How Circular Economies Will Drive a New Urban Metabolism
Who will you meet?
Cities are innovating, companies are pivoting, and start-ups are growing. Like you, every urban practitioner has a remarkable story of insight and challenge from the past year.
Meet these peers and discuss the future of cities in the new Meeting of the Minds Executive Cohort Program. Replace boring virtual summits with facilitated, online, small-group discussions where you can make real connections with extraordinary, like-minded people.
The Italian city of Matera, the current European Capital of Culture, is an ancient city founded atop a rocky outcrop. Its history, from Paleolithic settlement, to abandoned ghost town, and finally to sustainable, regenerated city, embodies the Greek word μεταβολή (“change”). And for me, it poses an interesting question: could the cities of the past hold the key to understanding the cities of the future?
Like Matera, the first cities were circular by design. They were self-sustaining, built on a virtuous cycle of activities that were interconnected and self-regenerating. They also integrated with the environment, feeding their people with local produce and building water channels through the rock.
Since the Industrial Revolution, though, the system underpinning the global economy has taken primary resources, turned them into products, and disposed of the waste. This linear approach has brought increased prosperity, but it’s also brought significant climate costs: greenhouse gas emissions, unmanageable levels of pollution and waste and depleted natural resources. As a result, each of the last 10 years has been successively the hottest on record, and sea levels are on the rise.
These statistics show that we can’t afford another decade of the linear economy. And as producers of more than 70 percent of global CO2 emissions, cities will need to lead the transition to circular.
In a circular city, “reduce-reuse-recycle” will replace “take-make-dispose”. Urban mobility will be carbon-neutral, relying on low- to zero-emission vehicles within a broader energy network powered by renewables. Cities and businesses will also generate savings from using recycled building materials and turning waste into fuel to power buses.
In other words, circular cities will blend ancient approaches with modern technologies. But how will they do it, and where will the money come from?
Five Ways Cities are Going Circular
While central governments are jumpstarting efforts to create a circular economy, the real change is taking place in cities. For example, Amsterdam is redesigning 20 product/material chains that are estimated to bring nearly €250 million in annual value (cost savings, in-kind value, and revenue).
At EY, we’ve studied hundreds of circular programs to establish the five areas that will be central in cities becoming circular.
- Citizen engagement. Just as with smart cities, citizen engagement will be at the center of the transition. Cities can use mobile technologies to influence consumer behavior and improve feedback loops to support their circular goals.
- Waste as a resource. Globally, only 9.1 percent of materials used by society are secondary; the remaining 92 percent are primary materials that end up in a landfill. Cities play an essential role in turning waste into assets.
- Circular design and planning models. Moving to a circular economy requires a fundamental change in how we design, produce, and use products. Products and plans will be based on zero waste and maximizing all resources from the outset.
- New models of procurement. Government procurement and buying rules favor owning, operating, and disposing of an asset. The circular approach favors access, such as leasing an asset or switching to service-based operating models.
- Circular economy incubators and start-up ecosystems. Entrepreneurs use creativity and hard work to bring new concepts and products to market, creating jobs and redefining what’s possible. Cities need to both support and work with entrepreneurs to create a circular economy.
How Cities Can Pay for Circular Initiatives
The five areas above show where cities are using their ingenuity to lead the shift to the circular economy. But while lack of funding and financing remains a constant pressure, the economic gains the transition will bring far outweigh the upfront costs. City leaders need to think creatively and work with the private sector to secure the funds for circular programs, faster. These approaches will help.
- Make circular a priority with direct funding and grants. Cities serious about circular programs will find a way to allocate funding for them. Singapore allocated $45 million to its Closing the Waste Loop R&D initiative, which funds projects that adopt circular economy approaches. City plans and budgets must also apply circular thinking when factoring in new revenue streams and cost savings.
- Attract private partners through corporate partnerships, alliances and venture funds. Private sector investors are increasingly investing in circular, sustainable initiatives. Decalia has launched its first equity investment fund dedicated to the circular economy. The Circular Economy Investment Fund is also doling out £18 million as grant funding to circular SMEs and entrepreneurs.
- Explore alternative funding models. New financial instruments that complement traditional public-private-partnership models can encourage the transition to the circular economy and fund sustainable infrastructure. Cities are increasingly using green, social impact, and sustainability bonds; in 2018, global green bond issuance reached $203 billion, up 3 percent from 2017.
- Use blended financial models for promising pilot programs with limited funding. Combining investment from international donor organizations, sovereign wealth funds, philanthropic organizations, and the private sector can get programs off the ground. The World Bank has pledged $200 billion for blended financing for urban sustainability in 2021-2025.
A New Chapter in a Long Story of Success and Survival
Achieving the shift to circular will require a city-wide effort, one that mobilizes stakeholders around a long-term common vision and takes citizen needs into account.
To attract investment for circular projects, cities should make data available on their performance and potential impact. They should also align policies to attract investment, such as targeted taxation and incentives, with those of central government.
Shifting from the system that has dominated the global economy for two centuries won’t be easy. Yet the history of our species is a story of success, survival, and continuous transformation – much of it incubated in cities. By merging ancient approaches with modern technologies, cities will be able to lead the shift to a circular economy and a sustainable way of life.
Leave your comment below, or reply to others.
Please note that this comment section is for thoughtful, on-topic discussions. Admin approval is required for all comments. Your comment may be edited if it contains grammatical errors. Low effort, self-promotional, or impolite comments will be deleted.
Read more from MeetingoftheMinds.org
Spotlighting innovations in urban sustainability and connected technology
This article was originally published on September 8, 2020.
Update for April 20, 2021:
After the murder of George Floyd we wrote this article as a kind of blueprint, a beginning to a new way of working with equitable resilience in our cities and beyond. Now, as the trial of Derek Chauvin comes to a guilty verdict in Minneapolis and the whole country reflects on the legacy of that verdict, we have to remember another senseless murder – another young Black man, Daunte Wright, at the hands of law enforcement, just miles from the courthouse. Again, Minneapolis is all of us. We have protested, we have voted. We stood up, we spoke out, we have raged about the anti-Black racism. We have seen people come together, we can feel a shift in this country. But there is so much more to do. No equity, no resilience.
-Ron & Stewart
Housing that is affordable to low-income residents is often substandard and suffering from deferred maintenance, exposing residents to poor air quality and high energy bills. This situation can exacerbate asthma and other respiratory health issues, and siphon scarce dollars from higher value items like more nutritious food, health care, or education. Providing safe, decent, affordable, and healthy housing is one way to address historic inequities in community investment. Engaging with affordable housing and other types of community benefit projects is an important first step toward fully integrating equity into the green building process. In creating a framework for going deeper on equity, our new book, the Blueprint for Affordable Housing (Island Press 2020), starts with the Convention on Human Rights and the fundamental right to housing.
Since the Great Recession of 2008, the housing wealth gap has expanded to include not just Black and Brown Americans, but younger White Americans as well. Millennials and Generation Z Whites are now joining their Black and Brown peers in facing untenable housing precarity and blocked access to wealth. With wages stuck at 1980 levels and housing prices at least double (in inflation adjusted terms) what they were 40 years ago, many younger Americans, most with college degrees, are giving up on buying a home and even struggle to rent apartments suitable for raising a family.
What makes it hard for policy people and citizens to accept this truth is that we have not seen this problem in a very long time. Back in the 1920s of course, but not really since then. But this is actually an old problem that has come back to haunt us; a problem first articulated by Adam Smith in the 1700s.