This is the third of four blogs in the Climate change and the circular economy series. Read part 1 and part 2 first.[hr]By Jelmer Hoogzaad (Shifting Paradigms) and Matthieu Bardout (Circle Economy)The Paris Agreement entered into force in November 2016, after receiving sufficient endorsement from national governments. Negotiators from 195 countries have since been defining rules and procedures, thereby shaping the way countries report on their emissions and mitigation ambitions, and agreeing on the modalities of international cooperation on greenhouse gas emissions mitigation.The latest UNEP gap report confirms that mitigation commitments submitted by the signatories do not add up to a decrease in greenhouse gas emissions that will secure a future without climate change exceeding 2°C, let alone 1.5°C. The circular economy can help do the extra heavy lifting to close this gap, but only if circular solutions are encouraged, recognised and facilitated by the Paris Agreement's implementation frameworks.Here’s how:1. Moving from offsetting to cooperation The Paris Agreement asks for voluntary climate action from all countries - industrialised and developing alike. That is unlike the Kyoto Protocol, which included emission targets for a selection of industrialised countries, who were allowed to use offsetting to invest in emission reductions in other countries and count these towards their own compliance. The Paris Agreement also relies on processes rather than strict mitigation goals.This makes the use of offset mechanisms complicated: although governments still welcome foreign investors to support domestic mitigation action, they also want to use 'low-hanging fruit' or low-cost mitigation options for their own mitigation ambitions. While offsetting under the Kyoto Protocol created an international competition for low-cost mitigation opportunities, the nature of the Paris Agreement calls for international cooperation, with all countries working together on low-carbon development and being able to exchange mitigation outcomes under Article 6 if investments made by one country lead to mitigation in another.Such cooperation makes sense since around 20% to 30%* of a nation’s carbon footprint typically lies in the embedded emissions of imported products. This means that a large share of global mitigation opportunities stretch beyond borders and across value chains. International cooperation is needed to tap into these opportunities. Since this is about the carbon footprint of the products and materials traded, circular economy principles point at mitigation options which have hardly been incentivised so far. Examples include: when the design of a product from one country helps reduce emissions in the use or end-of life phases in another country; when the substitution of carbon-intensive materials in one country reduces emissions related to their production in another country; or when a product can be completely replaced with a service.The Paris Agreement should make it easier for governments to take domestic and international action on extraterritorial emissions, seeking international cooperation to reduce emissions across value chains, and tapping into the collaborative principles of the circular economy.2. Collecting new data under the transparency frameworkThe Paris Agreement proposes a transparency framework for the disclosure and third-party review of national emissions and the implementation of climate action. This framework invites countries to report on their mitigation ambitions, using approaches from the Intergovernmental Panel on Climate Change (IPCC) that are based on sectoral and territorial accounting. Most activities under the Paris Agreement, such as policy support, climate finance, technology transfer and capacity building, rely on this data not only to track progress, but also to identify mitigation options.Unfortunately, territorial accounting does not show the potential for domestic actions and international cooperation to reduce emissions across borders through material substitution, circular design or replacing a product with a service. Likewise, presenting emission data per sector fails to reveal the potential for cross-sectoral mitigation action, while that is where the potential lies to use waste or underused assets from one sector as resource in another.These innovative and circular mitigation options tend to alter resource flows across borders and sectors. Consumption-based accounting - presenting emission data based on the service that an economic activity delivers to society - is better able to also disclose these mitigation perspectives.3. Elevating ambitionsIt is well understood that climate policies and national ambitions submitted to the UNFCCC to date fall short of reaching the 2°C or 1.5°C targets. More ambitious policies and new mitigation options are urgently needed. The Paris Agreement therefore includes a procedure for regular updates of national mitigation ambitions, inviting signatories to periodically increase the ambition of their emission reduction commitments or Nationally Determined Contributions (NDCs). This ratcheting mechanism provides an opportunity to introduce and encourage the use of circular economy strategies to bring emissions down even further. Since current NDCs make little use of these strategies, they enable governments to increase ambition. This does require a deeper understanding of the mitigation potential of a circular economy, and its possible rebound effects, such that governments can make optimum use of circular strategies and both reduce the greenhouse gas and resource footprint of their economies.4. Promoting structural change in low emission development strategiesNext to submitting Nationally Determined Contributions (NDCs), the Paris Agreement invites national governments to submit the Low Emission Development Strategies (LEDS) which will reduce their emissions by 2020. To date, these strategies hardly consider circular economy concepts.This provides an opportunity to make circular economy development a structural part of a country’s low-carbon development ambition, which is also where it belongs. A lot of the development challenges which countries face are related to the linear nature of their economy, whether it is the adverse landscape impact of resource extraction, deforestation, the use of fossil fuels and related greenhouse gas emissions or the massive waste disposal challenge that they face. A focus on greenhouse gas emissions alone only addresses part of the problem. By providing the holistic or systemic levers to truly transform our economies, circular economy offers a range of solutions which often address greenhouse gas emissions and unsustainable resource use jointly. 5. Introducing new approaches to capacity buildingInternational cooperation builds on three pillars: finance, technology transfer, and capacity-building. Moving away from a linear economic model requires systemic change and insights into the resource and energy metabolism of an economy. Systemic or metabolic approaches are common analytical tools to identify and assess circular economy options and should be applied more often to identify low-carbon development options. With the exception of India, Lao PDR** and a handful of OECD countries, they have hardly been used. Because of their potential to elevate the mitigation ambition of the Paris Agreement, metabolic approaches should become a cornerstone of capacity building on climate action.*This estimate varies between different sources. According to S. Paulik (2014) “emissions embodied in international trade change the footprint of many countries by 30% or more”. According to G.P.Peters (2008) “22% of global CO2 emissions are embodied in international trade”.**UNDP, "Circular economy strategies for Lao PDR - A metabolic approach to redefine resource efficient and low-carbon development" (forthcoming), a project with Shifting Paradigms, FABRICations and Circle Economy[hr]
A transition to the circular economy will require significant investment to research, develop, pilot and scale promising solutions. The final blog in our series will delve into specific steps to mobilise climate finance to support this transition.