Circular economy worth $2 trillion to Australian economy

28 March 2021 Consultancy.com.au 4 min. read
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Establishing a circular economy in Australia presents a massive $2 trillion opportunity according to accounting and consulting firm PwC, with significant environmental benefits to boot.

Sticking with a linear economy could cost Australia almost $2 trillion in forsaken economic benefits over the next twenty years, while transitioning to a circular economy might not only realise these gains but also prevent over 150 million tonnes of carbon dioxide from escaping into the atmosphere annually by 2040 – roughly around the time that global demand for gas is expected to peak. With net-zero emissions targets then just around the corner, it seems like a no-brainer to make the switch.

The figures are courtesy of professional services firm PwC, which in its latest modelling believes Australia could generate up to $1,860 billion in direct economic benefits through to 2040 by adopting a circular economy, and in doing so potentially shave 165 million tonnes of CO2 from the nation’s footprint per year by that time. Doing so however, and fully realising the economic and environmental potential, will require a concerted effort and the need for early progress.

Linear economy model

A renewed mindset among policy-makers, producers, manufactures, distributors, consumers and others – one which treats waste as a leakage of value to be avoided rather than dismissed – will also be required to establish a more sustainable circular economy with fewer emissions in place of the traditional linear model, guided according to PwC by the three principles of: optimising the consumption of finite resources, maximising product utilisation, and recovering by-products and waste.

75 million tonnes of waste

A linear economic model operates in the pattern of, crudely; source, make, use and dump, exacerbated by ever-increasing low-cost manufacturing and consumption. As it stands, upwards of 90 percent of the all raw materials dug from the ground or sourced elsewhere do not find their way back into the economy, while Australia currently generates nearly 75 million tonnes of waste per year. Meanwhile, commodities prices are on their way to tripling since the turn of the century.

“Every year millions of tonnes of materials are lost to landfill, such as plastics, paper, glass, metals, textiles, masonry, food and other organic materials. These are all potential sources of significant value and resources that are going to waste,” state the report authors, with PwC Chief Economist Jeremy Thorpe adding that, given the hundreds of billions of dollars worth of construction work presently underway, now is the logical time to institute circular building practices.

In compiling its report, PwC gave consideration to the industry, mobility, community, and built environment segments of the Australian economy, with, industry aside, circular-minded adjustments to the building sector accounting for the bulk of the economic promise, at a projected ~$775 billion over twenty years. Construction and demolition alone produces basically the same amount of ‘core waste’ in Australia as all other commercial and industrial activities combined.

Australia economic benefits of circular economy

Drilling down further (or preferably not as is the case), of the high priority opportunities highlighted by PwC with respect to circular practices in the building sector, such as district cooling and modular construction, simple high value recycling and the reuse of modules could again reap the greatest rewards, a huge ~$485 billion across the twenty-year time-frame. As it stands, around only two thirds of core construction waste is recovered, leaving plenty of scope for more.

Here, PwC contends that disassembly should be favored ahead of demolition at end-of-life (a process presumably made simpler and cheaper if factored in at the time of construction), with the resulting high-value recycling reducing waste and also then material costs by up to 30 percent while only increasing labour by an estimated 5 percent – in the process supporting jobs. Recycling construction modules also reduces the energy needed to extract and process virgin resources.

“As our population grows, and particularly grows in our cities, we’re seeing more amounts of waste and more emissions,” Thorpe, who previously headed PwC in Canberra, told Fairfax.

“The challenge today is that not all second-hand materials are price competitive, but by incentivising the types of economic activity that help nature’s ecosystems rather than deplete them, lawmakers have the power to protect the environment and accelerate the transition to a circular economy.”