Every product has a risk of ending up as waste in ecosystems and causing numerous societal issues. In order to tackle these problems and implement the circular economy, the UK-based Blindspot Think Tank proposes to extend producer responsibility to cover the risk of products becoming waste. A small insurance premium paid by producers, according to the waste-risk of their products, would be then spent on ‘precycling’ actions that cut waste-risk throughout society.
What does it involve?
In a time where waste is an ever-increasing issue, Blindspot Think Tank proposes a new way to implement ambitious circular economy by using markets to design-out waste. Building on practices of extended producer responsibility and risk-management, the proposal is to introduce a ‘precycling premium’ to be paid to insurers by producers for all products with a waste-risk. The collected premiums are then spent on cutting the waste risk. In this way the negative externalities of products and resources are replaced by price, profit and growth incentives in the market. Everyday decisions by all market participants then work to eliminate waste and create a circular economy.The government legislates and oversees the collection and spending of the premiums by insurers. Producers would design and manufacture less waste-intensive products since the precycling premium rate is based on the waste risk. This systemic change allows economic, business, employment, ecological and climate opportunities to be rapidly and fully captured.
Currently, the precycling premiums are under consideration as a systemic policy option by the European Commission and European Union Member States and they are ready to be advanced by further research and feasibility studies. If the policy is to be implemented by the EC, the impact will trickle down to many stakeholders. Stakeholders that should be involved in feasibility studies and pilots of the premium are policy-makers, producers, waste and resource experts, businesses and insurance companies.
In the European Union there is a growing awareness of the need for ambitious circular economy, so the area is therefore well suited to pioneer precycling premiums. Market externalities can be efficiently prevented rather than suffered with no need for prescriptive legislation or government intervention in market choices. Compared to taxes, the separation of precycling funds from Member States’ political budgets makes it easier to implement.
This Circularity Ladder presents economic activities with an increasing ‘degree of circularity’. When looking at the six circular business models we see two important things. First, some business models are able to achieve a higher degree of circularity than others. For example, a Sharing Platform does not directly lead to refurbishment (it is possible), but Product Life Extension does.
Second, all business models fall apart in different activities, of which again some activities are able to achieve higher degrees of circularity than others. For example, the Product Life Extension may involve maintenance, repair, reuse, refurbishment and remanufacturing. However, maintaining a product has more potential for resource efficiency than remanufacturing.