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Circular Economy

What are the disadvantages of the current linear economy?

Currently, it becomes increasingly clear that the linear economy is no longer a tenable model within the limits of our planet. The disadvantages of the linear economy outline the urgency for an alternative model, which can be interpreted as opportunities for the circular economy. The main disadvantages of a linear economy are found in the lack of solutions for the growing shortage of materials, increased pollution, increased material demand and the growing demand for responsible products.

Supply risks

In a linear economy the uncertainty about material availability grows. This uncertainty is based on the fact that the planet has a finite amount of materials and their availability depends on several mechanisms. This uncertainty is fueled by an increase in price fluctuations, growth of industries that are dependent on critical materials, the interconnection of products and processes, and geopolitical developments.

Price volatility

The fluctuation in commodity prices has increased since 2006 and significantly increased average prices. This not only causes problems for producers and buyers of raw materials, it also causes increasing risks in the market, making investments in material supply less attractive. This can ensure that long-term increase in raw material prices. Lee, Preston et. al, 2012

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Critical materials

There is a number of industries making extensive use of critical materials for their production. These are the metal industry, the computer and electronics industry, electrical equipment industry and the automotive and transport industry. In the Netherlands, these sectors represent a significant percentage of the economy. CBS, 2013, p.21-22

Dependence on critical materials ensures that companies are dependent on fluctuations in material prices, are unable to make predictions, and are less competitive than less material-dependent competitors. Accenture, 2014

Interconnectedness

Because of the increase in trade activities, the interconnectedness of products has become increasingly stronger. For example: water-scarce countries with a surplus of crude oil, trade oil for food, which results in a link between these commodities in the market. In addition, the production of many products is dependent on water and fuels. Because of this interdependence, scarcity of one raw material would have a widespread impact on prices and availability of more goods.

Ellen Macarthur Foundation, 2013a; Lee, Preston et. al, 2012.

Increasing material demand

Because of population growth and increases in prosperity, the number of consumers with a higher degree of material consumption, will increase by three billion in 2030. All trends seem to show that the relative decoupling of growth and material use will only decrease the pace of resource depletion, and will be put through sharp increases in material costs Jackson, 2011.

The resource consumption has doubled in the period 1980-2020, and will triple in the period up to 2050 when business-as-usual models are followed.

DEFRA, 2012, pp. 12–13; Ellen Macarthur Foundation, 2013a, pp. 14–16; UNEP, 2011, pp. 7–11.

Increase of externalities

Continuing to follow a linear economy will also cause negative side effects such as damage to ecosystems, reduction in product lifetime and the misfit with the demand for responsible products.

Degradation of ecosystems

Following the linear model of ‘take-make-dispose leads to the creation of waste. During production processes and because of the disposal of products large streams of material are generated that are not used but burned or left on a garbage dump. This will eventually lead to excess of unusable material mountains overloading ecosystems. This ensures that the ecosystem is hampered in providing essential ecosystem services (such as providing food, building materials and shelter, and the processing of nutrients).

Ellen Macarthur Foundation, 2013a, pp. 16–17

Decreasing lifetime of products

In recent years, the life of products decreased drastically. This is one of the driving forces behind the increasing material consumption in the Western world. The service life of products is still decreasing, by a process of positive feedback: Consumers want new products more quickly, and are using their “old” products for a shorter period of time. This results in a decreased need for quality products that can be used on the long term, which stimulates consumers to buy new roducts even faster.

Bakker, den Hollander, van Hinte, & Zijlstra. 2014

Misfit with the need for accountability

For both politicians and consumers, the awareness of the negative effects of regular industry and the demand for accountability of companies is increasing. The ecological footprint of a company can reduce the power of a brand when consumers avoid unsustainable practices. Also, policy makers will give priority to sustainable businesses when the negative effects of the linear economy are noticeable.

Accenture, 2014