Climate Action

3 reasons why embracing the circular economy can be powerful for middle income countries

Image: Photo by Alvaro Reyes on Unsplash

Maria Carolina Schmidt Zaldívar
Former Minister of Environment of Chile, Ministry of Environment of Chile
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This article is part of: The Davos Agenda
  • The circular transition is crucial to building a resilient economy, protecting social wellbeing, and mitigating the climate crisis.
  • The move to a circular economy can be especially powerful for lower- and middle-income countries.
  • The Circular Economy Action Agenda sets out the way forward for business, government and civil society.

In Chile, we have a dream that many share: to live in a world without waste. Such a dream requires a move towards a circular economy, where waste and pollution are designed out, products and materials are kept in use, and natural systems are regenerated.

Wherever you live, a circular transition is crucial to building a resilient economy, protecting social wellbeing, and mitigating the climate crisis. However, it can be especially powerful for middle income countries, given the impact to jobs and our particular vulnerability to the effects of the climate crisis. Understanding these opportunities brings us one step closer to the change that the circular transition can bring.


What is the World Economic Forum doing about the circular economy?

Opportunity: A sustainable economic recovery

The circular economy offers a $4.5 trillion economic opportunity by reducing waste, stimulating business growth, and creating jobs. Making better use of raw materials is not just good for the planet, it’s a financial imperative. The International Resource Panel found that more sustainable use of materials and energy would add an extra $2 trillion to the global economy by 2050.

And there could be particular advantages for low- and middle-income countries. International Resource Panel modelling shows that by 2060, with the right sustainable policies in place, growth in global resource use can slow by 25%. Meanwhile, global GDP could grow by 8%, with a particular benefit for low- and middle-income nations.

Pace's Circular Economy Action Agenda launches this month and will set out a way forward for business, government and civil society. Image: PACE

Economic opportunities also stem from making better use of waste. For example, in Chile, construction waste from authorized buildings alone exceeds 7.1 million tons per year, equal to all municipal domestic waste. But it’s often simply dumped in landfills - at best. This highly usable waste has been valued by some experts at about $315 million per year. If we find ways to reuse and not just dispose of this material, innumerable possibilities emerge for reducing emissions and creating other significant economic savings.

Myriad innovation opportunities exist for innovators and their regions. For instance, the Scale360° project, a global partnership recently launched in Chile, fast-tracks the circular economy by bringing together partners in tech, policy and business to find circular solutions that scale to address sectors such as fashion, food, plastics, electronics and others. By design, these collaborations are more likely to lead to businesses that can create jobs and contribute to an area’s economic evolution.

Opportunity: Promoting decent work

The need to provide good quality jobs that bring social wellbeing is a global challenge in a changing world, one made even more urgent by the mass unemployment and economic hardship caused by COVID.

Countries such as mine have a large number of people working in the informal recycling sector—there are currently about four million across Latin America and the Caribbean – which often comes with risks to health and safety as well as lack of job security. During the pandemic we launched an online platform connecting people working in informal recycling with those who wanted to continue recycling while stations were closed; informal recyclers could go door to door to collect the waste, and we could continue with our recycling habits.

But as we move beyond COVID, creating a circular economy offers a way to formalize and improve the living and working conditions of thousands of people working in the informal recycling sector, especially women. Research shows that a circular economy could generate up to 4.8 million jobs in Latin America and the Caribbean. In Chile, we have set a goal to create more than 180,000 formal jobs from the circular economy by 2040, for example through the repair industry, a key part of the circular economy. This will help us reach our target of increasing recycling rates from 4% to 65%, vital to our economic wellbeing and key to building a future where decent work is a priority.

Image: PACE

Opportunity: Mitigating the climate crisis

Like so many other countries, Chile is extremely vulnerable to climate change. This country meets seven of the nine critical vulnerability variables recognized by the United Nations. To prevent serious challenges such as increasingly unpredictable weather patterns, water shortages, and rising sea levels, it is crucial for our future, and for the future of other middle-income and developing countries, that we mitigate the climate crisis and build a stronger economic system that will be resilient against its effects.

How can a circular economy help? While switching to renewable energy could reduce emissions by 55%, the remaining 45% can only be tackled by changing the way we make and use products and food. If the world created a circular economy for just five key sectors — cement, aluminum, steel, plastics and food — we could cut CO2 emissions by 3.7 billion tons by 2050, equivalent to eliminating current emissions from all forms of transport.

Image: PACE

The circular economy will also help us build a strong system resilient to the effects of climate change. The World Bank has calculated that reaching carbon neutrality will allow Chile to increase GDP by more than 4.4% by 2050. This figure is multiplied by five if we value the indirect benefits, such as a decrease in deadly black carbon, and the enormous social benefits for people’s health and welfare. There are other more direct impacts, too; for example, as we reincorporate food waste into our soils, they are better prepared to cope with the water stress that we have witnessed over the past decade.

To drive these policies forward, as well as demonstrate their commitment internationally, countries can get started by introducing the circular economy as part of their Nationally Determined Contributions under the Paris Agreement, as Chile did in April 2020.

The need for action

Chile already has a strong start in place. In our country, 30% of all new public investment for recovery is specifically addressed at sustainability, climate action, and circular economy projects. And we have launched our Circular Economy Roadmap, an ambitious plan that involves nothing less than the circular transformation of every sector by 2040: from mining to construction, from industry to agriculture.

But the urgent challenges we face are global issues. Just as the plastic that washes up on Chile’s beautiful beaches flows in from all over the world, the actions we take in Chile impacts others around the globe. We can only solve these problems by working together. That’s why I have joined the board of PACE (the Platform for Accelerating the Circular Economy), to drive the change internationally and across business, government and civil society. The Circular Economy Action Agenda acts as a guide to all those who want to accelerate the transition.

A transition to a circular economy requires addressing issues along the full value chain of materials and production, redesigning not only products but also resource flows. In a globalized economic system, this requires collaboration. Over the next few years it is crucial that countries come together to promote commitments at a multilateral level. That’s why Chile supports the international efforts to move forward to a global legally binding instrument on plastic pollution prevention, in the framework of the UN Environment Programme.

Additionally, through the regional forum the Asia Pacific Economic Cooperation, Chile fostered a Roadmap in Marine Debris, which includes plastic litter in the ocean. And in the Pacific Alliance with México, Perú and Colombia, we are working on a Roadmap for Sustainable Plastic Management, which will allow our countries to work together in this area, forging key commitments and establishing new standards. The region also has an excellent opportunity to speed this transition through the establishment of the Latin America and the Caribbean Circular Economy Coalition.

Moving to a circular economy will take several decades. The work will be tough. However, there are huge benefits and opportunities within our reach. We must lead this transformation, to protect well-being as well as the climate.

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