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Circular transition: if not now, when?

In terms of employment, Italy ranks second in the EU for number of employees in the recovery, recycling and reuse sectors. It's important to take this opportunity for economic development.

by Daniele Fattibene - IAI
18 March 2021
8 min read
by Daniele Fattibene - IAI
18 March 2021
8 min read

Environmental and social benefits

The transition to a circular production and consumption model based on economic, social and environmental sustainability is one of the most important and controversial challenges for Europe and Italy. As recently stated by the European Commission, the application of a series of measures to support the circular economy could generate an increase in the EU's GDP of around 0.5 percent a year until 2030, creating around 700,000 new jobs. The circular transition is expected to produce a range of both economic and environmental benefits. In fact, a report by the Ellen Macarthur Foundation estimates that for plastics alone, the circular use of this material can reduce the amount of plastics and microplastics in our oceans by 80 percent, with savings of up to USD 200 billion, a 25 percent reduction in global greenhouse gas emissions and the creation of 700,000 net additional jobs by 2040. While, on the one hand, the circular economy is a great opportunity, it is also important to be aware that this transition will inevitably entail costs and, therefore, it is essential that those who risk finding themselves unprepared in this process of transformation are offered guidance and support, especially small and medium-sized enterprises.

The state of the circular economy in Italy: the 2020 Budget Law

In Italy, the real challenge will be to exploit to the full the enormous potential offered by the National Recovery and Resilience Plan (PNRR). On a political and regulatory level, the circular economy has become an increasingly important issue in our country. Italy has already implemented the EU Action Plan for the circular economy by issuing a series of specific legislative decrees on various issues (e.g., waste, packaging, batteries and electrical and electronic equipment, or end-of-life vehicles). Furthermore, according to a recent report by the Italian Alliance for Sustainable Development (ASviS) in recent years the composite indicators of responsible production and consumption have improved significantly, with considerable progress for the Material Circularity Indicator and the waste recycling rate, while domestic material consumption per unit of GDP is falling constantly (-27.5 percent compared to 2010).

To this effect, a report published last year by Circular Economy Network and ENEA names Italy as the leading nation in Europe, followed by France and Germany, in terms of circularity indicator, the indicator that measures the efficient use of resources in five categories: production, consumption, waste management, trade of secondary raw materials, investment and employment. In terms of employment, our country ranks second in the EU for number of employees in the recovery, recycling and reuse sectors, second only to Germany. In fact, the report estimates that there are more than half a million people employed in these sectors, or 2 percent of the national workforce, compared to an EU average of 1.7 percent, a positive trend that has unfortunately fallen by 1 percent compared to 2010. In this context, the 2020 Budget Law has already included some important initiatives that look in this direction. For example, in terms of responsible production, the Budget Law introduces a “plastic tax” from July 1, provides incentives for reducing the production of packaging waste, promotes the adoption of drinking water filtration systems, a system for monitoring the reduction in the consumption of plastic containers for drinking water and the introduction of incentives for users and consumers for container deposit schemes. Although these measures move in the right direction, they risk not being very systemic, leading to a general increase in product prices, however, without driving the production sector towards effective industrial transformation.

The challenge for the PNRR

The National Recovery and Resilience Plan (PNRR) offers an extraordinary opportunity for Italy to achieve this circular transition, with an envisaged EUR 7 billion by 2026. After the Commission presented the guidelines for member states, the previous government approved a first proposal for the PNRR which was sent to the Senate. The circular economy is one of the six missions of the PNRR (entitled Green Revolution and Ecological Transition) and includes four components. Of these, the first three are relevant to the circular economy. The first (Sustainable Agriculture and Circular Economy), seeks to promote environmental sustainability in the agricultural supply chain, support for innovative decarbonization projects and the transition to sustainable and certified processes, which adopt the principles of Life Cycle Assessment (LCA) to evaluate the environmental footprint of products and services. The second (Circular Economy and Valorization of the Integrated Waste Cycle), focuses on the revamping of existing installations and the construction of new plants for the valorization and closure of the waste cycle, in particular in large metropolitan areas of Central and Southern Italy. Finally, the third component (Circular Economy Projects for the Transformation of Industrial Processes) aims to support the transformation of industries (e.g., the petrochemical sector) through interventions by tender to replace more polluting raw materials with recycled materials. To achieve these objectives, the PNRR envisages a series of reforms, including the revision of the environmental tax system, and the definition of a national circular economy strategy by the Ministry of the Environment. 

An unrepeatable opportunity

The new government led by Mario Draghi will be called upon to present the final version of the PNRR to the European Commission by April 30. While it is not yet clear how far the new PNRR will differ from the old plan, it is clear that the transition towards a circular and sustainable economic model must play a primary role. The PNRR must help mobilize significant resources to accelerate this transition, by innovating the production models of businesses and preparing the Italian population for new employment opportunities. In this context, despite the significant efforts made at European level, many member states, including Italy, have not yet developed clear roadmaps for the transposition of European directives at national level, while there are no clear operational guidelines for adopting circular models or metrics for monitoring the transition.

Italian and European political decision-makers are therefore called upon to seize this important opportunity. It is essential that the huge public funding packages launched by the various countries of the world (USD 10 trillion alone by fall 2020) intercept these changes and take the opportunity to promote economic development that guarantees prosperity within planetary boundaries. Not only must European governments indicate a clear and precise direction of travel, but they must also invest the necessary resources to trigger this radical transformation, and create the founding conditions for truly systemic solutions. To this effect, the Italian Presidency of the G20 and the co-Presidency of the G7 with the United Kingdom are unique opportunities to shape the international political agenda and enable our country to act as a driving force for transition based on the principles of economic, social and environmental sustainability and inter-generational justice.

The author: Daniele Fattibene

Researcher at the Istituto Affari Internazionali (IAI), where he works on projects relating to sustainability and international development cooperation. He is coordinator of the Task Force on Agenda 2030 and Development Cooperation of Think20