Why a circular economy would be a game-changer for the EU

Only through a circular recycling system can the EU economy achieve sustainability, both environmentally and economically.
Lithium-ion batteries form a battery pack utilized in electric vehicles.

By Davide Chiaroni

Davide Chiaroni is Full Professor of Strategy & Marketing at Politecnico di Milano and co-founder of Energy & Strategy.

28 May 2024

Among the general public, recyling is often mistakenly equated with the circular economy.

However, ther are two distinct forms of recycling – 'linear' and 'circular.’ And now more than ever, it is imperative for European Union member states to move towards the latter, in order to boost the productivity of critical industries and stay competitive in an increasingly complex global business landscape.

The shortcomings of linear recycling

The linear approach to recycling is seen primarily as a facet of so-called waste management, a notion inherently at odds with the principles of the circular economy.

It's also plagued with major limitations.

First, in the vast majority of cases, linear recycling amounts to downcycling, meaning the value of the recovered material is reduced compared to its original value. For example, recycled plastic, particularly in its polyethylene form, often has significant limitations on its use. Similarly, steel and wood are usually reused in less prestigious applications than their previous market positioning.

This downgrading trend extends to more complex and composite materials, such as electronic waste or photovoltaic panels, which, even when properly processed, are reduced to silica sand and then employed for basic construction purposes. By decreasing the value of the output, downcycling forces recyclers to seek economies of scale to cut costs, potentially further compromising the quality of the processes.

Moreover, linear recycling is comparable to a wide mesh sieve. In the typical linear metal recovery and recycling process, the engine of an end-of-life household appliance – or of an electric car – could yield iron and aluminium worth around €200 per tonne. However, high value materials such as neodymium, a critical component of rare earths with multiple applications in electric mobility and a market value of over €40,000 per tonne, might slip through the cracks.

Last but not least, the prevailing regulatory framework in the EU is still based on the origin of a material, rather than its intrinsic nature. As a result, identical items, from computers and printers to X-ray machines, are subject to different routes and treatment protocols. This approach follows a linear perspective, which dictates that products end their life cycle along the same path by which they entered the market.

Redifining recycling

A circular recycling system represents a paradigm shift from conventional methods and aims to overcome the limitations of linear recycling.

It involves the creation of opportunities for up-cycling, where the full (or even enhanced) value of the materials is recovered and reintroduced into a production cycle capable of maximising their utility. Examples include the reintroduction of neodymium into the production of magnets for electric motors or of silicon solar cells for other electronic products.

Circular recycling also involves the establishment of tailor-made processes to meticulously separate materials on the basis of their inherent properties. Materials can then go through dedicated treatment pathways that facilitate their seamless reintroduction into the production cycle of 'new' items in a truly circular manner. These processes need to be co-designed with the product from the outset, streamlining the design for disassembly.

It's ultimately fundamental  to restructure the collection ecosystem, moving towards a model based on the nature of the material to be recycled – rather than solely on the ownership status of the end-of-life product – that strongly engages with producers and not just waste management companies.

A game-changer for the EU economy

Only through a circular recycling system can the EU economy achieve sustainability, both environmentally – by reducing the demand for new resources – and economically, by maximising the resources already at our disposal.

With Europe currently importing around 50% of its lithium, 60% of its cobalt, 70% of its silicon metal, and 90% of the rare earths essential to the ongoing green transition, allowing these resources to slip through our linear recycling processes represents an intolerable loss of value.

In 2023, Europe imported 60,000 tonnes of silicon metal and 30,000 tonnes of lithium. That amounted to 70% and 50% of its total need, respectively, to install 56 GW of photovoltaic panels and develop new electric vehicles. At the same time, 46 GW of aging photovoltaic panels and 500,000 EVs will end their life cycle in the next five to 10 years, yielding 69,000 tonnes of silicon metal and 15,000 tonnes of lithium.

Adopting circular recycling can balance demand and supply, reducing the EU’s dependence on imports – and deliver significant economic benefits. Lithium is valued at over €20,000 per tonne and silicon metal at €3,000 per tonne.

Recent EU initiatives such as the new Waste Framework Directive, the Circular Economy Action Plan and the Critical Raw Materials Act are promising steps forward. The challenge we face is to act swiftly to ensure we capitalise on these efforts in time.