The circular economy minimises waste and keeps materials and products in circulation for as long as possible. It is increasingly regarded as a promising model for achieving the Sustainable Development Goals (SDGs) and the global climate goals of the Paris Agreement, as well as driving sustainable and resilient economic growth in both developed and emerging economies.

The financial industry has a key role to play in scaling up circular practices and ensure the transition from a linear to a circular model. Interest and action from policymakers, the financial industry, and other stakeholders towards financing the circular economy is already emerging in the form of thematic circular economy funds and innovative financial vehicles, as well as new investment criteria, guidance and standards.

However, as more activities around circular economy financing are emerging, questions that arise concern issues of common definitions and standards, consistency with green climate finance and development finance as well as distributive justice and good governance.

Specific questions to be discussed during this event include:

• What is the current circular economy finance landscape in terms of initiatives, definitions, criteria and guidance?
• What are the roles of public and private funding and blended finance in financing the circular economy?
• What lessons can be learned from green climate finance initiatives and ESG related factors and risks?  What types of financial products for small and medium sized enterprises (SMEs) in developing countries are required?
• How can the finance industry support inclusive and just transitions to the circular economy?

This roundtable will bring together experts representing public and private finance and investment to discuss these questions and share best practise to forge pathways for joined up approach on circular economy finance.

The roundtable will build on previous and ongoing research by Chatham House and others, to drive forward a global and inclusive circular economy agenda.  

Attendance at this event is by invitation only.

In the context of the feasibility of reducing greenhouse gas emissions to net zero, policymakers are beginning to pay more attention to options for removing carbon dioxide from the atmosphere. A wide range of potential carbon dioxide removal (CDR) options are currently being discussed and modelled though the most prominent among them are bioenergy with carbon capture and storage (BECCS) and afforestation and reforestation.

There are many reasons to question the reliance on BECCS assumed in the models including the carbon balances achievable, its substantial needs for land, water and other inputs and technically and economically viable carbon capture and storage technologies.

This meeting will examine the potentials and challenges of BECCS in the context of other CDR and emissions abatement options. It will discuss the requisite policy and regulatory frameworks to minimize sustainability and socio-political risks of CDR approaches while also avoiding overshooting climate goals.

Attendance at this event is by invitation only.

This project will be led by Practical Action and UNHCR and will deliver renewable energy investments through an innovative approach in humanitarian settings, working directly with refugees and host communities in Kigeme, Nyabiheke and Gihembe refugee camps in Rwanda and with urban refugees in Irbid in Jordan.

The project will provide access to affordable and sustainable sources of renewable energy, and improve the health, wellbeing and security of target populations.

As part of this programme, Chatham House will work on a series of research activities and outputs that look to disseminate and scale up the lessons-learnt and evidence-generated by the programme.

Access more of Chatham House's work on humanitarian energy through our Moving Energy Initiative microsite.

As the UK leaves the EU and the formal negotiations on the future relationship begins, this workshop will discuss any immediate changes and review the short and medium term impacts of Brexit on the energy sector. 

The workshop will look to cover:

• The implications for UK business and system operations of the UK leaving the Internal Energy Market.
• Current and future investment trends in the UK energy system.
• The trade of electricity and gas over inter-connectors.
• The need for the development of a new EU-UK operational framework mechanism.
• The UK's EU withdrawal agreement and the operation of the Single Electricity Market (SEM) across Ireland. 
• Options for the UK outside of the EU Emissions Trading System (ETS) and the impact on carbon prices.

This workshop is part of a programme funded by the UK Energy Research Centre on Brexit and the UK’s Net Zero Energy Policy being run by the University of Warwick and Chatham House.

Attendance at this event is by invitation only.

Summary

• Current climate efforts are not progressing quickly enough to prevent the world from overshooting the global emissions targets set in the Paris Agreement; accordingly, attention is turning increasingly to options for removing carbon dioxide from the atmosphere – ‘carbon dioxide removal’ (CDR).
•  Alongside afforestation and reforestation, the main option under discussion is bioenergy with carbon capture and storage (BECCS): processes through which the carbon emissions from burning biomass for energy are captured before release into the atmosphere and stored in underground reservoirs.
• This pre-eminent status is not, however, based on a comprehensive analysis of the feasibility and impacts of BECCS. In reality, BECCS has many drawbacks.
• Models generally assume that biomass for energy is inherently carbon-neutral (and thus that BECCS, by capturing and storing the emissions from combustion, is carbon-negative), but in reality this is not a valid assumption.
• On top of this, the deployment of BECCS at the scales assumed in most models would consume land on a scale comparable to half that currently taken up by global cropland, entailing massive land-use change, potentially endangering food security and biodiversity. There is also significant doubt about the likely energy output of BECCS solutions.
• BECCS may still have some role to play in strategies for CDR, depending mainly on the feedstock used; but it should be evaluated on the same basis as other CDR options, such as nature-based solutions or direct air carbon capture and storage (DACCS). Analysis should take full account of carbon balances over time, the requirements of each CDR option in terms of demand for land, water and other inputs, and the consequences of that demand.
• There is an urgent need for policymakers to engage with these debates. The danger at the moment is that policymakers are ‘sleepwalking towards BECCS’ simply because most models incorporate it – or, almost as bad, it may be that they are simply ignoring the need for any meaningful action on CDR as a whole.

This meeting formed part of a programme of work which investigates the role of negative emissions technologies (NETs) in achieving the Paris Agreement climate targets. Previous meetings held in London and Brussels have looked at integrating negative emissions into EU policy-making, the implications and degree to which NETs, and in particular bioenergy with carbon capture storage (BECCS), can be an effective climate mitigation tool. This meeting focused on the possible deployment pathways of NETs and alternatives to BECCS for the US in particular, in the context of geographical constraints and socioenvironmental implications, the role of the private sector, and appropriate governance and finance mechanisms. 

Summary

• Many social and political issues have so far been neglected in planning for the circular economy transition. This paper aims to redress this by considering how ‘just transition’ and social equity may be achieved through policy and practice.
• The prevailing economic model is linear, in that resources are extracted, transformed into products, used, and finally discarded. In contrast, the circular economy recognizes that natural resources are finite, and aims to keep the materials in products in circulation for as long as possible: reusing, repairing, remanufacturing, sharing and recycling. While the concept of the circular economy is largely focused on developing new technologies and businesses to enable keeping materials in circulation, it also includes the notions of ‘designing out’ waste, substituting renewable materials for non-renewable ones, and restoring natural systems.
• The UN 2030 Agenda demonstrates that environmental, social and economic sustainability objectives cannot be separated. As the links between the environmental issues of climate change, overconsumption of resources and waste generation, and social issues of inequality and the future of work become increasingly obvious, the urgency to connect environmental with social justice is gaining in significance. The language of ‘just transition’ – a transition that ensures environmental sustainability, decent work, social inclusion and poverty eradication – has started to penetrate debates and research on sustainability policy, particularly in the contexts of climate change and low-carbon energy transition.
• A just transition framework for the circular economy can identify opportunities that reduce waste and stimulate product innovation, while at the same time contributing positively to sustainable human development. And a just transition is needed to reduce inequalities within and between countries, and to ensure that the commitment of the UN Sustainable Development Goals to leave no one behind is fulfilled.
• It is important to identify the likely impacts on employment as a result of digitalization and industrial restructuring. Combining circular economy policies with social protection measures will be important in order to ensure that the burden of efforts to promote circularity will not fall on the poor through worsening working conditions and health impacts, reduced livelihoods, or job losses. Identifying potential winners and losers through participatory ‘roadmapping’ can help shape effective cooperation mechanisms and partnerships nationally and internationally.
• Many low- and middle-income countries that rely heavily on ‘linear’ sectors such as mining, manufacturing of non-repairable fast-moving consumer goods, textiles and agriculture, and the export of these commodities to higher-income countries, are likely to be negatively affected by the shift to circularity. These countries will need support from the international community through targeted assistance programmes if international trade in established commodities and manufactures declines in the medium to long term. 
• International cooperation to create effective and fair governance mechanisms, and policy coordination at regional, national and local levels will play an important role in shaping a just transition. Multilateral technical assistance programmes will need to be designed and implemented, in particular to support low- and middle-income countries.
• Governments, international development finance institutions and banks are among the bodies beginning to establish circular economy investment funds and programmes. Just transition principles are yet to be applied to many of these new finance mechanisms, and will need to be integrated into development finance to support the circular economy transition.
• New international cooperation programmes, and a global mechanism to mobilize dedicated support funds for countries in need, will be critical to successful implementation across global value chains. Transparent and accountable institutions will also be important in ensuring that just transition funds reach those affected as intended.

The world is currently witnessing how vulnerable existing production and consumption systems are, with the current global health crisis harshly exposing the magnitude of the risks associated with the global economy in its current form, grounded, as it is, in a linear system that uses a ‘take–make–throw away’ approach.

These ‘linear risks’ associated with the existing global supply chain system are extremely high for national economies overly dependent on natural resource extraction and exports of commodities like minerals and metals. Equally vulnerable are countries with large manufacturing sectors of ready-made garments and non-repairable consumer goods for western markets. Furthermore, workers and communities working in these sectors are vulnerable to these changes as a result of disruptive technologies and reduced demand.

In a recently published Chatham House research paper, ‘Promoting a Just Transition to an Inclusive Circular Economy’, we highlight why a circular economy approach presents the world with a solution to old and new global risks – from marine plastic pollution to climate change and resource scarcity.

Taking the long view

So far, action to transition to a circular economy has been slow compared to the current crisis which has mobilized rapid global action. For proponents of transitioning to a circular economy, this requires taking the long view. The pandemic has shown us that global emergencies can fast-forward processes that otherwise might take years, even decades, to play out or reverse achievements which have taken years to accomplish.

In this vein, there are three striking points of convergence between the COVID-19 pandemic and the need to transition to an inclusive circular economy.

Firstly, the current crisis is a stark reminder that the circular economy is not only necessary to ensure long-term resource security but also short-term supplies of important materials. In many cities across the US, the UK and Europe, councils have suspended recycling to focus on essential waste collection services. The UK Recycling Association, for example, has warned about carboard shortages due to disrupted recycling operations with possible shortages for food and medicine packaging on the horizon.

Similarly, in China, most recycling sites were shut during the country’s lockdown presenting implications for global recycling markets with additional concerns that there will be a fibre shortage across Europe and possibly around the world.

Furthermore, worldwide COVID-19 lockdowns are resulting in a resurgence in the use of single-use packaging creating a new wave of plastic waste especially from food deliveries – already seen in China – with illegal waste fly-tipping dramatically increasing in the UK since the lockdown.

In this vein, concerns over the current global health crisis is reversing previous positive trends where many cities had established recycling schemes and companies and consumers had switched to reusable alternatives.

Secondly, the need to improve the working conditions of the people working in the informal circular economy, such as waste pickers and recyclers, is imperative. Many waste materials and recyclables that are being handled and collected may be contaminated as a result of being mixed with medical waste.

Now, more than ever, key workers in waste management, collection and recycling require personal protective equipment and social protection to ensure their safety as well as the continuation of essential waste collection so as not to increase the potential for new risks associated with additional infectious diseases.

In India, almost 450 million workers including construction workers, street vendors and landless agricultural labourers, work in the informal sector. In the current climate, the poorest who are unable to work pose a great risk to the Indian economy which could find itself having to shut down.

Moreover, many informal workers live in make-shift settlements areas such as Asia’s largest slum, Dharavi in Mumbai, where health authorities are now facing serious challenges to contain the spread of the disease. Lack of access to handwashing and sanitation facilities, however, further increase these risks but circular, decentralized solutions could make important contributions to sustainable sanitation, health and improved community resilience.

Thirdly, it is anticipated that in the long term several global supply chains will be radically changed as a result of transformed demand patterns and the increase in circular practices such as urban mining for the recovery and recycling of metals or the reuse and recycling of textile fibres and localized additive manufacturing (e.g. 3D printing).

Many of these supply chains and trade flows have now been already severely disrupted due to the COVID-19 pandemic. For example, the global garment industry has been particularly hard-hit due to the closure of outlets amid falling demand for apparel.

It is important to note, workers at the bottom of these garment supply chains are among the most vulnerable and most affected by the crisis as global fashion brands, for example, have been cancelling orders – in the order of $6 billion in the case of Bangladesh alone. Only after intense negotiations are some brands assuming financial responsibility in the form of compensation wage funds to help suppliers in Myanmar, Cambodia and Bangladesh to pay workers during the ongoing crisis.

In addition, the current pandemic is damaging demand for raw materials thereby affecting mining countries. Demand for Africa’s commodities in China, for example, has declined significantly, with the impact on African economies expected to be serious, with 15 per cent of the world’s copper and 20 per cent of the world’s zinc mines currently going offline. 

A further threat is expected to come from falling commodity prices as a result of the curtailment of manufacturing activity in China particularly for crude oil, copper, iron ore and other industrial commodities which, in these cases, will have direct impacts on the Australian and Canadian mining sectors.

This is all being compounded by an associated decline in consumer demand worldwide. For example, many South African mining companies – leading producers of metals and minerals – have started closing their mining operations following the government’s announcement of a lockdown in order to prevent the transmission of the virus among miners who often work in confined spaces and in close proximity with one another. As workers are laid off due to COVID-19, there are indications that the mining industry will see fast-tracking towards automated mining operations. 

All of these linear risks that have been exposed through the COVID-19 pandemic reinforce the need for a just transition to a circular economy. But while the reduction in the consumption of resources is necessary to achieve sustainability, the social impacts on low- and middle- income countries and their workers requires international support mechanisms.

In addition, the current situation also highlights the need to find a new approach to globalized retail chains and a balance between local and global trade based on international cooperation across global value chains rather than implementation of trade protectionist measures.

In this vein, all of the recovery plans from the global COVID-19 pandemic need to be aligned with the principles of an inclusive circular economy in order to ensure both short-term and long-term resilience and preparedness for future challenges and disruptions.  

Finance plays a key role in enabling climate change mitigation and adaptation. It is also a contested issue in the UN climate negotiations. The fourth event in the Chatham House COP26 Diplomatic Briefing Series will explore the politics of climate finance in the context of the COP, and provide a comprehensive update of the main climate finance-related negotiation items and processes. The topic is particularly timely given that the UK Government has made climate finance one of its top thematic priorities for COP26 and that 2020 constitutes the deadline for developed countries to mobilise USD 100 billion per year to support climate action in developing countries.