rural producers to take their own initiative to adopt and commit to sustainable practices.

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12.3 Methodological Procedures The qualitative research of this study is classified as descriptive, as it intended to analyze characteristics and describe the relationship between sustainable practices and the decision-making process in a company in the agricultural sector, aiming to draw a faithful portrait of the reality of the studied organization. The research is aimed at solving a complex problem that involves strategic planning and the achievement of corporate sustainability. As data collection techniques, a literature review was applied to better understand the topic studied, as well as to formulate the content categories necessary for analysis of the data obtained in the field research; the semi-structured interview, which is indicated when it is intended to understand the information that is being passed on at the same time makes it possible to ask momentary questions in the interview that are relevant to the investigated phenomenon (Glesne 2015); and onsite observation to identify points not mentioned by the interviewee and that are relevant in carrying out the research. The interview was applied on July 21, 2021, from 8:00 am to 9:30 am with the farm’s production manager and was recorded as it was authorized by the interviewee. The objective of the interview was to obtain information about the strategic planning of the agricultural unit in relation to the variables of the internal and external environment, for this, the variables indicated in the PEPSE model were used as a basis. The interview script followed the criteria adopted by the researcher Coral (2002) to apply the model. The Production Manager is an Agricultural Engineer and started his career at the company in 2002 as an intern and was hired in December 2003. Since then, he has been managing the Tamanduá Farm and five other farms owned by the Landolt family. The Production Manager is responsible for managing and establishing its direction. The information and strategic decisions of the business are centered around him. The process of qualitative data analysis was carried out using the content analysis technique through the application of categorization and coding mechanisms. Following the suggestions of Gibbs (2009), the study adopted the coding mechanism based on three steps: descriptive coding of the data to find categories related to the sustainability variables defined in the PEPSE model and to categorize the sustainable actions described by the interviewed manager. In the descriptive coding, close words or original terms of the transcribed speech were used, repeating the idea that the text conveys at first sight; analytical coding was used to apply a representative code of the idea conveyed in the interview text, in more depth, in order to better organize the collected data and optimize the analysis process; and finally, the theoretical coding, in which the data obtained was confronted with existing theories, specifically in this case with the PEPSE model adopted for the best direction of the study. The study adopted the variables indicated in the PEPSE model to analyze the internal and external environments. Altogether, the model proposes nine variables

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for the analysis of the external environment and ten for the analysis of the internal environment, as already presented. However, after an interview, the Intensity of Rivalry between Competitors variable was removed from the analysis, since it was declared that the company has no direct competitors. The main product of the farm is biodynamic spirulina, and according to information, the farm is the only one in the world to produce organic and biodynamic spirulina, for that reason, they do not consider that they have direct competitors. The qualitative stage was applied to identify variables and criteria adopted by the farm and respective strategies to deal with the internal and external environment. Thus, the study analysis categories were relevant, formulated from the proposed objectives and closed grid, based on the internal and external analysis variables present in the PEPSE model (Vergara 2012). To obtain the data, primary and secondary sources were used. As a primary source, an interview with a semi-structured script was carried out with the production manager of Tamanduá Farm, to collect information on specific aspects related to the farm, such as customers, suppliers, etc., in addition to seeking from the manager’s perspective, the analysis of the environment in which the farm is located. As secondary sources, scientific studies, opinions, reports, institutional websites, and journalistic articles were consulted to characterize the sector. During data collection, the interviewee informed that the company does not have direct competitors, therefore, the intensity of rivalry between competitor’s variable, considered in decision-making was not analyzed, since it does not apply to Tamanduá Farm. However, other variables that contemplate the analysis of competition such as competitors, potential entrants, and substitute products, are part of the data analysis. The decision to keep competition-related variables in the analysis was to confirm information with the manager.

12.4 Characterization of the Company Tamanduá Farm is in the rural area of the municipality of Santa Terezinha, in the hinterland of Espinharas, in the interior of Paraíba state. Tamanduá Farm was acquired by the company Mocó Agropecuária Ltda. in 1977, a name inspired by the cotton variety cultivated by its owners between 1977 and 1984 (Tamanduá Farm 2019). For the change from monoculture to diversification to be possible, studies were carried out in the region to adapt production practices to the characteristics of the environment – semi-arid climate with typical caatinga vegetation of the sertão and low rainfall records. Thus, Instituto Fazenda Tamanduá was created, also in 1977. The studies carried out by the institute resulted in socially and environmentally sustainable practices, such as organic and biodynamic production (Tamanduá Farm 2019). The sustainable production of Tamanduá Farm has earned them important certifications, such as the USDA Organic and Demeter seals issued by the Biodynamic

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Institute (IBD). Among the products sold by Tamanduá Farm, the highlights are Brown Swiss cattle, Alpine and Boer brown goats, Brown (red) and Black Rice, Rice Flour, Honey, Goat’s Milk, Mangos, Melons, Mini Watermelons, and Spirulina. produced according to national and international quality standards and certifications. Spirulina being the main product. Like many properties in the region, Tamanduá Farm is limited by its water storage capacity. As a strategy to overcome scarcity and to maintain annual profitability, managers opted for short-cycle irrigated crops such as cucurbits or long-cycle crops such as fruit trees, specifically mango trees.

12.4.1 Analysis of the External Environment According to Vlados and Chatzinikolaou (2019), the external environment is the set of all elements external to the organization that influence its operation. Although these factors cannot be directly controlled by organizations, knowing, and analyzing them is potentially beneficial, since social, political, technological, and economic issues are crucial to the performance of companies. In PEPSE, the government variable influences the environment and society and acts on all the other actors in the model. Regarding the natural environment, the variables that affect all the actors considered in the model were listed as: customers, suppliers, substitute products, potential entrants, and intensity of rivalry between competitors. With respect to society, it can act on competitive forces, especially regarding the company’s image. Customers, suppliers, competitors, potential entrants, substitute products, intensity of rivalry between competitors, government, society, and the natural environment were indicated as variables of society that act on all the actors.

12.4.1.1

Characterization of the Sector

Employing practically one in three workers in Brazil, the main challenges facing Brazilian agriculture today are dealing with high production costs. The Confederation of Agriculture and Livestock of Brazil (2021) forecasts an increase of more than 100% in expenses on fertilizers and pesticides for crops such as soy and corn, as a result of logistical bottlenecks in the production chain of input-exporting countries; variation in the operating cost of some products such as corn, coffee, and soybeans, which tend to rise; increase in the costs of agricultural inputs, including herbicides, which registered an accumulated increase of 372% in 12 months, which tends to increase production costs; energy or political crisis in the main suppliers of inputs to Brazil (China, Russia, Belarus, and India, which together import 76% of our raw material); the logistic issue, especially for the flow of goods and the bottlenecks of maritime transport; the climatic phenomenon La Niña, which should cause the

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anticipation of planting; the variants of COVID-19; and the environmental agenda (Zanatta 2021). As for trends, Minister Tereza Cristina pointed out government investments for innovation and sustainability, which tends to increase foreign investments; infrastructure improvements such as the conclusion of the BR-163 to facilitate the flow of production from the Midwest through the North Region, the socalled Arco Norte; expansion of connectivity in the countryside, with expansion of internet coverage (currently, only 23% of agricultural space has internet coverage); insertion of the country in the era of aggregation and capture of value, with the production of more plant-based protein foods, laboratory meats, vertical agriculture, and fermentation technologies (National Agency for Technical Assistance and Rural Extension [ANATER] 2021). Regarding the local market, agriculture plays a prominent role in the regional economy. Sugarcane is the most important product, especially in the states of Paraíba, Pernambuco, and Alagoas, but other products are also worth mentioning, such as soybeans, cocoa (especially in Bahia), coffee, corn, beans, rice, bananas, cotton, sisal, cassava, coconut, and chestnuts. In relation to livestock products, the raising of cattle (stronger in Maranhão, Piauí, and Bahia) and goats stand out (Dumont 2021). According to the Northeastern agricultural census carried out in 2017 and released in 2019, of the 10.1 million workforces employed in agricultural activities in Brazil, 46.6% of them work in more than 2.3 million establishments in the Northeast region, of which 79% are from family farming and occupy 20% of the total cultivated area in the country. The diagnosis of the region pointed out that despite the importance of agricultural activity for the economy, the sector is still underdeveloped in terms of infrastructure and technologies, in addition, its main difficulties are access to credit and technical assistance, and water scarcity. Regarding the modernization of practices, it is seen that most producers are on the sidelines, especially regarding the use of agricultural inputs. It is estimated that 30.3% of rural properties cultivate crops with fertilization, while the country’s total is 42.3%. The final data from the sector diagnosis showed that only 23.8% of producers use pesticides, 2.3% have tractors, and 8.2% have access to some type of technical assistance (Simões 2021). In turn, the municipality of Santa Terezinha, located in the Sertão Paraibano mesoregion and Patos microregion, has an approximate population of 4550 inhabitants [2021], GDP per capita of R$ 9825, 40 [2019] and 11.6% of the population occupied [2019], of which 40.35% work in the agricultural sector. Based on its data, the municipality can be considered small. Its economy is based on agricultural production, with most properties being considered family farming. The main agricultural products sold are maize, beans, rice, guava, palm, banana, soursop, and mango. In livestock, the herds of goats, pigs, sheep, cattle, horses, donkeys, and mules are highlighted. Also noteworthy is the production of honey, milk, and eggs (Instituto Brasileiro de Geografia e Estatística [IBGE] 2021). Located in the drought polygon, the city of Santa Teresinha is part of the Sertão Paraibano 2 Regional Market (MRT 05), composed of 44 municipalities. The MRT

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05 land network has 26,886 rural properties registered in the National Rural Registry System of the National Institute for Colonization and Agrarian Reform, of which 96.43% (25,925) are considered small rural properties, 3.11% (836) are mediumsized rural properties and 0.46% (125) are from large rural properties (INCRA 2021). One of the biggest obstacles to these properties and the subsistence of the population is the cyclical occurrence of droughts. In a survey carried out in Santa Teresinha, 147 water points were recorded, 01 natural source, 01 Amazon well, 03 excavated wells, and 142 tubular wells, located on public land (15), private land (130), and without defined property (71). Regarding the use of water, 35% of the registered points are intended for primary domestic use (drinking water); 30% are used for secondary domestic use (general use); 04% for agriculture; 03% for other uses, and 28% for animal watering (Ministry of Mines and Energy [Brazil] 2005). In view of the diagnosis presented, it is concluded that the main opportunities for agribusiness in the region are the export of products; business modernization, with access to technologies and production automation; adoption of sustainable production techniques, such as drip irrigation, given the regional characteristics; development of vegetable meats, following trends; and diversification of production. As for the main threats, it is possible to mention the difficulty in accessing credit; although vegetable meat is pointed out as a future alternative for a more ethical diet, for ranchers it can represent a difficulty, due to the need to adapt production; the variants of COVID-19; the country’s politics and international relations; and the little modernization of the sector.

12.4.1.2

Diagnosis of the External Environment

During data collection, the interviewee informed that the company does not have direct competitors, therefore, the intensity of rivalry between competitor’s variable, considered in decision-making was not analyzed, since it does not apply to the Farm. About customers, the company’s target audience was defined in 1998, when the farm owner observed that there was a high demand for organic and biodynamic natural products and at the same time, there were few companies serving this market. According to the Production Manager, the farm seeks to meet the market share that is interested in healthy products and/or products that bring socio-environmental responsibility as an added value, for that, according to him, for more than 20 years, the company became certified for the sale and export of organic and biodynamic products, following national and international protocols. Considering the interests of customers, the Farm has been dedicated to publicizing its social, environmental, and cultural actions, as well as the production process, with a view to strengthening its image in the market and acquiring credibility with the consumer. The main means of internal and external dissemination of the company’s sustainable actions is through documents, a website, and social networks. As for the location of these customers, the manager says they are local customers in the region, and there is a very strong clientele in the state of São Paulo –

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Brazil, and a large part of the production of mango and melon pulp is directed to Europe. The company serves the final consumer through e-commerce and the wholesale customer. According to the information obtained, there are ample opportunities to be taken advantage of by the farm in relation to the consumer market. However, there is the challenge of overcoming the region’s climatic difficulties, especially regarding water scarcity and the slowness of the certification process that slows down the company’s operations. As for the farm’s suppliers, there is a cardboard box factory for mangoes, melons, and watermelons; melon and watermelon seed suppliers; cleaning product factory; and graphics that make product packaging labels. Regarding how suppliers are selected, the commitment to socio-environmental awareness was pointed out, according to the manager, suppliers must be duly registered with their competent bodies and demonstrate that they care about the environment, and that they provide recyclable products. As opportunities for suppliers, the partnership with certified suppliers was indicated for the purchase and sale of products in the region, and as the main threat, there is the difficulty of finding local companies that are socially and environmentally responsible. For Coral et al. (2003), the substitute products considered in the PEPSE model are those that have a direct or indirect impact on the development of society; contribution to the reduction of negative social impacts; and products or services with a positive social image. Thus, according to primary data collection, the farm’s production does not have substitute products in the local market and direct competitors that impact the farm’s performance. However, at the national level, there are organic producers, such as the Landless Rural Workers Movement (MST) and at the international level, especially in the European market, Germany is the main organic market, followed by the European Union. Thus, as opportunities it is possible to mention the low competition in the national market for the farm’s products and the possibility of reinforcing competitiveness with the diversification of new products. The main threats are potential entrants and consumer awareness of the preference for sustainable products. The main actions to minimize the threat of potential entrants, indicated by the company, were certifications with reputable companies to prove that the products are free of chemical contamination, actions aimed at increasing sales and increasing the public served, which consists of promoting and publicizing socio-environmental responsibility through social networks. As a threat, conventional products were pointed out. These compete with more competitive prices, taking advantage of consumers who do not understand the importance of certifications or are still very price sensitive. As opportunities, the expansion of environmental awareness activities promoted by the farm in the local market to create in the consumer an environmental responsibility and conscious consumption was indicated. As for the government variable, the farm complies with environmental legislation and has a Private Natural Heritage Reserve (RPPN), with over 300 hectares registered for the federal government, in this area several research projects are carried out in partnership with universities. There are also Permanent Preservation

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Areas, which are the banks of rivers, and streams within the property. For example, in 3000 hectares [total area of Tamanduá Farm], there is more than 20% of legal reserve, in addition, fauna and flora surveys are carried out in partnership with institutions that promote environmental safety, such as the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA) and Legal Environmental Police. Thus, as opportunities, the partnership with government agencies for the preservation of local biodiversity and tax incentives was indicated. As threats, the delay in the process of issuing certifications by public bodies. As for the society variable, it was said that the company participates in the development of the local community by generating employment and environmental education for residents. Due to the actions described by the manager, the company was recently awarded the SMETA protocol, a specific certification for actions that are socially responsible. As practices that respect consumer rights, the company discloses its environmental inventory and releases a report with important information about its activities and production. The Farm also carries out philanthropic actions, both in the surrounding community and in the city of Patos-PB. Thus, as an opportunity for the company, a positive social image, communication with the local community, development of social activities and the SMETA seal that attests to its actions which opens opportunities for export are pointed out. The main threat is the lack of community awareness about sustainable consumption. For the manager interviewed, the environmental issue is a link to sustainability, among the actions to preserve the farm area and its surroundings, the manager claims to have partnerships with IBAMA, Environmental Police and the Veterinary Medicine course at the University Center of Patos (UNIFIP) for the care of wild animals. The farm today is a registered animal release unit, an important action for long-term sustainability, without degradation or minimization of this degradation. Regarding the energy sources used in production, it was clarified that the company uses hydroelectric energy supplied by the company in Paraíba, but there is a project to adopt solar energy in the coming years. There are also ongoing environmental projects, such as the use of nutrient cycling through composting, in which all organic material generated in the company is subjected to a composting process in which animal manure and pruning from the branches of the mango trees are used, transforming it into compost for the plants after one hundred days of decay. The manager also stated that there was a goal of reducing water use, for which drip irrigation was implemented. As for the effluents generated, the farm adopts septic tanks and selective collection. Thus, as opportunities, it is possible to highlight participation in environmental preservation projects, partnerships with environmental protection agencies and entities, access to technologies for sustainable production, awareness of society, and the growing demand for sustainable products. As threats, the use of fossil fuels in transport and the absence of renewable energy sources are identified, which can compromise the company’s image in the consumer market.

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12.4.2 Analysis of the Internal Environment The internal environment is understood as the set of factors present in the organizational environment which have a direct impact on its performance. In the study of the internal environment, current competencies and resources are considered to identify the most representative strengths and weaknesses of the company, compared to others in the same sector, to understand which resources can be used better and which should be improved upon. (Oliveira 2011). For Shatilo (2019), analysis of the internal environment is the tool that enables the development and operation of organizations. The study of the internal environment can be a means for business expansion or a source of problems that can compromise its existence. Organizations must identify their current competencies and skills, as well as their potential to better direct them toward fulfilling their objectives, mission, and vision. Therefore, based on the interview with the production manager, the variables indicated in the PEPSE model for the diagnosis of the microenvironment were analyzed, namely: strategic management, human resources, management of production processes and technologies, product development, guarantee of quality, information management, logistics, financial management, commercialization and marketing, and environmental management.

12.4.2.1

Diagnosis of the Internal Environment

Regarding strategic management, a lack of formal strategies was reported and the adoption of a structured strategic planning model that would help the management of the enterprise as well. Management practices are based on the employees’ empirical knowledge, thus making it impossible to have a clear view of the control and effectiveness of business management. The conduction of business takes place in a centralized way, in the figure of the production manager. Like strategic management, information management does not have a structured system, with a concentration of information in the figure of a single employee, which compromises the understanding of other employees about organizational plans and objectives. As for the strategic management of the company, according to the data collected in the interview, the strategic positioning in the market, the prospection and analysis of scenarios and markets are identified as strengths. As weaknesses, the lack of implementation of strategic planning (mission, vision, and values formulation) and the absence of a specific tool for the company’s environmental management were identified. About information management, weaknesses are the absence of information sharing with other employees, which in turn can compromise their view of the company in which they work. In addition, the absence of a structured information system for better decision-making can be pointed out.

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Regarding the development of products, this is based on the demands and interests of the market regarding organic products and considering the characteristics of the region and production capacity. As for the use of technologies, the farm either acquires technologies developed by third parties, adapts some of them to its reality, and develops its own technologies, such as the technology used in the production of organic Spirulina. According to the Production Manager, the technology developed on the farm not only allowed the cultivation of Spirulina in the region, but also made it the only and truly organic Spirulina produced in the world. Thus, as a strong point, the farm’s competitiveness in a promising market, acquisition, adaptation, and development of technologies for sustainable production, institutional partnerships for agriculture and the identification and evaluation of opportunities for the commercialization of production products were pointed out. As weaknesses, it was indicated that the farm needs to diversify its, since it remains concentrated in few options for the market, as well as expanding the production areas, thus ensuring improvement of the activities that are developed. Regarding production processes and technology management, production with forage planting was indicated as practices, to avoid laminar erosion, and machines were developed for this purpose; adoption of a planting calendar, considering crop rotation with local species; and farm-specific soil management. The company also has an irrigation system with treatment by magnetization, a technology that makes the water have a charge that does not obstruct the drips. As positive points, the manager mentioned access to technologies and development of its own and specific technologies for production, such as organic spirulina. As negative points, the absence of renewable energy sources to minimize environmental impacts. Regarding logistics, the company has a distributor supplying products in Europe, and as for actions aimed at the internal environment, the farm uses technologies for greater efficiency in the production and storage of goods. As positive points, there is access and technological use and as negative points, the absence of a structured strategic planning that allows the evaluation and control of the production and management of the company, to make it possible to verify the efficiency. For the commercialization of products, the company works with e-commerce, through its own website and direct sales throughout the country, with São Paulo – Brazil, the main state for marketing the farm’s products. There is also sale to wholesalers. For exports, the company has a distributor in Rotterdam, Netherlands. The company delivers mango and melon pulp as well as mangos to the Port of Rotterdam and the distributor distributes the products throughout Europe. The management of the company’s image is the responsibility of adapting the farm to the methodologies and meeting the criteria for acquiring certifications and internal marketing practiced with the awareness of employees and motivational practices. Today, the farm is a national and international reference in organic and biodynamic agriculture in terms of its sustainable production practices. As positive points, we have the internal marketing, the necessary certifications for the commercialization abroad and the online store to serve the national market and intermediary to reach the international market. As a weak point, there is the difficulty of fixing the

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prices of products for resellers, who can sometimes apply an abusive rate of profit for the resale of products. For hiring employees, the local workforce is prioritized, first the families inside the farm and then the families living in the surrounding areas. As for the training of hierarchical workers, the educational level is from technical to higher education and the qualification of employees follows the area in which they work and the level of demand for each position. The CEO has a degree in law, the others have degrees in economics, administration, and agronomic engineering. There are also employees with technical training in their areas, such as food technicians. As for the turnover, the permanent employees of the farm have been working for years, some joined as interns and were later hired and/or promoted. Temporary employees, as in the case of those hired by harvest, are residents from the surrounding area and whenever there is a seasonal need for hiring, they are called upon complying with all the requirements of labor legislation. The farm constantly holds events and promotes environmental education and awareness among the staff. The company follows measures to protect against accidents at work and during the period of the COVID-19 pandemic, health standards were adopted to prevent the spread of the virus among employees. According to the interviewee, there were no losses of employees due to the disease. As positive points, there is the ease of hiring qualified labor for the functions, respect for labor legislation and professional qualification. As a weak point, a deficiency in communication between all hierarchical levels was observed, with information centralized among managers. Another negative point observed is the absence of qualified professionals for the implementation of strategic planning and project management. Regarding financial management, the difficulty of aligning sustainable production with profitability was reported, for which the company has planned other projects to increase revenue. As positive points, there is the great economic potential of the farm, with the possibility of exploring various businesses, such as agrotourism, one of the idealized projects. As a negative point, the centralization of decision-making and management is highlighted, which can compromise the progress of the projects to be developed. As for environmental management, the Production Manager of the farm states that this is the focus of the company’s management and as actions for its sustainable operation, plans are established, where all actions and resolutions are included in the environmental management plan. Thus, each employee is trained in the area in which they are working, and these action plans are implemented through onsite training and lectures. The interviewee also stated that several training sessions are carried out with employees throughout the year to improve the company’s environmental performance. Regarding the negative impacts, it was answered that the activity that most involves human activity is mango production, but that in this sense, it is not considered a negative impact. Even though the manager did not recognize the negative environmental impacts in the interview, it is necessary to remember that fossil fuels are still being used in the cars available to the farm, which admittedly has a negative impact on the environment. Regarding consumption, it was clarified that between 400 and 500 liters per month are used. Another point

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is the non-use of renewable energy sources. Given this fact, it is identified as a bottleneck in the company’s environmental management. Regarding the positive environmental impacts, there is the preservation of biodiversity, beekeeping, “because bees not only produce honey, but they also form a link in agriculture, pollinating melon, watermelon, mangos and still produce honey, and favors the pollination of native species” (Production Manager 2021). Regarding current environmental strategies, the manager indicated the Permanent Preservation Areas (APP), with the objective of increasing partnerships with educational institutions and increasing the number of academic research carried out on the farm. There are also strategies adopted to reduce the impacts of activities, such as solid waste management. It emphasizes that the farm is a school farm and that it works with a focus on the environmental awareness of its employees and the community. Thus, we can indicate as weaknesses in the company’s environmental management as the use of fossil fuels and the absence of the use of renewable energy sources and the absence of the use of specific tools for the environmental management of the farm. As positive points, the hiring of local labor, with a positive social impact on the community, promotion of environmental education for residents in the surrounding area and employees, selective collection, and conservation of biodiversity, in partnership with government agencies and educational institutions. The farm has important certifications, which guarantee them a great competitive advantage, they are the USDA Organic and Demeter seals issued by the Biodynamic Institute (IBD); the Organic Product Brazil, issued by a certification body accredited by the “Ministry of Agriculture, Livestock and Supply (MAPA) and accredited by the National Institute of Metrology, Standardization and Industrial Quality (Inmetro), and which ensures that a certain product or service obeys the norms and practices of organic production”; and Global G.A.P (Good Agricultural Practices), a private organization that establishes standards and certifications of good agricultural practices, covering food safety and sustainability requirements (traceability, production techniques, environmental preservation, food safety, and social aspects) (Organicsnet 2021; Sebrae 2018). The farm is also certified with the seals: Selo BR-BIO-122 Agriculture NonEU, which is an IBD code for Brazilian producers certified according to European Regulation (EC) 834/2007, in accordance with the requirements of the European Regulation (EC) 834/2007 and (EC) 889/2008; and SEDEX/SMETA. SMETA 4-Pillar Certified Factory issued by SEDEX Members’ Business Ethics Audit (SMETA), which uses SEDEX’s social audit methodology to assess locations and suppliers to meet working conditions in the supply chain (Sedex 2021). As a strong point of the farm, certifications, quality standards attested by national and international quality organizations and zero waste, with the use of waste in the production chain, stand out. As a weak point, the absence of specific tools for environmental management and strategic planning to measure and control results is highlighted.

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Survey of Current Strategies

The survey of the current strategies adopted by Tamanduá Farm was carried out through the application of an interview with a semi-structured script with the managers and on-site observation. For a better visualization of the strategies adopted, these are organized according to the variables analyzed. Initially, market strategies were identified according to the variables of analysis of the external environment. Thus, environmental certification, construction of a positive image, dissemination of good practices, inventory of fauna and flora, hiring of local labor, cultural events, certified suppliers, exclusivity agreement with certified suppliers, partnership with environmental preservation agencies and entities, partnership with educational institutions, school farms, and endomarketing were identified as current strategies. As for the strategies of the internal environment, for better performance of business activities, knowledge of local geography, adaptation of agricultural practices to local characteristics, partnerships with educational institutions for sustainable agriculture, acquisition and adaptation of technologies to farm practices, development of proprietary technologies with low environmental impact, organic and biodynamic production, development of self-production practices, irrigation with low water consumption, internal marketing for motivation and good practices among employees, e-commerce to serve the final customer, distributor to access international markets, environmental management plan, employee training on sustainable practices, selective collection, partnership with a collectors association, biodynamic beekeeping; use of non-marketed products and use of waste for composting and animal feed. It can be observed that some strategies are applied in more than one variable, as is the case of certifications and environmental education, this happens because they are key strategies for the company’s competitiveness in the segment in which it is inserted. According to the research data, Tamanduá Farm, despite not having a structured Strategic Planning and specific tools for Environmental Management, has defined good strategies to achieve its organizational objectives and, in this way, positioned itself in the market and conquer a respectable image with the consumer market, as a national and international reference farm in sustainable agricultural production.

12.4.3 Proposition of Strategies to Be Adopted Based on the Analysis of the Environment After the information provided by the production manager, insertion in the Latin American market through commercial representatives and expansion of wholesale customers through the hiring of a team of sales representatives; imposing a price

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list for the sale of products by wholesalers, expanding partnerships with educational institutions in the region for environmental education and conscious consumption, seek partnerships with investors (China, for example, which has invested in research in the area of sustainability in the northeast region), partnerships with university extension projects to formulate strategies for the commercialization of goods, expanding opportunities for technical visits to learn about sustainable agriculture, adoption of a solar energy system to replace hydroelectric energy, and biofuels as an alternative to fossil fuels are suggested as strategies to be adopted by the farm. Finally, it is suggested that the organization adopt a structured model of strategic planning aimed at analyzing environmental strategies, with a view to better the understanding of the company’s positioning in the market and evaluating its results. Although the PEPSE model has been used as a basis for the identification of environmental variables and strategies, not being applied in its entirety, it was found to be an adequate tool for the organization’s profile, since it is easy to apply, focused on the industry and proposes variables compatible with the reality of the unit. It is also proposed to define the hierarchical structure of the farm for better division and organization of work, since decisions are centralized in a single person; planning meetings with the team to align understanding on decision priorities and business vision; and finally, promote training with the team involved in strategic planning and the importance of periodically carrying out a strategic business diagnosis to analyze the company’s relations with its stakeholders.

12.5 Conclusion Based on the research, it was found that the variables of analysis of the external environment adopted on the farm from the PEPSE model are customers, suppliers, potential entrants, government, society, and the environment. It was identified that in the decision-making process and in the elaboration of strategies, the competing variables, substitute products, and intensity of rivalry between competitors are not considered, since the farm considers itself having to deal with direct competitors for its products. However, given the increasingly fierce competitiveness in a global market, it is suggested that in future planning, substitute products should be considered in the elaboration of environmental strategies. As for the internal environment variables, all the variables proposed in the PEPSE model are considered in the formulation of farm strategies, with the product development, environmental management, and quality assurance variables being the ones that have received the most attention in farm planning. As a suggestion, it is indicated once again the adoption of structured environmental tools to better verify the sustainable potential of the company. The PEPSE model proved to be adequate to the reality and organizational objectives, being a good tool to assist in the strategic management of the business.

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As for the strategies adopted, environmental certification, construction of a positive image, dissemination of good practices, inventory of fauna and flora, hiring of local labor, cultural events, certified suppliers, exclusive agreements with certified suppliers, partnerships with environmental preservation agencies and entities, partnerships with educational institutions, school farms and endomarketing, to deal with external variables. And knowledge of local geography, adaptation of agricultural practices to local characteristics, partnerships with educational institutions for sustainable agriculture, acquisition and adaptation of technologies for farming practices, development of proprietary technologies with low environmental impact, organic and biodynamic production, development self-production practices, irrigation with low water consumption, internal marketing for motivation and good practices among employees, e-commerce for end-customer service, distributors to access international markets, environmental management plan, employee training on sustainable practices, selective collection, partnership with an association of collectors, biodynamic beekeeping; use of non-marketed products and use of waste for composting and animal feeding, to deal with internal variables were identified. It was observed that the farm adopts strategies compatible with its reality, however, a greater control and structuring of its management processes is necessary. As limitations of the research, the COVID-19 pandemic was the main obstacle, since the adoption of sanitary measures and reduction of staff on the farm, as well as restrictions on visitation, made contacting employees difficult and directly compromised data collection. As suggestions for future work, the full application of the model used is recommended, to analyze the organizational typology and the sustainability potential of the farm more directly, although it has certifications, the use of fossil fuels and non-renewable energy compromises its classification as a sustainable company.

References Agência Nacional de Assistência Técnica e Extensão Rural. (Brasil) (2021) PIB do setor agropecuário registrou alta de 5,7% no primeiro trimestre. ANATER: 07 june 2021. https://www.anater.org/index.php/2021/06/07/pib-do-setor-agropecuario-registrou-altade-57-noprimeiro-trimestre/. Acess: 06 setember 2022 Agripino NE, Maracajá KFB, Machado PA (2021) Corporate sustainability in agribusiness: paths and implications for brazilian practices. Res Soc Dev 10(7):e30210716567. https://doi.org/ 10.33448/rsd-v10i7.16567 Amaral GF, Guimarães DD (2020) Panoramas Setoriais 2030: Agropecuária. Banco Nacional do Desenvolvimento Econômico e Social https://web.bndes.gov.br/bib/jspui/bitstream/1408/ 14235/2/Panoramas%20Setoriais%202030%20-%20Agropecu%C3%A1ria_P.pdf Bartzas G, Komnitsas K (2019) An integrated multi-criteria analysis for assessing sustainability of agricultural production at regional level. Inf Process Agric 7:223–232. https://doi.org/10.1016/ j.inpa.2019.09.005 Benn S, Abratt R, O’Leary B (2016) Defining and identifying stakeholders: Views from management and stakeholders. S Afr J Bus Manag 47(2):1–11. https://doi.org/10.4102/sajbm.v47i2.55

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Chapter 13

Application of Industrial Ecology Principles In and Around Cement Industry in NCR of Delhi: Potentials, Problems and Possibilities Anuja Malhotra

and Nandan Nawn

Abstract Cement is among the highest pollution-generating industries in India, both directly (particulate matter) and indirectly (use of thermal-powered electricity as an input). With growing infrastructure requirements, the volume of cement production—globally ranked second—can only rise. At the same time, as a ‘Scavenger Industry’, it has the potential to innovate around its input requirements, be it ‘exchange’ of by-products, and/or recycle and reuse of others’ ‘wastes’. Grounded in the framework offered by Industrial Ecology this chapter looks at the potentials, problems and possibilities of applying ‘circular economy’ in and around Cement Industry in National Capital Region (NCR) of Delhi, India. Three ‘exchange’ scenarios have been constructed—use of fly-ash from power plants as an input, waste plastic (Refuse Derived Fuel) as fuel, and crop residue (as briquettes) as fuel. It has been argued that the social benefits of implementing these exchanges are high and there is a case for—diverse—intervening and facilitating roles of the State. Keywords Industrial ecology · Closing material loops · Cement industry · Industrial waste recycling · Pollution in Delhi

The chapter is a modified version of the Masters’ Thesis (link) submitted by the first author in partial fulfilment of requirements of M.Sc. in Economics degree from TERI School of Advanced Studies, New Delhi, under the supervision of the second author. Authors would like to acknowledge contributions from Dr. Ashok K Dikshit, National Council for Cement and Building Materials, Faridabad towards preparation of the Masters’ Thesis. A. Malhotra () Center for Policy Design, Ashoka Trust for Research in Ecology and the Environment (ATREE), Royal Enclave, Bengaluru, Karnataka, India e-mail: [email protected] N. Nawn Department of Economics, Faculty of Social Sciences, Jamia Millia Islamia, New Delhi, India e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Singh et al. (eds.), Green Circular Economy, Circular Economy and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_13

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It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth. (William Stanley Jevons (1866) The Coal Question: An Inquiry Concerning the Progress of the Nation and the Probable Exhaustion of our Coal-Mines, 2nd edition. Macmillan, London, p. 123) The economic system is stable somewhat in the way a bicycle and its rider are stable: if forward motion stops, the system will collapse. Forward motion in the economic system is technological progress. (Robert U Ayres (1989) Industrial Metabolism. In: Ausukl JH, Sladovich, HE (eds) Technology and Environment. National Academy Press, Washington, DC, p. 32)

13.1 Introduction Interdependence between economic systems and ecosystems was recognised even in the era of classical political economy. The use of “original and indestructible powers of the soil” to explain the rent paid to the landowner in On The Principles of Political Economy and Taxation (1817) by David Ricardo is just one of many examples. This attribute could explain ‘differential rent’ across parcels of land with varying degrees of ‘productive power’. It was a rate question, and so was the ‘paradox’ in The Coal Question (1866) by William Stanley Jevons.1 However, the latter is also a scale question. Nevertheless, neither is known to have caused much flutter within the ‘policyspace’ then. About one-and-a-half centuries later Club of Rome published Limits to Growth (1972). This marked the entry of the scale question in the economic ‘policyspace’ (at least) albeit only in the academic domain. The ‘oil crisis’ in the subsequent year, of course, subsumed it, though some prominent economists engaged with it, even if just to dismiss it. In the next half a century it completed a full circle: what is commonly regarded as ‘climate change’ today is a pure scale question. For a while, the ‘policyspace’ has been abuzz with how not to breach the limits, dictated by Nature. The matter in question is to regulate human activities that have been the main driver of climate change, primarily due to the burning of fossil fuels (like coal, oil, and gas), which produces heat-trapping gases. This is the absorption capacity or ‘sink function’ provided by Nature in the form a ‘fund-service’ a la Nicholas Georgescu-Roegen (1971)—a scale question. The basis of apportioning the amount (per capita income or population, for example) is still being debated. So is the question of who will pay for the costs of the corresponding action, i.e., abating release of emissions beyond the ‘quota’. In fact, recently there have been calls for paying the damages as compensation to the nation-States who are or will be victims due to inaction. All of these are scale matters—dictated by Nature— and are occupying the ‘core’ of the global ‘policyspace’; it’s in the ‘political action domain’ and beyond the academic one.

1 Later,

it was termed as ‘rebound effect’.

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The common obsession shared by the political class, dominant schools of thought in economics, business, and financial world—around economic growth—is an indisputable fact. It follows that even if many ‘transitional’ pathways have been located to address the scale question—by definition, involving lowering of the scale of economic system—none have been found to be acceptable to those holding power, be it nationally or in the global arena. They prefer playing with the rate question—say, by improving energy and material efficiency (or, lowering energy and material intensity). Stanley Jevons through ‘Jevons’ Paradox’ had shown the limits of playing with the rate question to address a scale question (see, Polimeni et al. 2008). It follows that the number of ‘transitional’ pathways that the powerful can find acceptable are rather limited. As a corollary, pathways which minimally affect those obsessed by the ‘growthmania’ will enjoy a positive and non-zero probability of being accepted. Pathways based on the framework offered by Industrial Ecology (IE) belong to this set. The stiff resistance from the powerful to adopt any pathway that calls for downscaling of economic systems—such as what degrowth movements ask for— paves the way for exploring two options. First is the possibility of ‘decoupling’ main products (a ‘good’) from the by-products (a ‘bad’). Making emission norms stronger for passenger vehicles is an example here—but, this is a rate matter.2 The other is use of by-products of unit A (that are ‘wastes’ to producer of A), by producer of unit B, as an input. By extension, it is possible to imagine use of by-products of unit B (that are ‘wastes’ to producer of B), by producer of unit A. This ‘exchange’ makes it a ‘circular economy’. This process is iterative: any number of units can be a part of this ‘circle’. Alternatively, this makes the ‘loop’ closed. The inherent assumption here is that the ‘wastes’-turned-inputs will replace the conventional input and will not have much consequence for either the technology-inuse or the input-output relationships. It follows that, input per unit of output, for the economic system in question consisting of all participating units will fall. In case the output remains unchanged (assuming constancy of demand) in physical terms, then total quantity of inputs in physical terms will fall. This has obvious economic and financial consequences for the participating units—but, in case those ‘wastes’ (in the case of non-use as inputs) were otherwise being dumped on a landfill (opportunity cost of land) or waterbody (water pollution) or being just burned (air pollution) there are additional social benefits in finding ‘use-values’ from them. The circular economy not only saves social but also private costs (savings on the conventional inputs). This idea is borrowed from the functioning of ecosystems. .

∼∼∼

2 This is measured in terms of release of various noxious gases per unit of air released, assuming a constant relationship between the latter and distance covered.

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Fischer-Kowalski (1998a)3 identified late 1960s-early 1970s to be the time when “pioneers of ‘industrial metabolism’”4 worked across disciplines that served as foundations to the later works in Material Flow Analysis, Circular Economy, and Social Metabolism—all within the fold of IE. Suh (2009, p. vi) mentions “history of industrial ecology and input-output economics, material flow analysis, LCA [Life Cycle Analysis], sustainable consumption, policy applications, energy and climate change, waste management, national accounts and statistics” among the ‘topics’ included in the Handbook of Input-Output Economics in Industrial Ecology— this illustrates the breadth of the subject. Engaging with it requires inter-, if not trans-disciplinary endeavours. But, irrespective of its ‘command’ in such forays, Economics—as a discipline—assumes a disproportional importance in the ‘political action domain’ within the policyspace. Ayres (1989, p. 23) writes, [i]t is increasingly urgent for us to learn from the biosphere and modify our industrial metabolism, the energy- and value-yielding process essential to economic development. Modifications are needed both to increase reliance on regenerative (or sustainable) processes and to increase efficiency both in production and in the use of by-products.

As “economic system depends on the extraction of large quantities of matter from the environment” (Ayres 1989, p. 25), it’s useful to find the “fraction of the total mass of processed active materials that is annually embodied in long-lived products and capital goods (durables)” (Ayres 1989, pp. 25–6). “The annual accumulation of active materials embodied in durables, after some allowance for discard and demolition” was found to be “6 percent of the total” and the remaining “is converted into waste residuals as fast as it is extracted” (Ayres 1989, p. 26). In this ‘metabolic view’, evolution of the industrial processes is seen through “savings in materials and energy inputs or capital requirements, if not both” (Ayres 1989, p. 32). Here, it makes economic sense to invest in development of processes that can “saves one link in the chain between raw materials and finished materials or final goods”. This will “improve[e] overall effectiveness in production” through “development of new processes [that] shorten [...] process chains, bypassing as many intermediates as possible” (Ayres 1989, p. 32). But the other possibility is “better use of by-products and wastes” (Ayres 1989, pp. 32–3; emphasis added). One such is finding “new uses for what were formerly waste products” (Ayres 1989, p. 24). In case disposal of wastes becomes costly, due to newer regulations, it makes economic sense to locate an ecologically more benign option, namely, finding buyers of by-products. Ayres (1989, p. 33) used the metaphor of a “the myopic drunkard’s walk” to characterise evolution: “The drunkard’s walk is not exactly random, but it tends to follow the path of least resistance in the short run”. Ayres (1989, pp. 34– 35) “postulate[d] a long-run evolutionary imperative favouring industrial metabolic

3 Also 4 This

see, Fischer-Kowalski (1998b). term was coined by Ayres (1989).

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technologies that result in reduced extraction of virgin materials, reduced loss of waste materials, and increased recycling of useful materials” and also that “shortterm economic incentives do not necessarily point in the direction indicated” besides the fact that they “are often inconsistent with the postulated long-term imperative”. It follows that there must be some “counteracting incentives and mechanisms” that “must grow out of social and even political responses to perceived environmental problems. It is political action, ultimately, that creates the incentive structure—fiscal, monetary, and tax policy—and the regulatory environment within which economic incentives drive entrepreneurial activity (Ayres 1989, p. 35; emphasis added). It is this lack of ‘political action’ that has ensured that ‘sustainable development’ remained as a mere buzzword (besides being vague and unclear). For the same reason, variety of pathways (howsoever defined) under ‘energy transition’ or ‘low carbon economy’ will not be acceptable to the global powers as shown by Ghosh (2021), among others. Pathways following ‘industrial metabolism’ satisfy the conditions mentioned in the quote at the beginning of this chapter from Ayres (1989, p. 32). The recent presence of terms like ‘industrial economy’, ‘circular economy’, dematerialisation and other such (outside of the academic and) in the political action domain owes much to the ‘limits to growth’ in real terms (pun intended) across sectors and systems.5 One of the key elements in the practice of industrial metabolism is facilitating ‘coordinated development’ of industrial units that can engage with each other towards ‘exchange’ of by-products to satisfy the condition of “new uses for what were formerly waste products” (Ayres 1989, p. 24). ‘Industrial ecosystem’ at Kalundborg, Denmark involving a coal-fired power plant, an oil refinery, a pharmaceutical maker and a plasterboard manufacturer (Ehrenfeld and Gertler 1997), has been the pioneering instance of a successful ‘industrial symbiosis’.6 Closer home, Ramaswamy and Erkman (2006) is one of the earliest expositions. It covered textile industry in Tirupur, foundries in Haora, leather industry in Tamil Nadu (using Resource Flow Analysis as a tool) and Damodar Valley Region (using industrial metabolism as a tool) to examine potentials for application of IE. Like others, it emphasised on the tasks for ‘environment planners’ within industries, companies, and public authorities to engage with multi-level planning and listed various tools towards this end. One such tool is to construct various ‘scenarios’ keeping in mind the requirement of ‘exchanges’ among participating units. This tool has been rather common, as can be seen in a recent study on China involving “energy-intensive industries such as steel, cement, and power” (Zhang et al. 2022, 5 Ecological Economics and Journal of Industrial Ecology among others have been carrying papers on these matters for a few decades. Researchers at the Universitat Autonoma de Barcelona, Barcelona, Spain and Institute of Social Ecology, Klagenfurt University, Vienna, Austria have been forerunners in this area. 6 Frosch and Gallopoulos (1989) popularised the idea of waste exchange between industries, imagining the industrial system to mimic biological ecosystems that are highly effective at recycling. See, Ayres (2004) on the limits to this idea.

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p. 1).7 This paper also constructs alternative scenarios (Sect. 13.4) in and around cement industry for National Capital Region of Delhi, India.

13.2 Contextualising the Research Problem This section provides the rationale behind choice of industry and geographical space.

13.2.1 Why Cement Industry? Cement is an indispensable component in construction as such and infrastructure in particular. With growing requirements, the production of cement in India can only rise. Rising concerns over the environmental impacts of its production and consumption have led to experimentations with a variety of substitutes: mud, plastic and geo-polymers, to name a few. Yet, their disadvantages outweighed their feasibility.8 Cement remains the most preferred binding material worldwide. At the same time, efforts to control pollution intensity via ‘end-of-pipe’ solutions have not been successful (Bahel and Kanchan 2017). Numerous studies have shown that it makes sense to focus on production activities rather than on end-of-pipe solutions. For sure, their ‘performance’ largely depends on regulatory mechanisms, their implementation and continuous monitoring by the State but in developing countries institutions and regulatory frameworks are rather poor (Andersen 2007; Preston 2012). As a result, end-of-pipe solutions have seen failure in multiple places. Consider the following example: in 2014, the Ministry of Environment, Forests, and Climate Change (MOEFCC), Government of India directed industries to comply by certain norms. One was for the cement industry, wherein 194 cement plants were asked to reduce their particulate matter (PM) emissions by establishing an ESP (Electrostatic Precipitator) unit in their factories. However, due to financial and space constraints, less than 5% of the plants complied. In response, the government made the norms less stringent as apparently the financial and capital constrains were ‘genuine’. Ultimately, the cement industry is still one of the most polluting industries of India (Bahel and Kanchan 2017).

7 This study used “business-as-usual, optimization of product structure, low-carbon technology application, and policy advancement” (Zhang et al. 2022, p. 1). 8 Mud needs higher content of clay and is a poor insulator; plastic has environmental impacts throughout its entire life-cycle; and geo polymers have been technically difficult to create; thus, hindering the scalability and feasibility of usage (Civil Engineers Forum 2016).

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Potential for this ‘scavenger industry’ (Rejinders 2007) to use other industries’ ‘wastes’ and reduction in the overall environmental impact in the process is well recognised. To reiterate, in the language of IE this warrants “new uses for what were formerly waste products” (Ayres 1989, p. 24) and can be seen as mutually beneficial exchanges of by-products (or, simply ‘exchange’). Precisely for this capability of using by-products of other industries,9 cement has been a common component of ‘industrial ecosystems’ as can be seen in most eco-industrial parks.10 In approaches using IE principles solutions are not sought after the damage is done. Instead, it tries to minimise that damage in the first place by reducing the material used or reusing waste products. Even the measurement in terms of materials and not money. It opens up a possibility where material load is reduced, without even considering the damage cost. For instance, a quantitative study of the Kalundborg Industrial Park shows that more than 30 exchanges took place between industries. It has also been shown that more than 95% of the input water required in thermal power plants is sourced from wastewater of other industries (Jacobsen 2006). Domenech and Davies (2011) quantified CO2 emission savings to be 64,460 tonnes per year and groundwater savings to be 2.9 million-meter cubes per year. IE warrants the design of processes such that waste is reduced, “closing loops” of materials rather than polluting the land and water through their disposal. It warrants the use of “appropriate technology” which means that while deciding the technology or process, the local situation must be considered. The social, political, geographical and cultural situation plays an important role in determining the technology (Reddy 1998). For instance, the problem of air pollution in Haora (West Bengal) could not be solved by using natural gas as an input, which was a perfectly good solution in the western parts of the country. Rather, the region-specific appropriate solution was to develop a left-over gas from coke ovens (Erkman and Ramaswamy 2003). IE endorses that solutions may be inspired by the best practices globally, but they much be locally checked for feasibility and appropriateness. As mentioned before, cement is the second most consumed material on earth (after water), which is not surprising as it is indispensable in construction and even the development of agriculture. In India, it is the second most important primary input for the economy (after steel and iron). Cement is required by almost every other industry, provides employment to almost 1 million people (directly as well as indirectly), and contributes substantially in the Foreign Direct Investment inflow. It has forward linkages to infrastructure as well as backward linkages to coal,

9 These include using foundry sand and waste paint from auto manufacturing industry, fly-ash from electric power plants, scrap tires from tire dealers or manufacturers, paper sludge from pulp and paper factory, kiln dust from road construction industry, gypsum and slag from non-ferrous metal industry. 10 In eco-industrial park businesses cooperate with each other (and with the local community, at times) in an attempt to reduce waste and pollution. This takes place through sharing of resources (material, water, energy, and even information) among others. For instance, in the Kolkata leather complex in India consisting of 500 tanneries a common effluent treatment plant (CETP) was set up to reduce the environmental impact since this joint approach was economically feasible.

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electricity and natural gas (Pandey 2017). Alternatives to cement do not enjoy economic and technical viability. Materials like mud, plastic and geo-polymers have been experimented as substitutes for cement but the scalability and feasibility are not comparable. This makes cement largely non-substitutable (Civil Engineers Forum 2018). Cement is also responsible for negative impacts on the environment and human health. Following is a list (not exhaustive) of these impacts: • Globally, almost 5–6% of carbon dioxide emissions are attributed to the cement industry. • Highly energy intense, fuel consumption in the clinkers is responsible for emissions such as NOx, SOx, CO2 , and particulate matter (Mehraj and Bhat 2014). • Cement dust contains heavy metals such as nickel, cobalt, lead and chromium. These are hazardous for human health and vegetation (Baby et al. 2008). • Prolonged exposure to cement dust can cause serious irrevocable damage to humans and any soil, plants and vegetation that comes in contact (Mishra and Siddiqui 2014). • Linkages between cement dust exposure and respiratory symptoms in human population are well established (Ikli et al. 2003). Because of all these reasons, the MOEFCC has categorised the cement industry in the ‘red’ list or most polluting category. These classifications have been done on the basis of a pollution index, constructed as a function of emissions (air pollution), effluents (water pollution), hazardous wastes and consumption of natural resources. The significant negative environmental impact can offset using the principles of IE, namely, waste exchanges. Oss and Padovani (2003) have shown that cement industry may be one of the best drivers of practices related to IE in the manufacturing sector. To some extent, the Indian cement industry is already practising IE. The government mandates that cement industry can use fly-ash (from thermal power plants) to make blended cement. There has been progress such that 25% of the flyash generated is being used by cement industry (Shankar 2018).

13.2.2 Research Area Particulate matter (PM), a pollutant emitted from cement production, is the most prominent cause of pollution in the National Capital Region (NCR) of Delhi (Sharma and Dikshit 2016).11 This region records poor air quality almost throughout the year. A study by TERI and ARAI (2018) shows that unless the air quality is improved, the health damage in the area will escalate at a steep rate. It is

11 NCR includes eight districts from Uttar Pradesh, 14 from Haryana, two from Rajasthan and the National Capital Territory of Delhi.

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Fig. 13.1 Map of Delhi NCR and illustration of presence of industries in the region. (Source: Created by authors using data from Ministry of Commerce and Industry) Note: This is not an exhaustive list; the icons are not to scale, they are only indicative

obvious that application of IE in the cement industry in and around this region can contribute towards lowering of the pollution to some extent, besides a reduction in the extraction of ‘resources’ to be used as inputs—both can be economically and ecologically valuable. Figure 13.1 shows the location of industrial units in the study area with a potential to exchange by-products. In Delhi NCR, the landfills are overflowing (Nandi 2017). Delhi’s waste management has been a systematic failure where 9500 tonnes of garbage per day is generated only to end up in uncontrolled landfills. Overflowing landfills are causing groundwater pollution (Mor et al. 2006) and methane emissions (Talyan et al. 2008). Yet, 80% of the waste may not end up in those landfills if there is segregation at source and it reaches its appropriate destination be it for recycling or reuse or even conversion into manure. The Delhi government is spending INR 1350 crores annually on waste management and disposal but results have been far from expected (Singh 2014). It makes sense to locate markets for such exchanges of waste, and reduce the need for disposal in landfills.

13.3 Some Empirical Matters To locate possibilities of exchange of by-products between cement and other industries the first step is to understand the flows of resources in the cement industry itself. The methodology has been developed by pioneers like Ayres (1989). The material and energy flows can be accounted for a substance, product, process, company, municipality or region—the level of analysis depends on the purpose of the study. For our purposes, we construct input-output matrix for the cement industry.

13.3.1 Environmentally Extended Input Output Matrix The basic input-output (I-O) model was developed by Leontief in the 1930s. It was constructed using economic data for a specified region. As the name suggests, the

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Table 13.1 EEIO matrix for cement industry (annual) Raw material Limestone (22.82 million tonnes) Gypsum (1.14 million tonnes) Grease (167 tonnes) Lubricating oil (489 tonnes) Bauxite/iron ore (0.79 million tonnes) Water (14.69 million meter cube)

Energy consumption Main-product and by-products Emissions per year Coal + pet coke Cement (23.18 million tonnes) CO2 emissions(69,063 TJ) 15,098,332 tonnes Diesel oil Waste oil and Electrical (748 TJ) grease cables (83,633 litres) Biomass fuels Steel scrap Plastic bags Dust emissions(304 TJ) (30,635 565.53 tonnes tonnes) Alternative fuels Waste Glass NOx (1339 TJ) cement bags 23.883 tonnes Electricity Wood Copper SOx (481,624 MWh) 2714 tonnes

Source: Created by authors using Annual Reports and GRI Reports of ACC Limited (ACC Limited, 2017a, 2017b), Ambuja Cement Limited (Ambuja Cement Limited, 2017), Dalmia Bharat Limited (Dalmia Bharat Group, 2016) and JK Cement Limited (JK Cement Limited, 2018)

analysis involves flows of products from each sector (input) as well as the flow to each of the sectors (output). There have been many modifications to the conventional I-O matrix to account for social and environmental matters. For instance, ‘Economic-Ecologic models’ have been developed to include the ecosystem where flows are recorded between ecosystem and economic systems. These are known as the environmentally extended input-output matrix (EEIO) in general. The goal of EEIO is to incorporate the indirect or embodied environmental impacts associated with production. For instance, an EEIO analysis can capture how much nitrogen is released into the environment in the production of wheat (Kitzes 2013). EEIO matrix of cement industry (Table 13.1) has been prepared using the Annual Reports and GRI reports of some cement companies. Annual reports provided monetary values. Material flows have been compiled using data submitted by these companies through their sustainability reports as per Global Reporting Initiative (GRI) standards.12 There are many notable features in the input and output of cement industry that strengthens the case for use of IE (Table 13.2).

12 GRI is an international independent institution that disseminates globally applicable sustainabil-

ity reporting. See, https://www.globalreporting.org/standards/

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Table 13.2 Notable features of input and output of cement industry Feature Considerable amounts of mineral resources (bauxite, iron ore and sand.) Primary raw material is limestone

Water is used for cooling purposes, not as a ‘direct input’ More than 90% of the energy consumption is sourced from fossil fuels

High volume of emissions

Details Limestone is one of the 12 ‘most critical’ mineral resources for which no substitutes are available and it is indispensable for cement manufacturing. As per Indian Bureau of Mines, the limestone reserves available in India are expected to last only another 30 years. There too, all available reserves cannot be exploited due to many reasons such as deposits being in inaccessible areas, lack of infrastructure and other restrictions. Cement cooling is an important step in the process because it enhances the quality of cement. However, on an average only 9% is sourced from treated/reused water. Problems associated with fossil fuel dependency are environmental pollution, economic dependence on imports and contribution to global warming. In Indian cement industry, the use of alternative fuels (like by-products from other industries) is only 2–3% of the total energy mix. In some European countries, these alternative fuels account for more than 60%. Cement industry is highly polluting. 50% of emissions is due to chemical process of manufacturing, 40% is due to burning fuel and remaining owes to use of electricity and during transportation.

Source: created by authors

13.3.2 Locating Exchange Possibilities Next, we identify the possible ‘waste exchanges’ with cement industry as the destination. There are two such: the use of alternative raw materials (as inputs), and introduction of waste materials as alternatives to fossil fuels.

13.3.2.1

Alternative Raw Materials as Inputs

To reiterate, cement industry has the potential to use by-products of other industries. These include but are not limited to steel slags from Iron and Steel industry, fly-ash from power plants, aluminium slag, paper sludge from paper industry, and shredder residue from auto scrap processing. Cement is a binder—a substance that binds other materials such as sand or gravel. The by-products mentioned at the beginning of this paragraph can be used as binding materials as well. For instance, fly-ash can be mixed with cement to make a binding material known as blended cement (Helmuth 1987). Bureau of Indian Standards allows use of fly-ash up to 35% in such a mixture (Bobde 1998). Even though the Indian cement industry has seen an increase in the use of fly-ash and production of blended cement, it still uses less than 30% of available fly-ash. The major reason for this is unavailability of fly-ash in the desired quality.

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The benefits of such blended cement are several. Since lesser cement is required as a binding material (while having at least the same level of strength), lesser pollution is emitted in the production of cement. Moreover, lesser raw material is mined including scarce and ‘critical’ ones like limestone. There have been successful attempts worldwide with exchanges in these lines. For instance, in the Cajati Industrial Park, Brazil, a cement plant was built only to make use of by-products of other industries. Millions of tonnes of wastes have been avoided in the process. In Japan, the Taiheiyo Cement used sewage sludge and incineration ash as raw materials. In Hannibal, Missouri, waste materials contaminated with heavy metals (their toxicity polluted land and water severely) were used in cement industry (Hanehara and Ichikawa 2001).

13.3.2.2

Alternative Fuel Source

The cement industry in India relies majorly on the consumption of fossil fuels for the burner. More than 90% of the energy is sourced from Coal and Pet Coke. However, global (and local) experiences have demonstrated that there are many alternatives to such fossil fuels that can be used for the burner. These include, among others, plastic, slaughterhouse wastes (bone, fat, and meat), scrap tires, municipal solid waste and biomass. In France, use of meat and bone solved a sizeable panic caused by infected beef (Mehta 2002; Naryana 2009). Briquettes from agro-waste (crop residue) can be used as fuel in the cement kiln. In NCR, where the burning of crop residue is considered to be a major contributor of air pollution, this might address a much bigger problem than just reducing use of fossil fuels in cement production (Bikkina et al. 2019).

13.4 Three Scenarios of Waste Exchange We elaborate on the possibilities mentioned in 13.3.2 above in this section.

13.4.1 Using Rejected Plastic as Fuel for the Burner (Scenario 1) According to the Central Pollution Control Board, Delhi is the highest contributor to plastic waste, nationally, with more than 700 tonnes per day. This has made the water in adjacent Yamuna river unfit for domestic and commercial use. Alternatively, the plastic has ended up in landfills or was simply burnt. Delhi government banned plastic use completely in 2009. However, there has been an implementation failure.

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Since 2018, NASA satellites have been identifying ‘red dots’ in the NCR region. They indicate burning of plastic and municipal solid waste in the open areas.13 Alarmed, the Environment Pollution (Prevention and Control) Authority (EPCA) directed the Delhi Pollution Control Committee (DPCC) to act. However, even after posting nearly 100 environment marshals and flagging more than 10,000 violations, the ‘red dots’ did not decrease substantially. The laws prohibit such burning but implementation and follow-up is a challenge—for every such non-point source emissions like this—simply because it’s nearly impossible to monitor due to prohibitive costs. Using plastic waste as fuel for the burner in the cement plant is placed under the category of Alternative Fuels and Raw Material (AFRM). In India, AFRM makes up for less than 4% of the fuel needs in the cement industry, as the energy dependence is still majorly on fossil fuels. In many countries—such as Switzerland, Germany, Austria, Denmark and the Netherlands—cement industry has been sourcing majority of their fuel needs from AFRM. In fact, the use of AFRM may help India meet its climate change goals (Shankar 2018). Next, we explore stages to realise this possibility. In the first stage, namely, collection of plastic, labour for recovery of ‘resource’ is the most important input. The second one is to process and convert the ‘resource’ into Refused Derived Fuel (RDF). And the final stage is to provide this RDF to cement plants. The labour is available in the region. A conservative estimate is that there are about one to 2 lakh waste-pickers collecting almost 2 kg of plastic per day, per person. These are conservative estimates and it is said that the actual number may be close to 8 kg per day per person. Even the conservative estimate makes it almost 6000 tonnes of plastic per month. Due to lack of official means of processing plastic, less than 10% of collected plastic is recycled and the rest ends up in either landfills, the Yamuna or is burnt. This calls for placing the entire collection process within a ‘formal network’. Of course, this will make the working and living conditions for the waste-pickers better, who are still majorly working outside of ‘formal network’. In contrast to the labour-intensive nature of collection and segregation stage, preprocessing one is capital-intensive. In it, calorific value of waste is calculated to explore viability, followed by treatment with chemicals & microbes to eliminate moisture, before shredding the waste into small particles and converting into fuel. The requirement of physical machinery and land is estimated to be as follows: (a) a minimum 25 acres land required for the pre-processing of waste, (b) machinery (costing INR 20–100 crore depending on size of unit) and additional machinery of about INR 5 lakhs to dehydrate the non-recyclable plastic. A back-of-the-envelope estimate shows conversion of 500 tonnes of waste to 150 tonnes of refuse-derived fuels (RDF).14

13 These

satellites would not be able to detect minor fires such as a “chulla” (oven) or matchstick, these have to be big fires that generate heat for over 4–5 h (Thakur 2018). 14 Data taken from Tamil Nadu Pollution Control Board (2017), Central Pollution Control Board (2017), Gautham (2018).

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Use of RDF as fuel does not warrant any change in the existing technology or machinery at the cement plants (Modi and Rajasekar 2012). Clearly, supply of RDF takes place only if sum of expenditure of labour and machinery in the first two stages are less than the price of RDF. However, the opportunity cost of RDF as a fuel is the price of its substitute, namely, coal and pet coke. In short, economic viability of scenario 1 depends on fulfilment of two necessary conditions: (a) A non-zero supply of RDF, if and only if, total cost (labour time + machinery) ≤ total revenue (price of RDF x quantity of RDF sold). (b) A non-zero demand of RDF, if and only if, unit price of RDF ≤ unit price of coal/pet coke. If (b) does not hold per se, there can be a case for government intervention in the form of subsidy. Next, we look at the expected societal benefits, and social costs borne currently. Former includes the following: (i) Saving landfill space: None of three landfill sites—Bhalswa, Ghazipur and Okhla—comply with the schedule 3 of the Municipal Solid Waste (MSW) Rules, 2000. Accordingly, the DPCC does not grant new authorisations but still they are used for disposal because of lack of alternative. According to DPCC reports, more than 8000 tonnes of MSW reach these landfills every day, even if they are not even allowed to be operational. Conversion of plastic into RDF will help addressing this problem. (ii) Decline in use of Pet Coke: The major part of energy requirements in cement industry is sourced from pet coke; for some, it is 100%. Most is imported from the USA. Tests by EPCA on imported pet coke revealed that they contain 17 times more sulphur than coal. Some finds it akin to export of pollution to India from the USA. Its low cost owes to discontinuation of its use by USA refineries. In fact, even the Government of India banned use of pet coke as a fuel. However, the ban was not implemented on cement industry still. As and when it does, cement industry will have search for economical alternatives: RDF can be one such. The cess makes coal an unfavourable option (Jethmalani 2017). (iii) Technical advantages of using RDF: Two facts—namely, lesser emissions compared to coal and higher yields of chlorinated organic—make RDF an important component in meeting the global climate change commitments. In fact, co-firing (combining) RDF with coal can make it a more efficient fuel with higher yields, as well as a cleaner fuel with lower emission (Raghunathan and Bruce 1997). Some studies suggest that if RDF is used as fuel, emissions are definitely lower for up to 30% use of RDF, and above that it is ambiguous (Asamany et al. 2017). But, in Delhi NCR, the use of RDF is less than 2%. The current societal costs are as follows: (i.) It is estimated that the health cost of Delhi is close to 3% of the GDP (World Bank 2016). A significant part of emissions is due to burning of plastic.

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(ii.) Daily cost of waste disposal is more than INR 100 lakh, even if conservative estimates are taken. INR 40 lakh is spent per day on the transportation of waste in Delhi alone and INR 1800 per tonne is paid to contractors for disposal in the landfill. (iii.) INR 1514 crore has been spent by the Delhi government in 18 years to clean the Yamuna as reported by Mahapatra (2012).

13.4.2 Fly-Ash Used in Manufacturing Cement (Scenario 2) Fly-ash is a by-product from burning coal in thermal power plants. Its disposal on land and water has serious environmental consequences in terms of PM. Recognising its reutilisation potential, the Fly Ash Mission was started in 1994, jointly by Ministries of Power and Environment & Forests. Its use has been promoted for the manufacturing of ash bricks, building material, pavement construction, and road embankments, among others. Acceptability has been one challenge: it was reported that contractors find raakh (fly-ash) not good enough for road construction. Even the presence of NTPC professionals at the construction sites was of limited help. This problem of acceptability does not exist at the cement industry since the Bureau of Indian Standards (BIS) certifying that use of fly-ash up to 35% is desirable. In fact it provides the cement improved resistance from sea water and sulphate soil. There are a variety of uses in the cement industry (NTPC 2007): 1. Fly-ash can be mixed with cement clinker to improve the performance of Ordinary Portland Cement and manufacturing Portland Pozzolana Cement. 2. Fly-ash can be used instead of cement up to 35% in concrete. However, the replacement percentage can be as “high” as up to 60% in high-volume fly ash concrete. The percentage is dependent on expected compressive strength, modulus of elasticity and tensile strength. Fly-ash was available free of cost till 2004 and only transportation was to be paid for by the cement industry. However, later coal-fired power plants started charging INR 500–700 per metric tonne (MT). Alongwith transportation, the cost becomes INR 1000–1500 per MT, depending on the location of the grinding unit. Yet, all flyash cannot be re-used as it is. Coal-fired power plants usually has a variety of ash (NTPC 2007): (a) Fly-ash, a fine material possessing desirable pozzolanic (cement grade) properties; and (b) Bottom ash—collected at the bottom of the furnace—is relatively coarser and possesses little reactive ability. To make it ‘fit for use’ in cement production, fly-ash has to be treated chemically, thermally or mechanically to enhance its reactivity. This involves extra costs. Yet, even thousands of tonnes of fly-ash remain unused in the country (Table 13.3). Even this non-use has social costs, in terms of augmenting PM, and costs of storing— as pond ash or mound ash—including but not limited to occupying space (NTPC 2019).

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Table 13.3 Fly-ash availability in India Region Delhi and NCR Other Total in India

Stock of bottom ash (metric tonne) – 9,38,328 9,38,328

Fly-ash available (metric tonne) 18,500 42,014 60,514

Source: Created by authors using Data from NTPC (2019)

It appears that cost of pre-processing and transportation is perceived to be high by the cement industry—notwithstanding the technical feasibility—and is considered to be economically unviable. In short, this is a classic case of market failure. Ordinarily, the market should have discovered a price where fly-ash could be sold. Next, we will explore the nature of State intervention to ‘correct’ this failure. To answer this question, the opportunity cost of business as usual (unutilised fly-ash) has been listed below: 1. Fly-ash ponds/mounds occupy large agricultural land. In the Badarpur power plant, it is about 2200 acres, which is more than 70% of the total power plant area (Verma 2018). Opportunity cost in terms of agriculture use has been estimated to be an income of INR 10,000 to 40,000 per acre of land (per cropping cycle), depending on the type of cultivation, soil and other such factors. Back-of-theenvelope estimate reports an income of INR 20–60 crore per year in total. In fact, this is an underestimation because the Haryana government has set a target of income at INR 1 lakh per acre of land, which is more than twice of this estimate (Jayan 2018). 2. Coal fly-ash is a known source of anthropogenic PM globally. It has been established that sustained exposure to ambient PM is a cause of mortality. A study by IIT Kanpur has revealed that fly-ash is one of the major contributors to PM pollution in Delhi: it contributes to almost 40% of PM2.5 and more than 25% of PM10. This has also been reiterated by others (Singh 2011; Sharma and Dikshit 2016). The health cost of this PM is high (particularly PM2.5). It has been estimated that residents of Delhi lose 10 years of their lives due to air pollution (Greenstone and Fan 2018; Ghazali and Kaushal 2015). The economic cost of air pollution—and not PM per se—in Delhi has been assessed at about 3% of its GDP (about INR 2 lakh crore) in 2018 by World Bank. 3. More than 80% of the raw materials in cement comprises of ‘scarce’ limestone. Though it is a ‘critical’ raw material, reserves are expected to last only 25– 30 years more. Moreover, only ‘cement grade’ limestone can be used. Even all such available limestone cannot be used due to infrastructural barriers, restrictions due to law, and higher costs (Bapat 2018). Clearly, use of fly-ash can help conserving this resource. In fact, this can reduce pollution as well: life cycle analysis of limestone shows that 1 tonne of crushed limestone results in emission of 3.13 kg of CO2 per tonne. Limestone quarrying has been identified as “contributors to climate change” (Kittipongvises 2017).

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4. The Badarpur power plant was shut down in 2018 because it contributed to 11% of Delhi’s PM2.5. Re-use of fly-ash in cement production and consequently, the landscaping of 2000 acres of fly-ash pond may enable this plant to function (Verma 2018)—this shows the importance of ‘circular economy’. Clearly, there are many market failures, warranting intervene by the State, say, by providing subsidy towards purchase of fly-ash. Alternatively, if cement plants find it economically viable to use fly-ash, then State may ensure ‘matchmaking’, facilitating the ‘waste exchange’, even by providing a nominal discount to some taxes.

13.4.3 Using Briquettes Made by Crop Residue as Fuel for the Burner (Scenario 3) Emissions from crop residue burning in the states of Punjab, Haryana and western Uttar Pradesh contribute to regional pollution. This even affects parts of Bihar and West Bengal depending on wind patterns (Sharma 2018). An annual economic loss of USD 30 billion from stubble burning caused air pollution in India was estimated (Jitendra 2019). Many schemes including subsidised machinery to encourage in-situ management of crop residue have been announced by both state governments and Government of India (Ministry of Agriculture & Farmers Welfare 2019; Mohan 2018). However, the implementation is still a challenge, notwithstanding grounds-up interventions like involving panchayats to encourage farmers and even announcement of ‘rewards’ (Hindustan Times 2022). Certainly, behavioural changes are rather hard to achieve, especially those involving additional costs—either as rent or purchase price for the machinery besides the fuel costs. An alternative is conversion of crop residue into briquettes—known as briquetting—which may be used in the cement industry as fuel. Briquetting can yield a cheaper and cleaner fuel, in addition to solving the menace of residue disposal (Quartey 2011; Bilgin et al. 2015). Crop residue briquettes have also been called the new source of renewable energy which can displace the use of coal in the energy mix (Gondwe et al. 2017). There is indeed a business case for briquetting as estimates from Jain and Yadav (2019) and Datta (2019) show. A briquetting company in Kampala, Uganda recorded a rate of return of 7%. 100 full-time workers (70% were women) and 400 labourers produced 1680 tonnes of briquettes per year with an initial capital investment of 698,964 USD (equivalent to about INR 4 crore). In addition to return to the company, savings of 6.1 tonnes of CO2 per tonne of briquettes as well as additional income to farmers of about 15 USD (INR 900) per tonne (received on selling the crop residue) was recorded by IWMI (2012).

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Clearly, this ‘model’ requires focussing on regions with surplus crop residue. An investment of INR 1–3 crore can yield 1000–2000 tonnes of briquettes, per year, per plant. With two plausible revenue streams—sell of briquettes and carbon credits (Anand 2018)—and low gestation period it can be a profitable opportunity for private players. Hypothetical studies in India show a clear possibility, but commercial applications are rare. In fact, societal benefits are significant, which we list next. 1. Jayan (2019) cited a study published in the International Journal of Epidemiology that estimated costs from respiratory diseases caused due to exposure to stubble burning as INR 2 lakh crore every year for Punjab, Delhi and Haryana. Another study in Nature was quoted as well which argued that about 60% of Delhi’s air pollution in winter is due to stubble burning in the neighbouring states. This cost is saved in case crop residue burning can be controlled—briquetting model provides an economically viable opportunity. 2. In this model, farmers receive twofold benefits—from saving the costs of disposing residues and selling them. To be owners of briquetting plants, this is a profitable opportunity, as the calculations show. In fact, studies have estimated that the price of briquettes as fuel is comparable to the price of pet coke— indicating that cement players will not be disincentivised to buy briquettes. In case the use of pet coke is banned, like RDF, briquettes can be an option to ensure continuous supply of fuel to the cement plant. Of course, it is also a cleaner fuel with emissions lesser than fossil fuels. All these will lead to additional employment opportunities. Again, realising the potential of scenario 3 requires interventions by the State, in the form of ‘matchmaking’.

13.5 Summary and Conclusions The three exchanges illustrated in 13.4 have been proved to be technically feasible, backed by research and established by example. To summarise: plastic as RDF contributes to less than 2% of energy needs for cement plants which can be increased; fly-ash from thermal power plants is already in use but there is potential to aim at increasing it; briquettes from crop residue are a promising fuel source. In each, there are significant social benefits. The problem per se is unavailability of an ecologically benign input—preprocessed plastic for use as RDF/fly-ash in desired form/briquettes—at the required scale. At times it could be due to price differences quoted by buyers and sellers and at others it is simply lack of coordination. It follows that the nature and type of intervention by the State will vary: it will be match-making between potential participating units at times and at another it will be subsidisation or lower tax rates. State intervention towards application of IE principles is not a new concept (Costa et al. 2010). It is expected to address technical, behavioural, economic

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and even informational barriers that thwart implementation of these principles. In fact, these roles of the State have been recognised in the evolution of industrial ecology (Zheng et al. 2013). In particular, its role towards intra- and inter-industry coordination has been the key. Collaborations can be encouraged either directly by regulation (such as mandating the use of fly-ash in cement industries), or indirectly through economic incentives (such as subsidised buying of fly-ash by cement industries). There are ample examples in this regard. The German government mandated automakers to take back and recycle the automobiles they produce. Following this, the automakers encouraged material suppliers to accept recovered metal from dismantled cars and used those recovered materials in new car parts and ‘closed the loop’ in the process. In another instance, a substantial carbon tax on fuel was shown to dramatically impact the product cycle of such fuels. Regulatory frameworks played a key role in the USA in promoting energy-efficient equipment instead of constructing new plants to generate energy. Even the Kalundborg Eco-Industrial Park—the most quoted example in discussions on IE—has its roots in government intervention. Symbiosis Centre in Kalundborg (2013) in a publication marking 40th anniversary of ‘The Kalundborg Symbiosis’ (Ditlevsen 2014) listed many roles that the State had played through its various arms. For example, municipality of Kalundborg helped participating units to engage in dialogues, acted as a matchmaker forming collaborations and facilitating trust building between (private) participating units, securing knowledge sharing by adding credibility besides extending loans to build infrastructure such as pipelines for exchange of by-products. All these points to roles that high or low transaction costs can play in markets to achieve socially efficient outcomes, as pointed out by Ronald Coase. Interventions by the State are necessary to minimise them. .

∼∼∼

This chapter focussed on the cement industries, and included only three possibilities. Clearly, more such technically viable exchanges within the cement industry can be explored, such as use of paper sludge, slag, scrap tires, biomass as fuel and even animal and bone waste products. Scope can be further increased to include other industries such as oil refineries. Being in this anthropocentric era, a paradigm shift is required such that the industry and the environment can move towards a ‘balance’. This shift requires re-thinking systems, change in values and the functioning of the economy. If sustainable development is to be achieved, then a systems approach is necessary, which will remain elusive unless concrete steps are taken. Some steps mentioned in this chapter may provide grounds for implementation of IE at higher levels. These steps, once implemented, will gradually evolve IE toward solutions to industryenvironment ‘frictions’. In fact, IE principles can be useful towards construction of the frameworks where industry can serve as a catalyst towards achieving ecolog-

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ically sustainable, socially just and economically viable development processes and outcomes.

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Chapter 14

Challenges and Recommendations for a Green Circular Economy Lledó Castellet-Viciano, Águeda Bellver-Domingo, Vicent Hernández-Chover, and Francesc Hernández-Sancho

Abstract The economic model that governs our society is linear and unidirectional, in which natural resources are extracted from the environment, to later be used as raw material for various products that will be consumed and finally discarded. The premise of this model based on “extract-produce-use-dispose” was that resources are abundant, easily accessible, and their management as waste is very economical. However, it has been observed that the dynamics of this system is unsustainable or unfeasible in the distant term both due to the limited lifetime of the goods, and due to the great demand for resources that in many cases are scarce and the pollution generated by the immense amount of waste generated. However, the shift from the conventional model to a new circular economy model requires to overcome different obstacles at social, political, economic, and legislative levels, among others. To this end, we need to define the main challenges that will let us to achieve a more sustainable model. Keywords Sustainability · Circular economy · Transformation · Strategies · Innovation · Digitalisation

14.1 Introduction 14.1.1 The Current Situation of Natural Resources and the Environment The current world is managed by a linear take-make-use-dispose economy model that is collapsing the environment. The origins of this economic system date back

L. Castellet-Viciano () · Á. Bellver-Domingo · V. Hernández-Chover · F. Hernández-Sancho Inter-University Institute for Local Development (IILD-WATER), Water Economics Group, University of Valencia, Valencia, Spain e-mail: [email protected]; [email protected]; [email protected]; [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 P. Singh et al. (eds.), Green Circular Economy, Circular Economy and Sustainability, https://doi.org/10.1007/978-3-031-40304-0_14

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to the mid-eighteenth and early nineteenth centuries in Great Britain with the industrialisation of production processes that mechanised lots of manufacturing processes giving rise to serial and mass production of products. This phenomenon, accompanied by the Industrial Revolution and capitalism, gives as a result an economic model based on industrial activity and the current consumer society. The development of this economic model, which brought considerable welfare to our society, has paradoxically, caused an irreversible environmental impact. The industrialisation not only accelerated the production of products but also eased the access to natural resources, which linked to the population growth, and led to an exploitation rate of natural resources that exceeds their replenishment or recovery capacity. Currently, the production and consumption model is linear and unidirectional. This model puts the emphasis on the provision of the society commodities without paying attention to the quantity of hazardous materials generated throughout the life cycle of the goods and services (manufacture, use and disposal). Moreover, this linear model has a direct impact on the long-term availability of resources, the efficiency of production systems and economic growth. Recently, it has been observed how resource scarcity affects economic and social development. Many companies have now begun to notice that this linear economic system jeopardises the supply of raw materials and increases resource prices. With the expected population growth and the current pattern of production and consumption, it is likely that prices and volatility will remain high, that resource extraction will move to places more difficult to access, and that the environmental damages caused by the exhaustion of natural assets will increase. Considering both the situation of natural resources and the expiry of the linear production model, Circular Economy becomes a novel and optimal alternative for the development of the new production model.

14.1.2 The Concept of the Circular Economy Circular Economy (CE) has gained momentum in the last years in view of the high demand for natural resources in the current linear economic model. Although the popularity of the concept, there is no accepted uniform description for it (Kirchherr et al. 2017a). The origin of this concept is rooted in the movement that emerged in the 1960s on the biophysical limits of the economic system that was threatening the environment as a consequence of the indiscriminate use of raw materials by the industrial sector. Boulding (1966) suggested that the only way to ensure that natural resources were not exhausted was by creating a closed economic cycle in which the waste generated was recycled and reintroduced back into the system, thus maintaining the stock of limited resources. However, the first time the term circular economy was formally used was in 1990 by the economist Pearce and Turner (1990), who introduced a new economic model based on the principle of “everything is an input to everything else”.

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In parallel, as it gradually became clear that industries were having a negative impact in terms of both the excessive use of natural resources and the use and generation of toxic substances, the new concept of “sustainable development” emerged. The first time this concept appeared was in the Bruntland Report in 1987, which aims to “meet the needs of the present generation without compromising the chances of future generations to meet their own needs”. Similar to the concept of Circular Economy, neither is there a concrete definition of sustainable development. It is a concept that has often been considered ambiguous and too unspecific to be implemented. For this reason, the definition has evolved over time (Fig. 14.1). The definition of sustainability and specifically Sustainable Development refers to economic, social and environmental sustainability, and the relationship between the three spheres. How the relationship between the three basic pillars of Sustainable Development is understood is what has evolved over time. Initially, it was understood that the three spheres were interconnected in some way and each of them was dependent on the other. Later, Mebratu (1998) showed that this relationship follows an order, so that economic sustainability depends on social sustainability, and social sustainability in turn depends on environmental sustainability, connecting the three spheres again. But more recently, the relationship

Fig. 14.1 Evolution of the concepts “Sustainable Development” and “Circular Economy”. (Source: adapted from Prieto-Sandoval et al. 2017)

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Mining/materials manufacturing

Farming/collection1 Biological nutrients Biochemical feedstock

Restoration Biosphere

Product manufacturer

Service provider

Biogas

Cascades Anaerobic digestion/ composting Extraction of biochemical feedstock2

Technical nutrients

Parts manufactor

Recycle Refurbish/ remanufactor Reuse/redistribute Maintenance

Collection

Collection

Energy recovery Leakage tobe minimised Landfill

Fig. 14.2 Restoration of biological and technological nutrients (circular economy model). (Source: Ellen McArthru Foundation 2013)

between economy, society and environment has been joined by a third variable, time, as actions taken to achieve a balance between economic, social and environmental development can have an impact in the short, medium or long term (Prieto-Sandoval et al. 2017; Lozano 2008). Both the circular economy and sustainable development have gained prominence up to the present day. And given the principles and purpose of both concepts they are often presented together. In fact, some authors understand the circular economy as the practical guide to achieve the principles of Sustainable Development (Murray et al. 2017; Ghisellini et al. 2016). Among all the definitions that have been assigned to the term Circular Economy, perhaps the most commonly used is the one drawn up by the Ellen Mac Arthur Foundation Circular Economy Team (Kirchherr et al. 2017b), in which the circular economy is presented in a butterfly diagram reflecting the production and consumption system in which different materials and biological and technological products are recirculated in the economic system in order to extend the useful life of products, reduce the amount of resources extracted from the environment and minimise the generation of waste throughout all production processes (Fig. 14.2). In the 1970s the main strategies associated with the circular economy were based on “Reduce, Reuse and Recycling” and became known as the 3R’s, a concept that

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Table 14.1 Circular economy strategies Strategy More efficient use and production of goods and services

R0 refuse

R1 rethink

R2 reduce

Prolonging the service life of the products and their components

R3 re-use R4 repair R5 refurbish R6 remanufacture

R7 repurpose

Effective use of materials

R8 recycle R9 recover

Description Rendering the product unnecessary, either because it is no longer useful or by replacing it with a different product that does the same function. Intensify the use of products by cross-sharing actions or using cross-purpose products. More efficient fabrication and use of products and services using fewer natural resources and materials. Reuse of a rejected product that can still be used by a different user. Restoring a product (by maintaining or repairing) to return its functionality. Upgrading an old product. Build a new product, using parts of a discarded product. The resulting product has the same function than the one discarded. Build a new product, using parts of a discarded product. The resulting product has a different function than the one discarded. Processing of materials to be used again. Energy production through incineration of materials.

Source: Potting et al. (2017)

gained increasing importance alongside environmental movements in Europe and the USA. In recent years, the principles and strategies being developed to implement a circular economy have broadened to cover a wide range of possible strategies. Firstly, as a result of the publication of the Waste EU Directive 2008/98/EC, on waste and repealing certain Directives, the 3R’s were enlarged to 4R’s with the introduction of the concept “Reduction”, that refers to the need of reducing the generation of waste. Subsequently, the number of strategies was expanded to six, giving rise to the 6R – Reuse, Recycle, Redesign, Remanufacture, Reduce and Recover (Sihvonen and Ritola 2015). One of the most recent updates on the number of strategies encompassed by the circular economy is the 9Rs (Potting et al. 2017; Kirchherr et al. 2017b) (Table 14.1). From a purely economic point of view, circular economy can be considered as a business model which companies can use and take advantage of its opportunities. In this context, the circular economy business model can be approached from five different perspectives, which have their own distinct characteristics and can be used individually or combined (Lacy et al. 2014):

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1. Circular Supplies: This approach is premised on the provision of 100% renewable, recyclable or biodegradable materials. This model replaces the linear production model, reducing or eliminating the consumption of raw materials that are often scarce and unlimited, minimising waste production and improving process efficiency. 2. Resource recovery: waste recovery and processing by using up-to-date recycling solutions to be used as raw materials in other processes promotes return chains and recover the implicit value of the final product lifetime. 3. Product life extension: through this business model, which includes actions such as repair, upgrade and resale of products, the service life of products can be extended, while reducing the quantity of residues produced and the usage of resources. By repairing or upgrading the product, the company can generate additional revenue by incorporating new qualities to the product that can offer new services. It can also extend the useful life of the products economically since it delays the replacement or substitution of the product with a new one. 4. Sharing platforms: this particular approach encourages a collaborative environment between people using the product, whether they are individuals or organisations enabling and facilitating the access to recovered products in order to increase the utilisation rate. Besides, the maximisation of the utilisation of products and subproducts this model increases the productivity and creates user value. 5. Product as a service: in this business formula another option to the conventional market structure of “buy and own” is offered. With this purpose the products are shared by different products via a rental or pay-for-use agreement. This approach encourages both long-lasting performance and the ability to upgrade in reverse, moving from mass production to efficiency. This business model can be very attractive for companies whose product is expensive due to the technology used and the costs of operation and maintenance, but if the technology is shared by different users, the maintenance costs can be shared and reduced, while at the same time generating revenue from the leasing of the use of the technology. Therefore, circular economy can be understood as an economic and industrial system that implies a circular flow of materials and waste, seeking the reuse of different waste streams generated throughout the entire production system. In this circular model waste streams are used to create value ensuring the access to raw materials while restoring the capacity of natural resources. Thanks to that, the production processes and ultimately the economic growth do not rely on the stock of natural resources and reduces the pressure on them. Moreover, the elimination of the dependency between the availability of natural resources and the production processes permits to reduce the risk of raw materials shortages, ensuring the economic development. Nevertheless, to achieve this purpose and transform the linear model into a circular one the best available technologies, as well as innovation to maximise the efficiency of production processes is needed. In fact, some authors believe that circular economy could be a solution to break the link between the socio-economic growth and the environmental deterioration (Ghisellini et al. 2016).

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14.1.3 Guaranteeing a Sustainable Use of Resources A more efficient and sustainable resource management requires a joint reaction from society, from the perspective of citizens, the different economic and political sectors, with measures at all levels: local, regional, national and even global. In order to promote a more efficient and sustainable management of resources, it is necessary to change the current pattern of production and consumption. Thus, a more efficient production process implies not only reducing the volume of resources used directly in processes, but also all raw materials involved in them. In addition to reducing the consumption of inputs, it is necessary to minimise the waste generated throughout the production system and to use renewable energy sources, which will allow us to move towards a much more efficient and sustainable production system. As far as the consumption system is concerned, it must be responsible, prioritising those products that have a smaller water and energy footprint. However, in order to guarantee the efficiency and sustainability of any resource, we must bear in mind how necessary it is to preserve and conserve natural capital, which is why the restoration of all those ecosystems and ecosystem services that have deteriorated becomes a priority, as well as halting the loss of habitats that are in danger. Changes in the system of production and consumption and favouring the protection and conservation of ecosystems must be supported by a series of financial mechanisms that include the valuation of natural resources, integrating them into decision-making, as well as the internalisation of the “polluter pays” principle. The polluter pays principle is one of the cross-cutting guiding principles of environmental policies in the European Union, which aims to establish a framework of environmental liability through which the agent causing environmental or social damage is held responsible for it and bears all the costs associated with the measures necessary to repair or prevent and control the mishap. But in addition to penalising instruments such as the above, economic instruments should be used to support and reward projects that guarantee the conservation and sustainable management of resources. And finally, if we take into account the globalised world in which we live, this improvement in the efficiency and sustainability of resources can only be achieved by promoting an equitable distribution of resources, in which the available resources must be shared and by making fair and joint decisions that take into account not only economic aspects, but also ecological values, which implies complementing GDP with other types of indicators to measure the level of wealth of a country. It should be highlighted the role that the European Union (EU) has played on showing the need of guaranteeing a supply of resources and an efficient use of them to ensure the prosperity of business and economies. In the last decade, the European Union has been driving governments and businesses around the world to implement strategies based on the circular economy model. As a result, the European Commission has been working for several years on the development of plans, packages and proposals aimed at transforming the current linear economic model into a circular one. The first step of the transition towards a circular economy

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model by the European Union began in 2014 with the communication ‘Towards a circular economy: a zero waste program for Europe’ in order to reduce the waste generated. This publication was followed by ‘Action Plan for a circular economy in Europe’ published in 2015 in which the European Commission proposes a series of measures that go beyond the reduction of waste and affect all stages of the products lifecycle. In 2018, the ‘Circular Economy Legislative Package’ was presented, highlighting the ‘European Strategy for Plastic in a Circular Economy’ and the ‘Sustainability Strategy for Chemical Substances’. In order to generalise the implementation of the circular economy, recently, in 2020, the ‘New Circular Economy Action Plan for a cleaner and more competitive Europe’ was published, which is a key element in the European Green Deal (European Green Deal), Europe’s new program for sustainable growth. Only in this way, we could ensure the integrity of ecosystems, the conservation of biodiversity and guarantee food, water and energy security.

14.2 Obstacle and Enablers of Circular Economy Currently, there is sufficient information about the condition of resources and how they will be affected if we do not act, and there is also enough information about what we need to do to change the situation. However, there are several barriers that are holding back the progress towards a circular economy model that guarantees the sustainability of the system. Some studies differentiate between barriers to circular economy and drivers of circular economy. Nevertheless, the authors of this chapter will introduce them together since the limitations to circular economy become the areas with a greater potential of improvement. There is a wide range of research that focus on the analysis of this topic and mention a wide range of barriers/drivers to achieve a circular economy model, but ultimately, they can be grouped into the following four areas: (i) Social/cultural; (ii) Technological; (iii) Financial, and (iv) Political. De Jesus and Mendonça (2018), through a literature review of numerous articles, not only analyse and define the main factors that affect the circular economy but also rank them according to their relevance for achieving the circular economy. For this purpose, they use a hard-soft dichotomy system. Below we present a schematic approach of the influence of these factors and their relevance to the circular economy (Fig. 14.3).

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Fig. 14.3 Impact of the most relevant factors to enhance circular economy. (Source: adapted from de Jesus and Mendonça 2018)

14.2.1 Description of the Main Factors to Enhance a Circular Economy Model 14.2.1.1

Technological

In order to make the transition to a circular economy, a number of technological developments are required to enable the circularity of products and materials. Some authors qualify technological development as a basic requirement for implementing the circular economy (Shahbazi et al. 2016). Kirchherr et al. (2018) found design as a major impediment to the circular economy transition. In order to extend the useful life of products, it is necessary to know their limitations and those of the materials that constitute them in order to improve their quality and durability, whether from a design or process point of view. Furthermore, the recovery, recycling and valorisation of materials require techniques that facilitate and speed up the process. Today, waste separation efforts are constrained, resulting in difficulties in ensuring high-quality of recycled products, which leads to another problem, the unreliability of supply of recycled goods, in quantity and quality, which causes many producers to prefer virgin material. Currently, when products or materials are recycled, they are often of lower quality, and if they are of adequate quality, there is a lack of information to prove it, which generates mistrust on the part of consumers, who are not willing to buy what is recycled (Grafström and Aasma 2021). It is necessary to have techniques capable of effectively separating the materials and products to be recovered in order to maximise material recovery. Once materials have been recovered, they must be reintroduced into the cycle through reuse or recycling, which also depends on technical aspects. It is necessary to know where or in which sectors the materials can be reused and the required quality criteria. In this respect, information and communication technologies play a key role.

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Economic and Financial

To enhance the circular economy, it is essential to create or modify the functioning of the current market in order to finance circular economy business models and to amortise the high initial investment costs of the actions (Grafström and Aasma 2021). It is necessary to create a market for reused, recycled or recovered products, which have little or no economic value, and this is something that needs to be changed. However, for this market to be successful and to boost the demand for these products, the creation of the market should be accompanied by a system that certifies the quality of the products, giving customers more confidence and security (Mhatre et al. 2021; Ghisellini et al. 2016). Another aspect that also needs to be addressed is the supply of products in quantity. Currently, the quantity of a product recovered for reuse may not meet consumer demand, and in turn, this is also a problem for companies trying to recover a subproduct in their processes, since the implementation of a recovery process may entail a high cost in relation to the amount of by-product obtained. In addition to this, raw materials often have a very low price compared to reused materials or products, which does not allow these products to be competitive (Kirchherr et al. 2018). Currently, low raw material prices are acting as a disincentive for the consumption of recycled or reused products and impede the move towards a circular economy model. According to Masi et al. (2018), one of the main problems hindering the move towards the circular economy is the lack of investment to implement the necessary technologies to maximise material recovery and management. There is currently a lot of uncertainty about the demand and value of recycled products, so the willingness to invest in markets for recycled materials is very low. It should be kept in mind that any change involving technological development requires heavy investment that needs to be addressed together with other economic instruments to amortise these costs (Grafström and Aasma 2021). For instance, the incorporation of environmental externalities into products that use raw materials from limited natural resources can increase the price of raw materials and the products that use them. In this way, recycled or reused products could be more competitive in the market. At the same time, the current market is marked by relationships and contracts that are deeply rooted in the linear production system, so it is necessary to be open to new relationships and contracts.

14.2.1.3

Regulation and Policies

The integration of world economies (globalisation) has had a major impact on policies, instruments and investment decisions in cities, reducing the number of actors involved in resource management, and making them increasingly dependent on private operators. This situation sometimes limits or hinders the implementation or market entry of new products, generally non-conventional resources such as

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reclaimed water or energy from alternative sources to traditional ones. In order to implement more sustainable strategies such as those promoted in circular economy models, an economic, political and technological restructuring is necessary. But this change cannot be supported by current policy, which is highly influenced by the market and governed by short-term profits. It should be taken into account that policy and regulation can influence both producer and consumer behaviour by creating instruments that promote and incentivise the repair and reuse or recycling of products or the promotion of a collaborative economy. At the production level, certain political actions such as economic incentives can promote the development of innovative alternatives to improve the efficiency of processes (Ili´c and Nikoli´c 2016), or on the contrary, inefficient production processes can be economically penalised through charges (Zhu et al. 2015), both situations would promote efficient and clean production. At the European Union level, work is being carried out on the development of regulations with the aim of carrying out integrated and joint management of resources. However, for the established guidelines to take effect, they must be adapted to the national legislation of the different countries, which in turn must be transferred to regional and/or local regulations, taking into account the different administrations. In such a way that a regulation that claims to be integrative at all levels becomes a cross-sectoral regulation that does not allow for crosssectoral management of resources. However, the integration of some regulations is not always easy due to the fact that the management of the different resources is usually very fragmented and divided between different administrations with different competences over the same resource, making its management and the implementation of reuse, recycling and waste recovery actions extremely difficult.

14.2.1.4

Social/Cultural

A large proportion of the existing research about circular economy is related to the production chain, the sustainability of the production system, resource efficiency, and strategies to achieve the circular economy pointing out the main barriers and drivers of change towards a circular economy model... but there are very few studies that focus on the impact that circular economy will have on consumers, and how they will have to adapt to this change (Camacho-Otero et al. 2018). There are certain cultural values, norms, and social practices deeply rooted in people’s lifestyles that are difficult to replace or change. The throwaway culture that promotes high demand for of resources and the accumulation of hazardous substances is widespread today. In fact, lots of studies (Williams 2019; Kirchherr et al. 2017b) agree with social barriers being a significant obstacle to keep the products in the economic system for longer and closing the cycle of products and materials. To overcome this situation, it is crucial to appeal to consumers responsibility to promote the commercialisation of sustainable products. With this aim, more supportive measures are needed (Tan et al. 2022). For instance, the use of a labelling system that provides specific information about the sustainability of the products could help governments to gain society

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commitment and confidence (Mhatre et al. 2021; Ghisellini et al. 2016). According to Hobson and Lynch (2016), one of the main changes that today’s society needs to make is to abandon the belief that the ownership and newness of products is of greater value, and instead give priority to actions based on repair and the use of second-hand products. Generally, urban infrastructures and their layout are very inflexible, making it difficult to implement urban structures that allow for the circular management of resources. However, this inflexibility is mitigated when, unfortunately, the environment in which cities are located presents a certain level of degradation or environmental problems, such as poor air quality as a result of emissions, scarcity of water resources, soil pollution... In this situation, there is a greater predisposition of the society to implement or accept measures based on the circular economy that guarantee the sustainability of resources. One reason behind this social resistance to change is the little awareness of the circular economy, its benefits, the processes involved, etc. Information is the motor for change, so it is necessary to provide citizens with all the knowledge on the current conditions of resources and the need for change in order to raise awareness about a more conscious use of products and natural resources. Moreover, as a consequence of globalisation, citizens are not aware of the great negative impact that this consumption model generates, as these are generally produced in geographical locations other than the place where the product is consumed.

14.2.2 Synergies Among Factors to Scale Up Circular Economies Unlike de Jesus and Mendoça (2018), when it comes to measuring the impact that some factors have on circular economy, Kirchherr et al. (2017b) go a step further and define the pressure of some initiatives within four main groups of circular economy factors. This is because the impact of the initiatives that belong to the same group of factors could be different. It should be noticed that Kirchherr et al. (2017b) address the limitations of the circular model development, but this could be applied for both barriers and drivers (Fig. 14.4). This is a very interesting approach to initiate actions towards a circular economy model. In order to move quickly and efficiently towards a circular economic model, it is necessary to understand the relevance and scope of each of the proposed actions and to act in parallel at different levels (de Jesus et al. 2018; Kirchherr et al. 2017b; Ghisellini et al. 2016): (i) Micro level, the implementation of the circular economy focuses on individual actors, or companies, where the development or improvement of a product, production process or business model is aimed at, as well as organisational changes within the company itself in order to enhance the reuse and recycling of waste, and the improvement of the efficiency of the process.

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Fig. 14.4 Pressure of the main barriers. (Source: Kirchherr et al. 2017b)

(ii) Meso level, the development of the circular economy takes place through the interaction of different actors, a network of companies or industries, and regional policies. In order to move towards a circular economy model, it is necessary to establish new relationships that enable collaboration between different companies and facilitate the exchange and sharing of products or infrastructures to ease the closing of the products cycle. (iii) Macro level, the implementation of the circular economy is carried out on a larger scale such as national, European or global and it usually involves aspects related to legislation. The effect of actions implemented at the company level has a limited effect if relationships and collaborations between different companies and sectors are not fostered. Furthermore, all such actions need to be supported by institutions and policymakers. For example, in order to facilitate collaborative relationships between different companies and sectors and the flow of recovered or reused materials and products, legislation needs to be changed, which in many cases is very rigid in this respect and acts as a barrier to the implementation of the circular economy. Moreover, the factors are not isolated one from the other, i.e., there are synergies, so that a specific initiative, such as the implementation of digital technologies to facilitate the separation and recycling of materials within the framework of technological development, can be advantageous from a social point of view to spread a message to society about the amount of a certain material generated, its possibilities of use in another product and the environmental benefit it generates. In this way, a technological implementation can be a key to the process of material recovery and reuse and also to overcome some social obstacles. At the same time, a change in the market, in which the price of raw materials and reused products increases, can favour the consumption of the latter, favouring the acceptance of

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this type of products by society. Therefore, in order to make the transition to the circular economy effective, initiatives that have a positive effect on others should be prioritised to achieve a greater impact. Moreover, it should be taken into account that to implement a circular model, it is not enough to take action on only one factor, but it is necessary to work simultaneously on all of them so that the efforts have a greater and accumulative impact.

14.3 Cutting-Edge Practices to Enhance Circular Economy 14.3.1 Innovation Innovation is a key factor behind the emergence of novel circular businesses and constitutes one of the basic elements to close the life cycle of materials and products, increasing their useful life and reintroducing them into the economic system. According to de Jesus et al. (2018) innovation is not only linked to the technical sophistication of products or materials, but also has to do with adaptation to the context of their use, including economic, social and/or environmental aspects. Some authors when talking about innovation in the framework of the circular economy refer to it as eco-innovation (Prieto-Sandoval et al. 2018; de Jesus et al. 2018). The term eco-innovation refers to any novelty or advance in terms of production, application or commercialisation of a commodity from which a company or user benefits, the purpose of which is to reduce the environmental impact generated by other alternatives, so that social and/or environmental needs become the driving force behind such innovation (Prieto-Sandoval et al. 2018; Cohen and Muñoz 2016; Hofstra and Huisingh 2014). Furthermore, according to the OECD, eco-innovation is a tool that can make a product or service more competitive by reducing negative effects on the environment or society, thus it is also an enabler of sustainable development. Innovation can take place at any stage of the production and consumption system. The publications reviewed by Prieto-Sandoval et al. (2018) identify several innovative ways to implement the circular principles: • Business model innovations, concerning on how organisations or enterprises build and extract added value. • Network innovations, resulting from symbiotic collaboration among several enterprises. • Novelties in terms of organisational structure in which innovative organisational and management practices are developed to back up green policies. • Process innovations, relating to changes in how companies manufacture their goods or offer services. • Product innovations, that is connected to the quality and functionality of products.

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• Service innovations that are introduced in the context of circular economy aim to expand the lifetime of products through a decrease in their ownership; in other words, the same product can be used by different users many times, through renting or sharing actions. Consequently, it has an impact on the service infrastructure. • Market innovations, generated through the experiences shared by clients, the values of the brand and their product positioning. • Customer engagement innovations, focussed on addressing the satisfactionof the clients. One of the ways to analyse the relationship and opportunities of innovation and the circular economy is by disaggregating the circular economy by levels. When we talk about innovation at the micro level, it is usually linked to the product, the process or a new business model. At the product or service level, an improvement in design, quality and durability results in a more sustainable product. When innovation is applied to the process, it is generally to increase the efficiency of the process in terms of resources used and waste generated, resulting in cleaner production. When innovation is carried out through a business model, the aim is to improve the competitiveness of a more sustainable product or service, which is accepted and valued by users. At the meso level, what is sought is collective innovation, whether it is technological or not, its purpose is to promote cooperation between multiple actors. The aim of this new form of collaboration is for the different actors or companies to share processes, materials, products, infrastructures or services, optimising the use of resources. Finally, innovation at the macro level comes from the hand of national or more global entities or institutions with the necessary mechanisms to generate a context in which to promote actions or policies specific to the circular economy, such as waste management, scientific and technological improvement, or public awareness, for example. An important domain of the circular economy in which innovation plays a relevant role is in achieving greater efficiency in the reuse and recycling of products and materials, as the level of global consumption has increased and will continue to do so in the coming years, both in developed and underdeveloped countries. Therefore, in order to promote reuse and recycling, it is necessary to design an innovative waste management system, with technologies that improve and speed up the separation and classification of materials and products in order to recover as much as possible. It should be borne in mind that technological innovation alone cannot achieve this objective and requires new organisational forms that allow for adequate waste management. Therefore, a new reorganisation of the resource management system is needed, allowing the flow of information between producers and consumers in order to create a market of realistic opportunities (de Jesus and Mendonça 2018).

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14.3.2 Digitalisation A major ally of the Circular Economy is innovation, and this has a lot to do with the implementation of digital technology in different fields and for different purposes. In the industrial sector, digitalisation has become the driving force behind sustainable production, intervening in all phases of the process, from the eco-design of materials and products, the increase in the efficiency of resource use, the implementation and operation of the production process itself that is more respectful of the environment, to sustainable waste management that facilitates the reuse and recycling of products (Geissdoerfer et al. 2017). Such is the importance of digitalisation in production processes that all companies that do not make progress in its implementation put their competitiveness and survival in the market at risk (Bag et al. 2021). Both the circular economy and digitalisation are in an emerging state and there are very few references on how to make the most of digital technologies to effectively implement a circular economic model that guarantees the sustainability of the production and consumption system (Kristoffersen et al. 2020). Despite this, many authors find a positive link between the circular economy and digitalisation (Barteková and Börkey 2022; Bag et al. 2021; Sarc et al. 2019). Among the main advantages offered by 4.0 technologies is their capacity for process monitoring, data collection, data mining, data treatment and data processing, which generates information that can be easily shared between different sectors, companies or individuals. In this way, digitalisation can address one of the main barriers that hinder the operability of circular economy models, such as providing access and facilitating the exchange of data, information and knowledge across different actors involved. The circular economy is presented as a closed cycle, in which the circularity of the flow of materials and products depends on the interaction of different productive sectors (industries, services, waste managers, etc.) and consumers themselves. To guarantee this circular flow, it is essential that in parallel there is a flow of information and knowledge that allows information on the materials that comprise the products, their processing and manufacture, as well as information on repair and recycling that maximises the recovery of all the materials that constitute the product. When it comes to the reuse of equipment or any of its components, information on its condition and origin is extremely important for scheduling or carrying out the relevant maintenance tasks or possible repairs. The absence of this information leads to inefficiencies in the production processes in which this equipment is involved, which would result in a higher consumption of material and economic resources. Currently, the lack of information on the origin, conditions and quality of products and recycled or reused materials generates mistrust among consumers, preventing the adoption of a circular economy model. The implementation of different digital technologies would facilitate the availability of this information, contributing to increase the added value of products and materials by reintroducing them into the market and ensuring the closure of the product and material cycle. There are numerous types of digital technologies, which by their characteristics and purposes

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can be more easily adapted to some contexts than others. Since there is no room for mentioning all existing types of digital technologies, the most relevant and versatile ones for different processes and fields are mentioned below: • Internet of Things: It is conceived as a dynamic information management that exchanges and collects data from different electronic systems that transfer products, service, process, activity, or task data in real time (Tavera Romero et al. 2021). This digital tool allows the generation, collection and the analysis of the information required to achieve the principles of circular supply chains, such as waste and resource traceability, reverse logistics, independence of limited natural resources, remote production, remanufacturing and reuse. • Big Data: The main role of Big Data is to gather data and information from different platforms and users to achieve an effective decision-making (Kazancoglu et al. 2021). The importance of data lies in the possibility of using it to improve both services and products adjusting their quality or characteristics to the user demand, reducing rework and promoting circular economy actions such as reuse and recycling and extending the useful life of products (Chauhan et al. 2022). • Artificial Intelligence: According to Agrawal et al. (2021), within the CE framework artificial intelligence enables to improve the efficiency of production processes and product lifespan through the analysis of the large amount of data generated in the process. Therefore, this tool becomes very useful to make decisions that support the principles of circular economy. • Blockchain: it can be defined as a secure digital database (thanks to cryptography) that facilitates all kinds of transactions (not only economic ones) between different actors without the need for intermediaries. Blockchain can generate incentives to set new pricing systems and promote the exchange of resources at lower prices, in a transparent and secure way (Treiblmaier and Beck 2019). This new form of trade promotes waste reduction, as well as the reuse and recycling of products and materials. • Cloud Computing: it is a digital tool that provides access to remote computing and processing applications hosted by a company or a service supplier. Implementing these platforms in companies allows them to operate in a more coordinated and efficient way, integrating different departments, greatly improving the efficiency of the use of resources and reducing waste while scaling the decision-making process. As mentioned previously, the technologies presented above are not the only ones in existence, nor are they the only ones with positive effects on the drive towards a circular economy model. Moreover, different types of digitalisation can

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Fig. 14.5 Effect of combining different digital technologies on the circular economy. (Source: Barteková and Börkey 2022)

contribute to achieving the same principle of the circular economy, as can be seen in Fig. 14.5. However, the combination of different digital tools can magnify their effects. The impact of digitalisation on the circular economy is enhanced when different digital technologies are combined, allowing its scalability and extending its effects to different levels and areas. Digital technology can transform the way we traditionally produce and consume, helping companies and the production sector to meet one of the main challenges: to become sustainable producers. In this situation, the digitalisation of the production and consumption system becomes a tool with great potential as an enabler of sustainable production and the circular economy. The main characteristics of digital technologies include the generation and processing of data, which in turn can be shared in real time between different departments of the same company or between different companies and sectors. The availability and simultaneous flow of information allows different operators to interact, promoting a more efficient use of resources and reducing waste. In addition, the fact that information can be collected and shared in real time allows production or services to be adjusted to changes in the market or demand, speeding up the decision-making process and the capacity to act, again resulting in a more efficient use of resources and less waste generation. Another feature of digital technology that helps to achieve the principles of the circular economy is the decentralisation of information, raw material sourcing and production. The reintroduction of products or materials into the market extends the useful life of products and increases the number of sources of supply of products or raw materials, which significantly reduces the pressure on natural resources, as well as the production of waste that severely damages the environment. Finally, a major advantage of digital technologies that should be taken into account is virtualisation, which allows the recreation of a physical environment

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in which simulations and scenarios can be run, thus reducing industrial waste, as well as promoting environmental practices or increasing recycling opportunities. Some of the main areas of the circular economy in which digitalisation is particularly useful are the following (Chauhan et al. 2022): • Remanufacturing: one of the main actions within the circular economy is to promote remanufacturing. The main barriers that the productive sector encounters when carrying out remanufacturing are the high demand for material and economic resources involved, as well as time. In this sense, digitalisation tools could help to overcome these barriers by implementing optimisation models that allow the selection of those parts that are potentially recoverable in terms of costs, materials and time. • Collaboration: thanks to the collection and flow of data between producers and consumers, a collaborative environment that favours the reuse and recycling of products and materials through a new business model can be generated. • Valorisation, recycling and resource recovery: many of the features of digitalisation ultimately favour the valorisation, recycling and recovery of resources. Information flows not only connect suppliers and consumers but can also use digital techniques to optimise resource recovery and analyse their viability. • Reverse logistics and closing the loop: the application of digital technologies can be instrumental in the collection, treatment and transport of waste for remanufacturing. At a logistical level, it would be possible to carry out an inventory of materials to be reintroduced into the market in an efficient and controlled way, thus closing the cycle. • Waste segregation: In order to close the material and product cycle and to optimally recover, reuse and recycle, it is essential to have identified, checked and segregated materials. This is currently a time-consuming and laborious task, but the improvement and sophistication of a material triage and sorting system would speed up the process, enhancing the circular flow of materials. Therefore, digitalisation can be one of the key elements in the transformation towards a circular economic model.

14.4 Conclusions The transition from the traditional linear economic model to a circular one aims to put an end to the excessive consumption of natural resources and reduce the pressure on them. This means promoting strategies based on the reduction, reuse, recycling and recovery of products in all phases of the production, distribution and consumption cycle, guaranteeing the social, economic and environmental wellbeing of the present and future generations. This is a complex process, due to the large number of public and private actors, companies, technology and resources involved. However, despite the complexity of the transition, circular economy model

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is key to protecting the environment and improving people’s quality of life in a sustainable way. There is a great deal of research on progress towards the circular economy both at company level, and by industrial sectors with applications at local, regional or global level, and especially on the barriers to implementing the circular economy. Numerous limitations have been mentioned such as costly start-up costs, challenging global supply chains, blocking of resource-intensive facilities, shortcomings in cooperation between firms, insufficient consumer awareness, and limited dissemination of innovations; limited investment on technology; lack of economic incentives to promote an efficient use of resources or avoid contamination; weak support attitudes from consumers and industries; lack of environmental education and culture; scarce information resources; limited political support; or no effective legislation. All these constraints, which can be grouped into four factors: technological, financial, political and social, are in turn drivers for change, i.e., they are potential aspects that need to be improved in order to achieve a sustainable production system based on the circular economy. Digital technology and innovation are increasingly recognised as a potentially powerful tool to drive the transformation towards a circular economic model that generates more inclusive and sustainable economic and social growth. To ensure the transition towards a circular economy model, the analysis of the socio-economic and political context is essential, as it will allow the identification of the main economic sectors, and therefore those with the greatest potential, and the political predisposition and support to implement circular economy strategies. It should be stressed that circular economy has a multidimensional character, requiring the joint action and participation of all the actors involved, so that in order to abandon the current linear economic model, a broad institutional change in markets, public policies and social practices is required. Both digitalisation and innovation can help to achieve a more efficient production and consumption system. One of the main characteristics of digitalisation and innovation is that they can be applied at micro, meso and macro levels contributing to overcome the obstacles standing in the way of large-scale implementation of greener business models, decoupling economic activity from natural resource use and their environmental impacts.

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