DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS

58 • DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS
2.2.3 Quantify sector impact
Objective:
End product:
Understand the economic (and resource) impact of circular economy
opportunities, either as input to an economy-wide assessment (see
Section 2.3.1) or as a standalone result.
Quantified impact for each opportunity and circular economy scenario
(where applicable).
To build the case for business action and potential policy interventions, the economic
impact of each prioritised circular economy opportunity needs to be assessed.
This section describes a tool to conduct this impact quantification for individual
opportunities. The ambition level for the quantification exercise needs consideration
before the exercise is initiated – while understanding the impact is important to help
mobilise business and build the case for policy intervention, the related (potentially high)
resource demands needs to be balanced with that of the other steps from the toolkit.
This sector-specific quantification can be a goal in itself, or serve (as was the case in the
Denmark pilot) as further input for the economy-wide impact quantification described in
Section 2.3.1. In the latter case, calculations should be performed with a sufficient level of
detail to be able to convert to the input-output tables needed in the CGE or other type
of economy-wide impact assessment model (see Section 2.3.1 for further details).
While economic impact is a natural first choice of metrics to make the case for the
circular economy, other metrics such as resource savings and greenhouse gas emissions
can also be taken into account. In the Denmark pilot, resource savings were estimated
for two key materials (steel and plastics) and the change in CO 2
footprint was modelled
in the economy-wide modelling step (see Section 2.3.1).
Figure 14 shows an overview of a possible quantification methodology, illustrated
in the form of a driver tree. While the details typically need to be adjusted for each
opportunity, the driver tree offers a useful structure for the quantification. The core
of this approach is to zoom in on specific sub-sectors or even products (branch A of
the driver tree), and consequently scaling up the impact found in these sub-sectors
or products to the full sector and adjacent sectors (branch B of the driver tree). The
advantage of this approach is that it makes the analysis tangible, and allows businesses
to provide specific input. Other approaches are possible as well.
Branch A. Net value created in deep dive sub-sector. The net value creation is defined
as a product of the overall adoption rate of the circular economy opportunity, the
number of ‘units’ addressed, and the net value created per unit.
• Adoption rate. The adoption rate is a quantitative answer to the question ‘How
widely will this opportunity have been adopted in a circular scenario?’ where
100% means full realisation of the potential. In the Denmark pilot, the adoption
rates were always expressed as a difference between the circular scenario (2035
and 2020 horizons) and a ‘business as usual’ scenario (where some adoption rate
is typically also greater than zero). This allows the model to take into account
that circular economy opportunities will probably be adopted to some extent
even in a non-circular scenario.
• Number of units in deep dive sub-sector. The number of units is used to denote
any quantity used as the basis of the quantification in the subsector. The
unit could be (an estimated) number of products, or a volume of material flow
(such as tonnes of organic waste). It could also be a monetary unit, such as ‘value
of purchased goods’ or ‘output of new buildings’.
• Net value created per unit. Circular activities bring two kinds of direct financial
benefits to businesses: (i) cost savings from materials, components or labour
(for example due to parts recovery or virtualisation), and (ii) increased revenues
(from additional sales and/or a higher unit price). Additional costs include increased
labour costs, increased material/component costs (for example to de-