Developing an Indicator for the Circular Economy

Transcription

1 Draft Report Developing an Indicator for the Circular Economy Niels Schoenaker Roel Delahaye *This is a draft report, this report contains preliminary results

2 CBS Den Haag Henri Faasdreef JP The Hague P.O. Box HA The Hague project number National Accounts 13 augustus 2015 remarks The views expressed in this paper are those of the author(s) and do not necessarily reflect the policies of Statistics Netherlands.

3 Index 1. Introduction 4 2. Methodology and data Calculating the cyclical use rate: An example of the Czech Republic Calculating the cyclical use rate indicator for the Netherlands The basic cyclical use rate indicator for the Netherlands Modifications The cyclical use rate indicator adjusted for the Netherlands Building a time series Data sources Allocation of waste streams to material categories Scope of material flows included Results Results for the Netherlands Comparison of the results Comparison with Japan and the Czech Republic Comparing the cyclical use rate indicator and the recycling rate Discussion Conclusion References 22 Appendix 23 Developing an Indicator for the Circular Economy 3

4 1. Introduction The circular economy is an economic system designed to maximize reusability of raw materials and products and minimizing value destruction. It is about the transition from a linear economy, characterized as take, make and waste, to a circular economy in which resources cycle in the economy because of repair, reuse, remanufacturing, and recycling. The circular economy is very popular among policymakers in the Netherlands and the EU as a contribution to the solution of the raw material shortages that may arise in the near future by increasing prosperity and population growth. Several studies by the Ellen MacArthur Foundation (2012, 2013, 2014) show the many facets of the circular economy. Encouraging maintenance, repair, reuse and recycling of products is key. One of the ideas is that consumers no longer buy a product, but instead pay for the service to use the product. The circular economy is a comprehensive concept, and one could think of many indicators that tell something about the circular economy (See material flow monitor plus (MM+), which is under production). The goal of this report is to develop an indicator for the Netherlands with respect to the use of secondary materials, based on the developments at Eurostat (Task Force on Material Flows, 2014) and the report by Kovanda (2014). A major advantage of such indicator is the availability of potential useful source data. Currently there is no indicator available in the Netherlands or the EU that measures the use of secondary materials with respect to primary material input. For instance, the recycling rate shows the share of waste that is recycled or reused. However, it focuses on the output of the economy. A recycling rate of 100% implies that all waste is recycled and used as input in the economy. However, it says nothing about the level of secondary material inputs as compared to total material input. Furthermore, it says nothing about the value losses, and value creation of such recycling activity. The cyclical use rate indicator is developed for the Japanese Fundamental Plan for Establishing a Sound Material-Cycle Society (2003), and measures the amount of secondary materials used in the economy, relative to total material input. This indicator tells more about the input side of the economy. The cyclical use rate indicator measures the cyclical use of materials (U c ) relative to the total amount of material input into the economy (U c +DMI 1 ). So it shows the share of cyclical use of materials in total use of materials. A hypothetical cyclical use rate of 100% would imply that all material input into the economy is secondary and no raw materials enter the economy. However, this indicator says nothing about the waste streams from the economy to the environment. In an increasingly resource efficient economy, there can still be waste as the total amount of inputs decreases. So the circular economy is a broad concept and cannot be captured by a single indicator, a set of indicators would be required to cover all aspects of the circular economy. This same conclusion is drawn Geng et al. (2012), who developed an indicator system consisting of a set of circular economy indicators. The main aim of this paper is to explore the possibility to calculate the cyclical use rate indicator for the Netherlands, and to evaluate whether it has the potential to be included as an official statistic which may contribute to the mapping of the circular economy. This paper should be seen as a discussion paper in which all bottlenecks and findings for calculating the indicator are elaborated and open for discussion, rather than a final methodological report. 1 Direct Material Input Developing an Indicator for the Circular Economy 4

5 The remainder of this paper is organized as follows. The following section describes how this cyclical use rate indicator is calculated for the Czech Republic, based on the paper by Kovanda (2014). Further, based on the work by Kovanda, it elaborates how the indicator is calculated specifically for the Netherlands, and which data sources were used. The third section presents the results of the cyclical use rate indicator for the Netherlands, and includes an international comparison of these results. The fourth section comprises a discussion of the methodological choices made and of the final results. In the last section conclusions are drawn. Developing an Indicator for the Circular Economy 5

6 2. Methodology and data 2. 1 C a l c u l a t i n g t h e c y c l i c a l u s e r a t e : A n e x a m p l e o f t h e C z e c h R e p u b l i c The cyclical use rate is an indicator that presents the ratio of cyclical use to total input of an economy. It connects the topic of material consumption and waste management, and can be calculated as follows (Ministry of the Environment Government of Japan, 2003): PU c = PU c is the indicator of the cyclical use rate in percent. U c is the cyclical use, and is defined as the flow of materials that became waste, but which were fed back to the economy and used for production and/or consumption purposes, thus saving on the use of primary raw materials. DMI is defined by EW-MFA (Economy Wide Material Flow Accounting and Analysis) (Eurostat, 2001, 2012) and comprises the amount of domestically extracted raw material, harvested biomass and total imports (which includes raw materials, products and waste). The measurement unit of these material streams is kg. An overview of these material flows is presented in figure 1. Figure 1. Material balance of the economy depicting the components of the cyclical use rate indicator (PU c ) (Kovanda, 2014). Initially, the cyclical use rate indicator was developed by Japan. In his research Jan Kovanda (2014) investigated whether the cyclical use rate could also be calculated for countries other than Japan. Although some methodological issues were encountered and two modifications were made, it was shown that it can be calculated for other countries as well. The methodological issues were related to the Czech waste management system. The main issue was to determine what should, and what should not be attributed to the cyclical use of materials U c. For example, whether waste incineration for energy recovery and the use of manure as fertilizer should be attributed to U c or not (the first was excluded, the latter included). Determining the U c component was also the main issue for developing the cyclical use rate indicator for the Netherlands, as will become clear in this paper. Furthermore, two modifications were made to improve the indicator. The goal of the cyclical use rate indicator is to present the ratio of secondary material consumption with respect to total material consumption (primary plus secondary). However, DMI was chosen to represent the consumption of primary raw materials, but it also includes imports of waste, secondary materials and scrap for further manufacturing. These are not primary but secondary materials, Developing an Indicator for the Circular Economy 6

7 and should therefore be subtracted from DMI and added to U c. The result is the first modification as presented by formula 1. 1) A second modification was made for the Czech Republic with respect to the use of domestically produced secondary materials. These are materials which are of the nature of side products, by-products, and treated waste, which ceased to be waste the moment they became compliant with the conditions and criteria for materials obtained from products and which are subject of a retake. (Kovanda, 2014, p.80) These materials are not reported as waste in the Czech Republic waste statistics. However, these materials are used for production and consumption purposes, and replace the use of primary raw materials in production. So, these materials are included in the cyclical use of materials component, U c. The final result after including the second modification is presented by formula 2. 2) 2. 2 C a l c u l a t i n g t h e c y c l i c a l u s e r a t e i n d i c a t o r f o r t h e N e t h e r l a n d s The basic cyclical use rate indicator for the Netherlands 2 For the calculation of the Dutch cyclical use rate indicator, the same approach was used as for the Czech Republic. Firstly, the cyclical use rate indicator was calculated for the Netherlands as a whole, without any further modifications. Secondly, further modifications were considered so the indicator would best suit the specific situation of the Netherlands. So, the two components (U c and DMI) of the cyclical use rate indicator had to be determined. Determination of DMI was straightforward, as DMI is very well defined by Eurostat (2001, 2012). However, determining the cyclical use component (U c ) turned out to be more difficult. As described in chapter 2.1, U c is defined as the flow of materials that became waste, but which were fed back to the economy and used for production and/or consumption purposes, thus saving on the use of primary raw materials. This definition is useful to identify whether material flows should be included in U c or not, however, some aspects remain disputable (e.g. should waste incineration for energy recovery be included in the U c component?). Choices had to be made to compile the indicator, which leaves room for discussion. An overview of the choices made for calculating the indicator are presented in chapter 2.5 and 2.6, and a more extensive discussion of these choices can be found in chapter 4. Note that the of this paper is to explore the possibilities to compile a cyclical use rate indicator for the Netherlands, and that the choices made are not cast in stone. As a starting point to determine U c, all waste streams used in the Dutch economy were included 3, then several corrections were made. First, the waste used in the materials recovery services sector was replaced by actual recycling statistics 4, because part of the input (waste) into materials recovery services sector will be released again as waste. Secondly, the total 2 I.e. the cyclical use rate indicator, without any (country-specific) modifications (as is done by Kovanda (2014) for the Czech Republic before any modification was made). 3 Data obtained from PSUT (Physical Supply and Use Tables) of the Monitor Material Flows (Delahaye and Zult, 2013). 4 Data from the waste accounts Developing an Indicator for the Circular Economy 7

8 amount of waste used was corrected by subtracting the waste used in the sectors exports, accumulation, electricity companies and waste disposal services, because the materials (waste) used for these economic activities were not recycled, but were exported, landfilled or incinerated. Furthermore, for calculating the final indicator some other adjustments were made based on findings gained during the process of developing this indicator. An overview of all other adjustments is presented in chapter 2.6, scope of material flows included. With the U c and DMI components determined, the basic cyclical use rate indicator was calculated Modifications Then several modifications were made to optimize the indicator specifically for the Netherlands. Re-exportation in the Netherlands has a significant impact on import and export figures. Generally speaking these imports were included in DMI, even though they were not consumed or used in the Netherlands. Therefore, the first modification was to exclude reexports from DMI. 1) Correct DMI for re-exportation (imports excluding re-exports) Moreover, part of the import consists of waste rather than products. Just as in the case of the Czech Republic (Kovanda, 2014), a modification was made to correct total import for the import of waste. So, for the second modification the import of waste was subtracted from DMI 5. Some secondary materials were not labelled waste in the international trade statistic and can therefore not be subtracted from DMI. 2) Subtract the imports of waste (secondary materials) from DMI. Finally, Eurostat proposes (Task Force on Material Flows, 2014) to distinguish four material categories, biomass, metals, non-metallic minerals and fossil fuels. Therefore, this distinction was also made in this paper. This distinction was made for all material streams of both components of the cyclical use rate indicator, DMI and U c. This way, four cyclical use rate indicators were calculated, one for each of the material categories. This provided insights into the differences in circularity between these different material categories. 3) Distinguish four material categories The cyclical use rate indicator adjusted for the Netherlands After the inclusion of the modifications as proposed in section the cyclical use rate indicator for the Netherlands looks somewhat different than for the Czech Republic. Therefore, figure 1 requires an update that includes the changes made for the Netherlands. An adjusted overview of all material flows required for calculating the indicator for the Netherlands is presented in figure 2. The cyclical use component (U c ) now equals the sum of the domestic cyclical use of materials and the import of secondary resources. DMI is adjusted for re-exportation and the import of secondary resources, and is now called DMI a. 5 For the Czech Republic the import of secondary materials was subtracted from DMI and then added to Uc. However, for the Netherlands the import of waste was already included in the Uc component, so it is subtracted from DMI but not added to Uc. Developing an Indicator for the Circular Economy 8

9 Figure 2. Material balance of the economy depicting the components of the cyclical use rate indicator, including the modifications made for the Netherlands B u i l d i n g a t i m e s e r i e s The basic cyclical use rate indicator, adapted by the three modifications as presented in the previous paragraph, finally lead to the cyclical use rate indicator for the Netherlands. The indicator was constructed for the whole economy, and for the four material categories separately, for the years 2008, 2010 and This way a short time series was constructed which provided some insight in the developments over time D a t a s o u r c e s The input used to estimate the cyclical use rate indicator is derived from the Monitor Material Flows (MFM) (Delahaye and Zult, 2013). The MFM consists of physical (in kg) supply and use tables that are in accordance with concepts and definition of the monetary supply and use tables of the national accounts. In turn figures from the Material Flow Accounts (MFA) and the waste accounts are also part of the MFM. Instead of using the Monitor Material Flows the amount of recycled waste taken from the waste statistics can also be used as data source. In addition secondary materials that are not part of the waste statistics need to be added. The estimation of the DMI a was straight forward: data on imports and domestic extraction (as provided by the MFA) were used to determine DMI, which was then corrected for reexportation and imports of secondary resources to determine DMI a. With regard to estimating the cyclical use of materials (U c ) the amount of secondary materials used in production processes was needed. In the MFM these figures were taken from different data sources that vary in quality. One important data source is the waste accounts based on the RWS (Rijkswaterstaat) data. The total amount of recycled waste in the Netherlands was taken from the waste accounts. In addition secondary materials that were not covered in the RWS data were added. These secondary materials are often by products or left overs in the food industry. Data on these secondary materials was, among others, taken from CBS statistics on livestock manure and the association on animal feed. Developing an Indicator for the Circular Economy 9

10 Although the Monitor Material Flows was the primary data source used to develop the cyclical use rate indicator for the Netherlands in this paper, it is not necessarily required to develop the cyclical use rate indicator. Instead, data could be retrieved from other sources like the waste statistics, and the Material Flow Accounts A l l o c a t i o n o f w a s t e s t r e a m s to m a t e r i a l c a t e g o r i e s In order to calculate the indicator separately for the four material categories as proposed by Eurostat, all waste has to be allocated to one of these four material categories. Sixteen waste (and recycling) categories are distinguished in the Material Flow Monitor. Some of these waste categories can directly be allocated to one of the material categories. However, this allocation is not straightforward for all of the waste categories. Mixed waste for instance may consist of many different materials, and is more difficult to allocate. Table 1 provides an overview of the 16 waste categories distinguished in the Material Flow Monitor, and the choices made with respect to their allocation to one of the four material categories. Although some waste categories may include different type of materials, all of them are allocated to one material category, except chemical and healthcare waste. Chemical waste may include fossil fuels and heavy metals, which makes it difficult to allocate. So, some waste categories are difficult to allocate to a single material category. Therefore, to determine the cyclical use rate for each of the material categories more precise, more detailed information is required about these waste categories. So that a distinction of type of materials could be made within each waste category. Table 1. Waste categories allocated to material category 6 Code? Waste category Allocated to Remarks W01-05 Chemical and healthcare waste Not allocated?fossil? W061 Metallic waste ferro Metals W062 Metallic waste non-ferro Metals W063 Metallic mixed waste Metals W071 Glass waste Mineral W072 Paper waste Biomass W073 Rubber waste Biomass Synthetic? W074 Plastic waste Fossil fuels Bioplastic? W075 Wood waste Biomass W076 Textile waste Biomass Synthetic? W077 Other non-metallic waste Mineral Only mineral? W08A Discarded equipment Metals W09 Animal and vegetal waste Biomass W10 Mixed waste Biomass Could be anything W11 Common sludge Biomass Mineral? W12-13 Mineral waste Mineral 6 Codes from waste statistics Eurostat, see: Developing an Indicator for the Circular Economy 10

11 2. 6 S c o p e o f m a t e r i a l f l o w s i n c l u d e d Figure 2 provides a clear overview of the different material flows that should be taken into account for calculating the cyclical use rate indicator. However, the composition of some of these material flows is not that clear. Problems arise especially when it comes to determining the cyclical use of materials, both for the domestic cyclical use and the imported secondary material flows. Although in theory there is a clear definition about what is regarded as cyclical use, the flow of materials that became waste, but which were fed back to the economy and used for production and/or consumption purposes, thus saving on the use of primary raw materials, this is not as straightforward in practice. Further, problems were encountered with respect to data availability, and the allocation of material streams to the four material categories as proposed by Eurostat. Table 2 presents an overview of the encountered problems, the decisions made and the impact of these decisions on the cyclical use rate indicator for the Netherlands. The second column shows an overview of those components that were problematic for calculating the cyclical use rate, and the first column shows whether this component affects DMI a or U c.. The third column shows whether this component was included in the calculation of the indicator. An extensive discussion of the decisions made can be found in the discussion section (chapter 4). The final column indicates the magnitude of the effect on the total cyclical use rate if another decision (shown in column 5) was made. Table 2. Overview scope of materials DMI a or Uc Component Included Comment Other options U c Manure Yes In terms of dry product U c U c DMI a U c Renewable energy (Wind/solar/etc.) Energy recovery by waste incineration (biotic and non-biotic) Sand and gravel used for land raising purposes Demolition waste used for land raising purposes No No No Cannot be measured in kg Not regarded as cyclical use Not regarded as cyclical use Excluded Wet product Included Included Impact Low High High High No Excluded from U c Included High U c Chemical waste No Difficult to allocate to one of the four material categories U c Mixed waste Yes, allocated to biomass U c The import of secondary resources not classified as waste No Difficult to allocate, however, largest part is incinerated for energy recovery Data problem (e.g. by-products) Included Exclude, or allocate differently Included? Low Low Developing an Indicator for the Circular Economy 11

12 Developing an Indicator for the Circular Economy 12

13 3. Results 3. 1 R e s u l t s f o r t h e N e t h e r l a n d s The interim results of the basic indicator and the first modifications will be skipped in this section, and only the final results of the time series will be presented here. In order to build this time series, the cyclical use rate indicator was constructed for the four material categories separately and for the economy as a whole, for the years 2008, 2010 and The final results of the time series are presented in table 3 and figure 3. A more detailed table that shows the different material flows for each material category for all years can be found in the Appendix. For the Dutch economy as a whole the cyclical use rate indicator increased from 8,01% in 2008 to 8,41% in 2010, after which it increased to 8,47% in So, in the period 2008 to 2012 the cyclical use rate increased about a half percentage point since, thus a small but positive trend can be observed. Distinguishing the four material categories provides better insights in the cyclical use rate for the Dutch economy. The first eye-catching result is the very limited contribution of fossil fuels (<0,5% for all years) to the cyclical use rate. However, as fossil fuels are mainly used for energy generation, this result is not surprising. The highest cyclical use rate indicator in the Netherlands is observed for biomass. For biomass the cyclical use rate indicator was around 17,29% in 2008, and rising since then. This increase for both years was caused by an increase of the U c component (DMI a remained relatively constant), caused by an increase of recycled biomass (which also includes imported secondary biomass) and by an increase in the use of manure.for the material category metal, the indicator increased from 7,91% in 2008, to 11,77% in 2010, and then it fell back to 7,79% in This increase in 2010 is caused both by a higher U c component and a lower DMI a component, as compared to the other two years. The decrease of the DMI a component is solely caused by a decrease in the import of raw metals. The import of scrap metals, and the amount of metal recycled increased during this period, which explains the higher U c component. Finally, the second highest cyclical use rate indicator is found for the material category minerals. The indicator decreased from 14,99% in 2008, to 14,78% in 2010, after which it increased to 16,27% in This small decrease in 2010 was caused by a decrease in the U c component, the DMI a component also decreased but relatively less than the U c component (the decrease in DMI a is solely caused by less imports, because total domestic extraction increased). This decrease in U c is caused both by less imports of secondary minerals, and due to lesser recycling of minerals. In 2012, the DMI a component of minerals declined again (again caused by a decrease in imports, as total domestic extraction increased again). Further, U c increased with respect to 2010, due to a combination of increased imports of secondary minerals and an increase in recycled minerals. The combination of a lower DMI a and a higher U c led to an increase in the cyclical use rate. Table 3. The cyclical use rate indicator by material category calculated for the Netherlands for the years 2008, 2010 and Biomass 17,29% 18,63% 19,18% Metal 7,91% 11,77% 7,79% Mineral 14,99% 14,78% 16,27% Fossil 0,30% 0,27% 0,31% Total 8,01% 8,41% 8,47% Developing an Indicator for the Circular Economy 13

14 25,00% 20,00% 15,00% 10,00% PUc Total Economy PUc Biomass PUc Metal PUc Mineral 5,00% 0,00% Figure 3. The cyclical use rate indicator by material category calculated for the Netherlands for the years 2008, 2010 and C o m p a r i s o n o f t h e r e s u l t s Comparison with Japan and the Czech Republic It is difficult to compare the results of the cyclical use rate indicator for the Netherlands with those for Japan and the Czech Republic precisely, because different methods were applied to calculate the indicator for each country. Furthermore, detailed information on the results of Japan and the Czech Republic is only provided for the years 2007 and 2011, while the calculations for the Netherlands were made for the years 2008, 2010 and However, some similarities in the results can be observed. For instance, for all countries the highest cyclical use rate was recorded for biomass (above 17% for all), while by far the lowest rate was recorded for fossil fuels. The cyclical use rate for metals and minerals differs by country. For instance, the Netherlands records a higher rate for minerals, while the Czech Republic shows a higher rate for metals. Furthermore, the cyclical use rate indicator for Japan, which developed a Fundamental Plan for Establishing a Sound Material-Cycle Society (Ministry of the Environment Government of Japan, 2003), shows a clear upward trend since 2004 (from about 12% to over 15%). Such a clear upward trend cannot be observed for the Netherlands or the Czech Republic. However, the cyclical use rate indicator also seems to increase for the Czech Republic and the Netherlands, although less significant. For the Czech Republic the cyclical use rate increased from over 8% in 2002 to about 9% in 2011, and for the Netherlands the indicator increased about half a percentage point in the period 2008 to A closer look could also be taken to some of the different choices made, and their impact on the indicator. When looking at the modified cyclical use rate indicator for the Czech Republic, Developing an Indicator for the Circular Economy 14

15 biomass has the highest value (24.54%), and fossil fuels has by far the lowest value (1.19%) 7. Firstly, this high biomass value is largely caused by the inclusion of manure in the cyclical use component. When excluding manure, the biomass value would fall to 2.76%. A similar scenario holds for the Netherlands, when including manure as wet product the indicator for biomass increases from about 17% to over 27% 8. Therefore, manure was included in terms of dry product for the Netherlands. Secondly, the cyclical use rate indicator for fossil fuels has a low value (<1,27%) for all three countries. However, the second modification made by the Czech Republic has a significant impact on the indicator with respect to the reuse of fossil fuels. The survey of domestically produced secondary materials held in the Czech Republic increases the indicator for fossil fuels to 13,58%. The explanation given by Kovanda (2014) is that more than half of the domestically produced secondary materials consists of wastes from thermal processes such as fly ash and slag from the combustion of fossil fuels, which are being used for production of cement, concrete and other building materials and products. Fly ash and slag might be waste per se, but never actually enter waste statistics and are reported separately under the heading of secondary materials. In the Netherlands, this fly ash and slag is already included in the waste statistics, but it has a much smaller effect on the indicator than for the Czech Republic Comparing the cyclical use rate indicator and the recycling rate The Netherlands recycled about 81% of its total waste in This ratio is much higher than the outcome of the circular use rate indicator (<9%), which clarifies the difference between the two indicators as discussed in the introduction. Although increased recycling efforts positively affect the circular use rate, recycling efforts alone are not sufficient for a fully circular economy. 7 The modified cyclical use rate, calculated for the Czech Republic for the year 2011 (Kovanda, 2014). 8 Calculated for the year Source: Total recycling as a share of total processing of producers: / = 81,22%. Developing an Indicator for the Circular Economy 15

16 4. Discussion While developing the cyclical use rate indicator for the Netherlands, several issues were encountered. Especially the question what should and what should not be included in the U c component of the cyclical use rate is highly debatable. Different choices made with respect to the determination of the U c component may greatly affect the outcome of the cyclical use rate indicator. The main issues encountered during this research are discussed in this chapter. Furthermore, some methodological choices and options are discussed. Manure used as fertilizer Manure is a waste stream which can replace industrial fertilizers in agriculture, therefore it could be considered as part of the circular economy. The material streams identified to calculate the cyclical use rate are measured in kg. Therefore, whether taking into account wet manure (about mln kg) or dry manure (1.878 mln kg) 10, significantly affects the outcome of the indicator. The same result was found for the Czech Republic (Kovanda, 2014, p82). To compare these numbers, the total amount of industrial fertilizer (which can be replaced by using manure) used in the Netherlands is about mln kg 11. Another point one can make is that, with regard to the replacement of manure by industrial fertilizer, one should not consider weight but instead the phosphorous and nitrogen content. So, it probably makes more sense to include dry manure rather than wet manure but it would even be better to look at the active substances that are being replaced. Energy generation The use of renewable energy is also considered part of the circular economy (Ellen MacArthur Foundation, 2014). However, some types of renewable energy such as wind and solar energy cannot be expressed in physical terms, and are not included in the cyclical use rate (U c ). However, increasing the generation of these types of renewable energy will lead to a reduction in the use of primary resources such as oil, coal and gas. So, solar and wind energy have a decreasing effect on DMI, no effect on U c, thus positively influences the cyclical use rate to some extent, even though they cannot be included in the cyclical use rate indicator. Furthermore, waste incineration for energy recovery may also be part of the circular economy, although, with respect to cascading the use of materials, it is regarded as the final, least good option. Waste should only be incinerated for energy recovery when no other options remain, such as recycling (Ellen MacArthur Foundation, 2014). However, energy recovery from waste streams is preferred over using primary resources, such as energy carriers as oil, coal and gas, because it reduces the input of raw materials. However, it is debatable whether waste incineration for energy recovery should be included in U c, the cyclical use of materials. Kovanda (2014) decided not to include it for the Czech Republic. One could argue to only include biotic waste incineration for energy recovery because biotic waste is renewable, and the use of renewable resources is considered part of the circular economy. However, in line with this argument also (non-waste) biomass used for energy recovery should be included. In this case basically all biomass used in the economy could be included in the cyclical indicator because it is renewable, but this is not desirable for this indicator. Furthermore, biotic waste incineration for energy recovery reduces DMI because it replaces fossil fuels, just as solar and wind energy. However, in contrast to wind and solar energy biotic waste can be expressed in physical terms and can be included in U c. Therefore, 10 Data from the year In total mln kg is used, from which mln kg is export or re-exportation. Developing an Indicator for the Circular Economy 16

17 biotic waste incineration for energy recovery results in a lower DMI and a higher U c component, while wind and solar energy only result in a lower DMI component. So, if biotic waste incineration for energy recovery is included in the cyclical use rate indicator, it has a larger impact than the cleaner generation of wind and solar energy. In this research, energy recovery from (biotic) waste incineration is excluded from the cyclical use rate indicator, so it is not included in DMI or in U c. However, this waste stream is used for energy generation, which implies that less DMI (e.g. fossil fuels) is required to generate the same amount of energy. So, even if energy recovery from incineration is excluded from U c, it still has a positive impact on the cyclical use rate indicator (just as solar and wind energy). So, for calculating the cyclical use rate indicator it is important to make a clear distinction between reuse of materials (included) and renewable resources (excluded), although both are considered part of the circular economy. This energy generation example also shows the need for a set of indicators to cover the circular economy as a whole, rather than a single indicator. So, in this research energy recovery from (biotic) waste incineration is excluded from the cyclical use rate indicator. But to cover this gap, supplementary information on energy generation is available at the energy accounts. Actual material flows, or material flows expressed in Raw Material Equivalents? One of the issues that has not been addressed in this paper so far, but which received significant attention during this research, is whether the actual material flows should be converted into their raw material equivalents (RMEs), i.e. the amount of raw materials that are needed to produce the good in question. The reason for this is that imports (a part of DMI) include not only raw materials, but also semi-manufactured products and final products, while domestic extraction (which includes domestically extracted raw materials and harvested biomass) only includes raw materials. However, as is shown in a report by Eurostat (2014), there can be large differences between the actual total weight of goods, and the weight of the same goods expressed in raw material equivalents. These imported goods may have been processed, and the total weight of raw material extraction required to produce manufactured goods is higher than the weight of the goods themselves (Eurostat, 2014). So, a discrepancy exists between the domestic extraction of material resources, which is measured in tonnes of gross ore or gross harvest, and imports and exports that are measured in the weight of goods crossing the border. A solution for this could be to convert the traded goods into their raw material equivalents. By definition, DMI comprises the amount of domestically extracted raw materials, harvested biomass and total imports (imports of raw materials, products and waste). By converting the actual imports into their RMEs, the so called Raw Material Input (RMI) is calculated. So, for comparison purposes it seems that expressing both imports and domestically extracted resources in equal terms, RMEs, makes most sense. Further, in case of replacing DMI with RMI for calculating the cyclical use rate indicator, also the secondary materials in the cyclical use component (U c ) should be converted into RMEs. If this cannot be achieved, it is questionable whether it makes sense to convert the other streams to RMEs. In this research, an attempt was made to convert all streams into their RMEs. For the DMI component this was possible, although data was only available for the year However, it turned out to be more difficult to convert the material streams of the U c component into RMEs. So no further results of this modification have been presented in this paper. However, it might be an interesting option for further research. Developing an Indicator for the Circular Economy 17

18 DMI versus U c, comparing apples and oranges The previous discussion point emphasized the need for RMEs, because material flows of DMI and imports cannot be compared. It is also mentioned that the secondary materials in the cyclical use component (U c ) should be converted into RMEs. This is required because it has implications for the outcome of the cyclical use rate indicator, which will be shown by the following example. If the Netherlands imports 100kg iron ore, it can produce 20kg steel 12. The remaining 80kg becomes a by-product of the production process, it is converted into CO2 or other gases, steam, or slag. Some, but not all of these by-products can be reused. This steel can be used for a variety of products, but eventually it will turn into waste. Now, recycling all steel (20kg) with respect to material input (100kg) would imply that the cyclical use rate can impossibly reach the 100%. However, if the Netherlands decides to import steel instead of iron ore, then its material input is only 20kg. In case all steel (20kg) is recycled, a cyclical use rate of 100% could be reached. This example shows that the structure of the economy is of crucial importance to the outcome of the cyclical use indicator. This makes international comparison difficult. The cyclical use rate will be relatively low for countries that import raw materials or extract them domestically, as compared to countries that import semi-finished or finished goods. Therefore, comparing the cyclical use of steel with respect to the raw material input of iron ore, is like comparing apples and oranges. Converting all material flows, especially the U c flow, into RMEs could solve this problem. Input indicator versus consumption indicator Another point for discussion is whether the cyclical use rate should be calculated as an input indicator (DMI) or as a consumption indicator (DMC, Domestic Material Consumption). The first includes all materials used in the Dutch economy, i.e. total imports plus domestic extraction, regardless of where the materials are actually consumed. The latter corrects this input indicator by subtracting total exports, so it includes only those materials that are actually consumed in the Netherlands. The same issue holds when using material flows expressed in RMEs instead of actual material flows. In this case, both exports and imports should be converted into RMEs. This way, DMI becomes RMI (Raw Material Input), and DMC become RMC (Raw Material Consumption). Both variants, the input- and consumption indicator, could be considered for calculating the cyclical use rate indicator. However, a consumption indicator seems to fit best for international implementation, because double counting takes place when the input indicator is used. For example, part of Germany s imports are the Netherlands exports. If both imports and exports are included in the indicator, the same resources are counted twice. Difficult to distinguish secondary materials in the international trade data. Import of secondary materials which are clearly classified as (the reuse of) waste are taken into account. However, it is difficult to distinguish imports of non-waste secondary materials in the international trade data from regular products. For instance, when a by-product of a manufacturing process in Germany is exported to the Netherlands, it is regarded as an input for the Dutch economy in the MFA. Such input is not labelled secondary, and therefore will be added to DMI rather than the cyclical use component. Therefore imported secondary materials will only be taken partly into account in the U c. There is no easy solution for this mismatch. 12 The numbers presented are not realistic, but are only used to give an example. Developing an Indicator for the Circular Economy 18

19 Sand and gravel use for construction purposes excluded The domestic extraction of natural resources in the Netherlands (366 bn kg in 2011), consists for 90% of sand and gravel, which is used in infrastructural projects to raise roads and land for the construction of buildings or to strengthen dikes and coastal defences (Environmental Accounts of the Netherlands, 2012). In the period , 61% of this sand and gravel was needed for the expansion of the port of Rotterdam, the so called Tweede Maasvlakte. The remainder is used in the production of concrete and cement. The sand and gravel used to raise roads and land for construction is left out of the DMI component. This is done because the use of sand and gravel for construction purposes (i.e. land raising) is typically Dutch, and because of the large volumes used it may greatly affect the outcome of the cyclical use rate indicator for the Netherlands. Including sand and gravel use for this purpose would make international comparison of the indicator more difficult, because it would show a distorted image. Reuse of demolition waste for land raising purposes excluded The previous paragraph explained why sand and gravel use for construction purposes (i.e. raising roads and lands for the construction of buildings or to strengthen dikes and coastal defences) was excluded for the Netherlands. However, if raw materials used for this purpose are excluded from the indicator, then it makes no sense to include the use of secondary materials for this same purpose. So, in case sand and gravel use for construction purposes (land raising) are excluded from DMI, also the cyclical use streams used for this same purpose should be excluded from the U c component. In practice, for the Netherlands this means that the reuse of demolition waste (e.g. from buildings) used for land raising purposes should be excluded from the U c component. This is done by excluding the reuse of mineral waste for the construction sectors. Chemical waste excluded Chemical waste could not be assigned to one of the four material categories as proposed by Eurostat. Therefore, it was not included in the cyclical use component (U c ) of the indicator. So, if chemical waste would have been included the cyclical use rate indicator for the Dutch economy would have been somewhat higher. It would be optional to create a fifth material category remaining, to include all waste streams which cannot clearly be assigned to one of the four material categories. Although only chemical waste was not assigned to one of the material categories, there were other waste categories like mixed waste, other non-metallic waste, rubber waste and plastic waste, for which the allocation to a material category was not that straightforward. This allocation of waste to material categories requires more attention in order to further improve the indicator. Robustness of the cyclical use rate indicator One final point that has to be made is that the outcome of the cyclical use rate indicator fluctuates quite strongly for metal. From about 8% in 2008, it increases about 50% to almost 12% in 2010 and then back to about 8% in This raise questions about the robustness of the cyclical use rate indicator. There is no problem if this fluctuation represents an actual change in the economy, or maybe a special event, for instance caused by changes in policy. However, if such large fluctuation is caused by a lack of reliable data, then this could be problematic for the reliability of the indicator. Extending the timeline of the cyclical use rate Developing an Indicator for the Circular Economy 19

20 indicator by calculating it also for the year 2000 and onwards could provide more information about the robustness of the indicator. Developing an Indicator for the Circular Economy 20

21 5. Conclusion The cyclical use rate indicator is developed in order to tell something about the circular economy. However, the circular economy, as described by the Ellen MacArthur Foundation (2014), is a broad and comprehensive concept and it is hard, if not impossible, to measure it by a single indicator. One issue faced in this research that clearly shows this, is energy recovery from incineration. Renewable energy such as wind and solar energy is regarded as circular because it is renewable, however it cannot be measured in kg because there is no physical flow. Therefore, generating solar and wind energy is not included in the U c component, while waste incineration for energy recovery should be included in the U c component if the definition of U c (Chapter 2.2) is applied. The result would be that energy generated from waste incineration is regarded more circular than solar and wind energy. Therefore, it might be useful to develop separate indicators for reuse (cyclical use rate) and renewables 13 (e.g. renewable energy indicator) 14, which both cover a part of the circular economy. A set of indicators would be required to cover all aspects of the circular economy, as was also proposed by Geng et al. (2012). This research shows that the cyclical use rate indicator can be calculated for the Netherlands as well, although some modifications had to be made to improve the indicator, and to adjust it for the specific case of the Netherlands. First of all, DMI was corrected for re-exportation, and secondly, the import of waste was subtracted from DMI and included in the U c component. It is likely that such country-specific modifications also have to be made for other countries. The main issue encountered was the indistinctness about what should be included in the U c component. In order to develop an internationally comparable indicator it should be clearly specified what material flows should be included, because different choices with respect to the cyclical use component may greatly affect the outcomes. Further, several methodological and data issues were encountered and discussed. The results of the cyclical use rate indicator of the Netherlands were similar to those of the Czech Republic and Japan. The highest cyclical use rate was recorded for biomass, and the lowest for fossil fuels. The cyclical use rates for metal and minerals differed by country. A clear upward trend in the cyclical use rate could only be observed for Japan. However, also the cyclical use rate for the Netherlands and the Czech Republic increased slowly over time. Although the cyclical use rate indicator was calculated successfully for the Netherlands, there are still some issues open for discussion. Like whether to use an input- or consumption indicator, and whether conversion of material streams into their RMEs would improve the indicator. Furthermore, the outlier of metal for the Netherlands in 2010, raise questions about the robustness of the cyclical use rate indicator. Extending the timeline of the cyclical use rate indicator by calculating it also for the year 2000 and onwards could provide more information about the robustness of the indicator. 13 A similar problem may for instance occur for plastics made from fossil fuels, and bio plastics which are regarded more circular according to the Ellen MacArthur Foundation (2014). 14 Could also be an existing indicator Developing an Indicator for the Circular Economy 21

22 6. References Delahaye, R. & Zult. D. (2013). Monitor Materiaalstromen, Den Haag/Heerlen. Ellen MacArthur Foundation. (2012). Towards the Circular Economy, Economic and business rationale for an accelerated transition. Ellen MacArthur Foundation. (2013). Towards the Circular Economy, Opportunities for the Consumer Goods Sector. Ellen MacArthur Foundation. (2014). Towards the Circular Economy, Accelerating the scale-up across global supply chains. Prepared in collaboration with the World Economic Forum and McKinsey & Company. Eurostat. (2001). Economy-wide material flow accounts and derived indicators: a methodological guide. Luxembourg Eurostat. (2012) Economy-wide material flow accounts: compilation guide Luxembourg Eurostat (2014). Material Flow Accounts flow in raw material equivalents. _flows_in_raw_material_equivalents#comparison_between_actual_material_flows_and_mater ial_flows_in_rme Geng, Y., Fu, J., Sarkis, J., & Xue, B. (2012). Towards a national circular economy indicator system in China: an evaluation and critical analysis. Journal of Cleaner Production, 23(1), Kovanda, J. (2014). Incorporation of recycling flows into economy-wide material flow accounting and analysis: A case study for the Czech Republic. Resources, Conservation and Recycling, 92, Ministry of the Environment Government of Japan (2003). Establishing a sound material-cycle society: milestone toward a sound material-cycle society through changes in business and life styles. Tokyo. Statistics Netherlands. (2013). Environmental Accounts of the Netherlands The Hague. Related to material flow accounts and RMEs: df Task Force on Material Flows (2014), Meeting 7-8 November Minutes (final, 19 December 2014). Developing an Indicator for the Circular Economy 22