Circular Economy Scotland - in partnership with
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Circular Economy Scotland in partnership with
Summary
Rising resource risks and the growing However, the wider lessons for government Summary: circular economy opportunities in three Scottish sectors
recognition of the economic value being lost focus on how Scotland might capture the
in waste have raised business interest in the biggest circular economy opportunities. Less radical More radical
circular economy. These trends are feeding a Scotland is already ahead in resource
more interventionist approach to resource efficiency opportunities, particularly for
Oil and gas Better metal alloy Improved asset reuse, Reuse of existing pipelines
policy in countries as diverse as the US, materials. As such, it is well positioned to separation to improve within the industry and in for a carbon capture and
China, Germany, Japan and Korea. This capitalise on its high social connectedness recycling related sectors storage network
analysis shows how Scotland could help to and policy leadership on low carbon
make its economy more circular, by assessing technology to develop and pilot more Food and drink Food redistribution and Biorefining: improved Biorefining: extraction of
potential opportunities in three exemplar innovative, valuable, and ambitious circular anaerobic digestion for fermentation to produce specialist chemicals from
energy chemicals separated feedstocks
sectors, and developing these into a wider economy business models and technologies.
suite of lessons for government as a whole. To enable this to happen, we conclude that
Scotland needs a targeted, challenge-led Finance More recyclate, but not More circular economy Scottish private finance
The analysis draws on Green Alliance’s
innovation strategy run by institutions more reprocessing leads to infrastructure and piloting of circular economy
experience of working with the businesses limited investment in Scotland infrastructure abroad
in the UK’s Circular Economy Task Force. empowered to drive technically risky, but
It also derives from a programme of potential big win circular economy pilot
engagement with the businesses and political projects.
actors in Scotland’s oil and gas, food and Because Scotland is a relatively small
drink and finance sectors, which we have country, this strategy will be more likely to
undertaken with the Scottish Council for succeed if targeted towards innovations that
Development and Industry (SCDI). will help Scotland’s key sectors adapt to a
We draw out scenarios based on the more resource constrained world.
interaction between opportunities and all Scotland’s existing innovation institutions
decision makers’ appetite for risk, desire for could fulfil this role, if politicians provide a
government intervention and the political mandate for them to be bold, bearing in
will to act. As such, recommendations for mind that innovation inevitably leads to
action in specific sectors are presented as a failures as well as successes.
menu of options. 1Introduction
Achieving a more circular economy will Keeping
Keeping value in a circular value in a
economy
What is a circular economy? circular economy
mean governing differently. More
collaboration, both within and across
At its best, a circular economy restores old
sectors, needs to be underpinned by more User
products, parts and materials back to their
entrepreneurial institutions, whether led by
original use in a way that uses the least
the state or industry.
resources to deliver the same function.
Our analysis of three key sectors in Scotland
Ideally, this means direct reuse of products,
shows which circular economy
which preserves both the highly
opportunities might be possible, given a
engineered character of a product and its
range of different technical, political and
useful function. Where a product needs
social drivers.
repair or reconditioning before it can be
used again, remanufacturing preserves the
most value. These are the tightest ‘loops’
within a circular economy.
Re us e
Re p air
Closed l
port costs
Op en loo
p ar t s
The next best route is recycling, which can
ace
/ re
Trans
oop
be closed or open loop. Closed loop recycling
epl
p re
s
osts
ma
st
o
tc
/r
or
re c
turns products into materials that can be used fa sp
rt c
nu
air
cyc
ct Tran
ep
po
yc
to create the products they were recovered ur
li n
/r
e
ns
ss
li n
se
Tra
g/
As
g
So
from: examples include glass bottle to glass
rt a
ca
Transport costs
bottle or specialty alloy to specialty alloy
nd
s ca
in So
cle
rt /
d
recycling. In contrast, open loop recycling, or g
an
dis ell
l
el
ass res /r
es
emb /
downcycling, creates material suitable only le / m
elt Cast / r
eform rm
efo
for lower value applications. For example, /r
st
Ca
glass bottles can be used for construction
Disa
ssemb
aggregate and specialty alloys can be le / melt
downcycled into bulk metals. Although lower
value, this avoids the use of new materials. 2Scotland’s unique Institutions Scottish policy has pushed renewables development ahead of the rest of the UK
Scotland has many institutions which could
characteristics help to develop and commercialise new
technologies and business practices in a
Scotland has a suite of opportunities and circular economy. Renewable electricity 22%
challenges, derived from its particular consumed per capita
political climate, policies, institutions and across the UK 2011-12
Notably, its new innovation centres could
scale. build on international innovation policy
experience to bring forward technologies 6%
Politics and policy and business models for the circular
Scottish politics and policy has featured a economy; Scotland’s enterprise agencies 5% 11%
consistent narrative in favour of renewables have the opportunity to play a co-
and on the value of industrial strategy. ordination and funding role in bringing
This has helped to de-risk investment in new technologies and start ups out of the
both on and offshore wind. Similarly, lab and into the market; and Scotland’s
Scotland’s Zero Waste regulations have trade bodies and cross sectoral convenors,
been more comprehensive and targeted such as the SCDI, can help to diffuse
than other parts of the UK. But more innovative ideas and promote collaboration.
co-ordination and targeted policy will be
needed to secure supply chain
collaboration and investment in a circular
economy.
£85.38 £325.54 £147.35 £100.03
England Scotland Wales N Ireland
Investment in renewables per capita
April 2011 – March 2012
3Scale and geography Scotland population density: How could Scotland’s key
Scotland has an economies of scale by council area, 2009
challenge. Low population density outside
sectors benefit from the circular
the central belt limits large scale economy?
reprocessing, meaning that the
opportunities are likely to be in high value The analysis presented here focuses on
reuse and remanufacturing loops, or three sectors: oil and gas, food and drink,
greater separation of higher value materials. and finance. These were drawn from the
growth sectors targeted by the Scottish
Scotland’s relatively small size has an Government Economic Strategy.
upside, however, in greater social
connectedness. Concentration of economic The examples we give are all deliverable,
activity in a few, highly networked sectors but the main goal of our analysis has been
lowers the cost of collaboration and to understand what governance and policy
increases the viability of cross sectoral changes might be required to achieve a
projects and resource use. circular economy more widely in Scotland.
Each section identifies opportunities,
ranging from the least radical options to
the most radical: which serve to reflect how
Population density, 2010 far away the business models and
(people per sq km)
technology choices needed are from the
2,500 or over current situation.
1,000 – 2,499
500 – 999
250 – 499 The final section outlines the lessons from
100 – 249 the analysis, to inform the Scottish
99 or under
government’s approach to its future circular
© Crown copyright and database right 2010. Ordnance Survey Licence number ONS 100019153
economy roadmap.
4Key sector
Oil and gas
The oil and gas sector is a large user of The benefit of better value recovery would Potential circular economy interventions for
materials and a major economic force in not only be felt by the oil and gas industry. the Scottish oil and gas industry
Scotland. It’s also, essentially, a linear, An estimated 60 per cent of the cost of
extractive business but, even so, there are decommissioning “will ultimately be
Less radical More radical
significant circular economy opportunities. borne by the government through tax
relief.”3 This suggests that a government-
Decommissioning of offshore assets is industry partnership would make sense. Better deployment EXRDF scanners Material
of existing technology property testing
expected to involve spending £10 billion
over the next decade, and £35-50 billion by Extracting maximum value from a circular
2040.1 It will transport 405,000 tonnes of economy approach for the oil and gas
material onshore between 2013 and 2022, industry will require multiple Improved information Shared database
sharing of decommissioned
with opportunities for improved recycling interventions. The graphic right outlines assets
and enhanced reuse. 2 how interventions in four domains might
foster different outcomes.
Perhaps the biggest opportunity is reusing Co-ordinated An ‘eBay’ for Public plan for
infrastructure construction CCS roll out and
infrastructure for carbon capture and planning materials pipeline reuse
storage (CCS). This technology will be
needed to decarbonise industry and would
Technology CCS
help to decarbonise the power sector. The forcing development
UK has a strong combination of
engineering skills and appropriate geology
to lead its development.
Better metal alloy Improved asset reuse, Reuse of existing pipelines
separation to improve within the industry and in for a carbon capture and
recycling related sectors storage network
5Least radical: better alloy improvement as the decommissioning Materials in the Schiehallion rig5
process already includes some metal grade
separation information. The large tonnages of the Over $1m in copper value
alone in a similar rig
metals involved mean that specialist
Oil rigs use a large amount of high grade recycling should be viable, creating an
steel and other specialist alloys. These take a industrial opportunity.
lot of energy and sometimes rare materials
to make. Although recycling rates are high, Some decommissioining reports identify Other
it is unclear whether the value of these 20%
alloys and quantities of material, including
alloys is preserved when rigs are X60/65 microalloy steel (contains
decommissioned. niobium); duplex stainless steels (22-25%
Carbon steel
chromium); titanium; and Cu-Ni alloys. 32C1 steel 56%
Alloy content matters. Alloys are tuned to This allows an estimation of value: Hutton 13%
deliver very specific material characteristics: contained $1 million in copper alone6, and
hardness, ductility, malleability, corrosion duplex steel, which this rig has in
resistance, etc. When several alloys are abundance, is nearly double the price of
mixed together, these properties are lost. mild steel.
Although a few alloying agents can be
readily separated when mixed, many However, decommissioning reports don’t Stainless
cannot.4 As a result, recyclers must dilute steel
always produce detailed information, 4%
alloys with virgin metal so they don’t affect which can be as generic as ‘steel’ or as Inconel 625
the properties of recycled steel, and then detailed as the alloy grade. This means it’s 7%
add new agents to recreate new alloys. This Superalloy used in aerospace,
unclear how much specialist recycling is chemicals, energy and marine sectors
process wastes energy and materials. happening. Better information sharing
would ensure that all materials are
The least radical circular economy option recovered in the best possible way.
for the oil and gas sector is to separate high
quality metal alloys better, enabling more
effective recycling. This is an incremental
6How to make it pay: examples from The shipping industry provides an example How new technology can help
the car and shipping industries that’s closer to home. Maersk uses many of New technology makes identifying specific
The car industry has developed a business the same materials as the oil and gas alloys straightforward. Handheld EDXRF
model which could be adopted by oil and industry. It provides a good proxy for what scanners, which have only become available
gas companies. Car manufacturers contract the oil and gas industry could do with its recently, are:
with metal recyclers to maintain ownership assets. Maersk’s ability to categorise and
over metals used in autocatalysts, which separate different alloys means it’s likely to • able to distinguish between thousands of
they use in the next generation of cars. This sell scrap metals for ten per cent more than alloys in less than ten seconds;8
creates an incentive to separate which unseparated steel.7 This reduces the energy
guarantees material supply for needed for recycling and demand for virgin • inexpensive relative to overall
manufacturers and enables better recycling. materials. decommissioning costs, with a payback
Large integrated oil and gas companies period of under one year for a recycler;
could explore this for specialist metals.
• already used by some specialist recyclers.
9
A recyclable ship
Local authority recycling contracts split the
The Triple-E class will be designed for future safe and sound recycling. A new ‘Cradle-to-Cradle’
passport will be developed which will list the materials used to build the vessel, where they are profits from better separation between the
located and how they can be correctly disassembled and recycled. recycler and local authority seller. Cheaply
available separation technology means that
oil and gas companies could insist that
decommissioning companies separate the
alloys and share the additional revenue
98% of the Triple-E class vessel is steel gained from better separation.
High grade steel Low grade steel Copper
7More radical: reusing assets In the US, reuse and remanufacturing of If pipelines and steel can’t be reused within Further examples of oil and gas
heavy equipment used in the oil and gas the industry and are not valuable enough to industry steel reuse12
industry was worth $7.7 billion in 2011. export, products could be diverted to
Reuse is much more valuable than
Demand for reused equipment rose construction. This already happened in the
recycling. This is because reuse preserves
50 per cent between 2009 and 2011.11 construction of London’s 2012 Olympic
some or all of the function of the product.
Opportunities to reuse motors, engines, stadium, which used surplus pipelines as
In the case of pipelines, reuse could be
valves and other industrial equipment structural steel. Importantly, the steel used
worth five times the scrap value of the steel,
exist in other sectors abroad, including was not guaranteed for its structural
or even more, if reusing the pipelines
construction and farming. But reuse suitability but the Olympic Delivery Authority
means that new pipelines do not have to
companies need to know what’s available was able to test the steel cost effectively to
be built. But reuse is uncommon in the
at least a year in advance to be able to find ensure it would not fail. Similar measures
North Sea.
a suitable buyer. could be taken to ensure all UK safety
Reusing pipelines (values per km)10 regulations are respected, but this and other
experience shows that reuse is compatible
with strong health and safety rules.
A similar process could be used for From gasholder to office, Naaldwijk, the Netherlands
decommissioned oil and gas industry
£1.63m if reused for CCS assets, but would require more visibility
when the assets are brought ashore; this
could be provided through an ‘ebay’ style
portal for reusable materials and changes to
the way decommissioning is undertaken.
£0.26m if reused for construction
Another option is to reroll steel plate and
cut it into rebar for construction. This is
common practice in Indian shipbreaking,
but is less ideal as it uses more materials BedZed’s reused girders, London
£0.05m for scrap
and energy in processing.
8Most radical: direct reuse skills acquired by going early on CCS CCS opportunities14
networks in Scotland valuable to a wider
for carbon capture and storage market. Given the constraints on onshore
Faroe – Shetland Basin
CO2 storage, Scotland might also be able to
Pipelines could readily be repurposed to sell storage space under the North Sea if its
transport CO2 instead of gas, this would network is readily accessible.
eliminate the cost of removing them. This is
technically straightforward: pipeline and For pipeline to be reused in this way,
platform age, fatigue life and existing UK Northern and Central
collaboration across the oil and gas industry North Sea Basin
corrosion are all known, although and a plan for CCS roll-out are needed. The (including the inner Moray
Firth Basin)
confidential. The proposed Peterhead CCS industry itself has come up with a suitable
project already incorporates pipeline reuse. mechanism for this in the Wood Review,
although it is currently intended for more
The cost of pipelines is a significant fraction extraction. It has two elements: CO2 sources
of the cost of CCS: “an integrated transport Peterhead
and storage network… promises the • an industrial strategy, for setting an Power CCS pilot
biggest contribution to cost reduction for agreed industry-wide goal; Other sources
CCS in due course” according to Mott
Macdonald.13 Reusing infrastructure as part • a regulator to enforce collaboration to Forth Estuary
of an integrated network would reduce achieve the goal. CO2 sinks
costs further. Teesside
Many of the details are similar, including UK sedimentary UK Southern
For this to be a viable option, basins
‘the shared use of infrastructure’ and the North Sea Basin
masterplanning is necessary to link up creation of ‘hubs and clusters’ bringing Condensate field
multiple sources of CO2. Fortunately, different companies together and jointly Humber
Scottish and UK sources are reasonably well using transport and processing Gas field East Irish
Sea Basin
clustered. In the medium term, there is infrastructure. This framework could easily Oil field
plenty of demand for CO2 storage from be adapted to take up the better recycling,
across the EU, making the knowledge and reuse and CCS opportunities outlined here. Potential CCS
development zone
9Key sector
Food and drink
Scotland has a strong food and drink sector, materials and feedstock is perishable and Potential circular economy interventions for the
producing waste and byproducts which, if sometimes seasonal. Also, biorefining is not Scottish food and drink sector
captured and processed effectively, could be yet commercially proven, and requires
more valuable and resource efficient. New much greater interaction between
Less radical More radical
technology and much greater co- companies in very different sectors
ordination across sectors will be required
to maximise the opportunity. Nevertheless, Scotland has a range of Better deployment Food waste
of existing technology collection
research centres and start ups working on
The size of the prize is likely to be overcoming these technical and economic
substantial even if improvements are challenges. Government assistance with
incremental: better use of biowaste is co-ordination and innovation policy is Improved information Link retailer stock Link waste stock
sharing management systems management systems
estimated to be worth €1 billion per year to likely to be needed to realise more of these and redistributors and transport
the Netherlands.15 This value largely comes advanced opportunities. We outline here
from better application of existing three scenarios showing how intervention
Co-ordinated Co-ordinated siting Feedstock
technologies, largely through the anaerobic might influence which ones are realised. infrastructure of multimaterial separation and
digestion of animal waste. A similar figure, planning biorefineries industrial symbiosis
scaled down for the size of the economy, is
likely to be possible for Scotland. Technology Biorefining and
forcing synthetic biology
But creating more value will mean developing
biorefining, a process of capturing valuable
chemicals from biomass. However, doing
so is complicated by a number of factors:
water content limits the transport of many Food redistribution and Biorefining: improved Biorefining: extraction of
anaerobic digestion for fermentation to produce specialist chemicals from
energy chemicals separated feedstocks
10Least radical: redistribute Improving food redistribution Digital gleaning Anaerobic digestion
Food redistribution could be facilitated by Gleaning describes an old practice of As a way of recovering the value from waste
edible food and anaerobically extending supermarket distribution IT. volunteers helping to harvest food which food, anaerobic digestion (AD) is proven,
digest all waste Food in supermarket supply chains is well would otherwise not be harvested. It has financially supported and requires only
tracked. In contrast, redistributed food only been an informal activity, reliant on limited collaboration. Digesting all the food
Under any scenario, even with only limited tops up stocks at food banks rather than volunteers in the local community. eBay has waste in Scotland would save £23 million
collaboration and technological innovation, replacing the food ordered from already enabled unwanted products to be in avoided landfill costs, and gain £27
ensuring that edible food is consumed wholesalers, because the food banks don’t reused by linking buyers and sellers. A million of value from generated energy. AD
should be top priority. The two main know how much redistributed food will be similar system could work for fruit and could produce 337GWh of biogas which is
preconsumer sources of food waste are: available in advance. Better information and vegetables, with farmers advertising the about 0.5 per cent of Scottish heat demand
more notice would mean these charities availability of their surpluses. The costs of by 2020.19 Given existing good practice
Supply chains: 45-60 kilotonnes of food
•
could count on redistributed food and buy such a system would be modest, and even a and policy in Scotland, this is likely to
in Scottish supply chains could be
less food to feed the same number of small increase in the use of harvested food become the norm. AD of other
redistributed to people each year, with an
people. Integrating Fareshare (and others) could be significant. biodegradable wastes would increase
approximate value of £50 million.16
into food retailers’ supply chain biogas production and the value captured
In-field food losses: WRAP estimates that
management systems would reduce their for the economy.
•
three megatonnes of food is wasted prior costs and enable more efficient food
to harvest across the UK every year.17 FAO redistribution.
data suggests root and tuber crops, fruit
and vegetables and fish are the major
areas of loss.18
11More radical: Biorefining
A single sector approach: whisky A multi-sector approach: whisky, biorefining these prior to AD, can extract
Developing a circular economy approach fish and pharma two additional, valuable products: protein
for one sector is possible, but has By contrast, working across sectors enables meal for fish farming, which displaces fish
limitations. For example, acting on its own, higher value products to be captured from meal and is worth around £1,500 per
the whisky industry is improving resource wastes and byproducts. In the example tonne, compared to the £50 per tonne for
productivity by capturing heat and below, the whisky industry could still pot ale syrup;20 and phytosterols, which
electricity from its byproducts. capture heat and electricity, but by help to manage cholesterol levels.
Heat and Heat and Anaerobic
electricity electricity Digestion
Whisky Spent ale Fish
Whisky Anaerobic distilleries
distilleries Digestion
Pot ale Bioreactor High lysine Salmon Fish oil
Pot ale protein meal fishing
Draff Draff Bioreactor Spent grains
Phytosterols Pharma-
etc ceuticals
12Two ways of biorefining Extraction: existing chemicals made by Farm type by parish22
Capturing higher value products can be plants are extracted and purified. Compared
done in two ways: to fermentation, outputs are more valuable
but there is much more technology,
Conversion: Fermentation of cellulose, feedstock and market risk, making this the
hemicellulose or lignin to create platform most radical bioeconomy option. Several
chemicals. This builds on existing work feedstocks are available in Scotland,
done for second generation biofuels. including whisky byproducts, for
Fermentation by specialist bacteria creates phytosterols and protein; potato hulm, for
the precursors to bioplastics, including chaconine and solanine for pesticides; and
PLA, PEF and others.21 These plastics may some fish waste, for omega 3 oils.
have properties that are better suited to
food storage than fossil fuel derived plastics The challenges for biorefining
and consequently should have market value
in addition to their green credentials. They Transport and the availability and
are also worth more than energy, such as seasonality of feedstock
bioethanol or biogas. In theory, the process The Scottish government collects very
to create them is tolerant of multiple, detailed data on production, as illustrated
different inputs and able to produce by the detailed map of farming types
multiple, different outputs. This means it shown on the right, but there is currently
should be more resilient to feedstock and no equivalent for waste and byproducts,
market risk than single output plants, like which makes it harder to get an overview
first generation biofuel plants. However, of the opportunities available. Scottish
there are few examples of commercial Enterprise is analysing feedstocks to Cereals Dairy
platform chemicals plants, making this a inform business and government; this General cropping Cattle and sheep (LFA)
more radical bioeconomy option than should provide a basis for brokering
Horticulture Cattle and sheep (lowland)
anaerobic digestion. opportunities and an analysis of
infrastructure lock-in risk. Specialist pigs Mixed
Specialist poultry Other 13Infrastructure lock-in risk By comparison, 9-13Mt of total biological Scale of bioeconomy factories and Sugar
refinery
Some bioeconomy opportunities may byproducts and wastes are thought to be their traditional counterparts 50kt per year
allow for evolutionary change in available in Scotland.23 There’s a choice
infrastructure. For example, extracting between larger, lower value, more flexible
Polylactic acid
proteins from whisky pot ale, as described technologies which are nearer to market, (plastic) plant
above, improves AD gas or liquid biofuel such as biofuels, and higher value, but 60kt per year Anaerobic
digestion
yield, so these processes don’t compete for more inflexible ones, which carry more 35kt per year
feedstock. technological risk.
Straw
biorefinery
But other opportunities are subject to Scotland only has enough feedstock for 150kt per year
feedstock competition and infrastructure one, or perhaps two, biofuel plants able to Isobutanol plant
200kt per year
incompatibility, creating create lock-in scale up to compete with fossil fuels. In
risks. For instance: contrast, a larger number small scale plants
could be more resilient to changing
• converting biomass into platform economic conditions. This may mean that
chemicals relies on substantially the same higher value, low volume options are
feedstock as AD; preferable, but these are likely to need
intervention to achieve.
• pot ale syrup production competes with
Oil refinery Polyethylene plant
AD and protein recovery technologies for 5Mt per year 1.2Mt per year
feedstock;
• the scale of production for different
systems varies, affecting transport
networks and the number of supply chain
actors. Rough scales for different Bioethylene
technologies are shown on the right. (platform chemical)
300kt per year
14The importance of brokering There are two strategies for brokering: Challenges and interventions for biowaste
Many of the challenges outlined above can
be eased by using Scotland’s institutions as Area based: this is likely to make most Challenge Intervention
brokers, to match feedstock with potential sense in Scotland’s more remote locations,
users; to help address transport challenges especially on islands. This brokering role
and lock-in risk; or to support the financing could be fulfilled by local authorities, Transport Big business can organise this independently,
of new projects. though they would need to work across the but remote regions and SMEs will need brokers
municipal and commercial waste divide to
Brokering is most important at smaller Availability and seasonality of feedstock Feedstock assessment, which Scottish
maximise opportunities.
Enterprise is undertaking
scales, both of geography and business. For
example, just 200 of the 1,200 food and Sector based: for high value, higher Infrastructure lock-in Outline assessment of the fit of different
drink manufacturers in Scotland have volume feedstocks. Examples include fallen feedstocks with technologies
revenues over £1 million. These SMEs are stock from salmon farms, to recover
likely to require assistance to access high fishmeal and fish oils; protein recovery and Finance Overview of how subsidy, waste regulations
value recovery opportunities. platform chemicals from the higher and fossil fuel price projections affect
volume whisky distilleries; and biorefining bioreactors
from forestry by-products.
Durability of the market for outputs Leave to the market to assess
Effective brokering needs to be guided by
an assessment of technology maturity and
the scale of operation required by different
biorefining processes. Indicative thresholds
could help to inform the scale for collection
and convening.
The table on the right is an overview of
these main challenges to extracting more
value from biowaste, and the possible
interventions to overcome them.
15Key sector
Finance
The finance sector does not produce or To illustrate how these two needs might be Potential circular economy interventions for the Scottish finance sector
consume large quantities of resources, but addressed together, so that more circular
is a key enabler for the circular economy. economy infrastructure can be financed, Less radical More radical
Understanding how finance can play a part three scenarios are outlined on the right
in the circular economy in Scotland means which capture a range of possible
seeing the circular economy is an interventions and outcomes. Better deployment Separate collection,
of existing technology improved materials
innovation process, which has two key recovery facilities
elements:
Co-ordination: high value opportunities, Improved information Public arisings data Government/industry
sharing for business and led finance-finding
via reuse or remanufacturing, need municipal arisings institution
designers, manufacturers, retailers and
logistics companies to work together to
Co-ordinated Government-led Finance sector-led
make and move products. infrastructure convening across convening across
planning supply chains/business supply chains/business
Technology: achieving technology
innovation requires new means to share Technology Government-led
information about a product’s lifetime, forcing multi-sector
repair, and function, along with new innovation pipeline
technologies to reprocess, redesign and
remanufacture.
More recyclate, but not More circular economy Scottish private finance
more reprocessing leads to infrastructure and piloting of circular economy
limited investment in Scotland infrastructure abroad
16Existing policy may hamper biomass… which are not counteracted by Different support systems for energy and materials in Germany.25
taxes on fossil carbon sources as a raw
circular economy finance material.”24
opportunities Instruments Biofuels Biogas for Wood pellets Material use, bio based
electricity for electricity products
Closed loop recycling, reuse, biorefining or heating
There is significant finance available for the and remanufacturing should not need to be
resources sector, but it is focused on energy Tax incentives Yes (Yes) Yes No
subsidised once scaled up but, where there
from waste (EfW) technologies. Interviews is competition for feedstock or finance, Quotas (biofuels, RED) Yes Yes Yes No
we conducted with finance professionals in public policy should be adjusted to enable EEG (electricity/heat) Yes Yes Yes -
Scotland suggest this is not because the these technologies to compete. Emissions trading Yes Yes Yes No
finance community believes EfW
(ETS)
maximises value recovery. Rather, Because of its scale, Scotland may need to
investment takes place because of subsidy; work with other governments to address Market introduction Yes Yes Yes Yes (but largely expired)
for example through financial support for schemes or special (for lubricants, insulation
existing market incentives: for example,
market regulations and bioplastic packaging)
pyrolysis and gasification; PPP contracts; there is strong demand for refuse derived
and feedstock guarantees, via local fuel in other parts of Europe, and UK policy Others (eg rural Yes Yes Yes No (CAP reform proposal
authority contracts. favours biomass for energy. development scheme) 2011: Yes)
Research and Yes Yes Yes Yes
Although recycling captures more value development
from materials, fluctuations in the market
value of recycled plastics are seen as risky,
compared to the stable returns created
through subsidy. Getting finance for higher
value circular loops will require a
reassessment of current policy. The German
government’s assessment for biobased
materials concludes that “market distortion
hinders the competitiveness of producers
of materials [rather than energy] from
17Least radical: incremental In the case of abiotic materials, better The recently announced Scottish Materials
sorting might also enable incremental Brokerage Service could fill these data gaps,
improvements to circular improvement in financing of circular especially if data about commercial and
economy finance economy infrastructure. The scale of industrial waste is included. To capture the
feedstock required for closed loop plastics very high value options, it would ideally
As in previous scenarios, limited reprocessing, and WEEE or large scale metal need to provide more specific information
collaboration and technological innovation recycling, means that investors have a bias for about materials than existing European
mean that much of the value of the circular projects closer to large sources of arisings, Waste Codes data.
economy can’t be captured, or in this case, ie locations outside Scotland. Scotland’s
can’t be financed. existing strategy of improving sorting, if There is, of course, no guarantee that the
extended, might enable smaller scale, infrastructure using Scottish materials
In the case of biobased feedstock, anaerobic would be built in Scotland. Instead, due to
feedstock specific recycling plants to be built
digestion is a proven technology, viable at scale and geography challenges, feedstock
in Scotland. For example, Biffa Polymers in
small scale, supported by subsidy and exports for some materials may make the
Redcar switched from mixed plastics to
Scotland’s zero waste regulations to most financial sense.
single stream polypropylene, which makes
improve feedstock availability. This makes it
its relatively small scale, just 20,000 tonnes
the most bankable circular economy Overall, this least radical approach is likely
per year, economically viable.27
option, suggesting improved feedstock to see limited investment as the finance
separation would enable the finance There are also data driven, sector-specific community focuses on easier opportunities
community to support more AD. In opportunities. Feedstock risks could be elsewhere. However, Scotland would
contrast, finance for projects with reduced by identifying a range of potential benefit from capturing more value from
marginally higher technical risk is unlikely suppliers through much more detailed, exported materials.
to be available without further intervention: publicly available data on arisings, collected
even relatively less risky ethanol producers, across municipal, commercial and
like Ineos Bio and Vireol Bio-energy, have industrial sectors. This would enable
located their plants in the US to take venture capital and private equity finance to
advantage of locally available grants and tax more readily arrange for the feedstock
rebates rather than achieving finance to needed to enable more circular economy
develop their technologies in the UK.26 infrastructure to be built.
18More radical: infrastructure and Enterprise, and Zero Waste Scotland have all number of supply chain actors who need to funding, but by “envisioning the
performed aspects of this role, but not co-operate. opportunity space… and overseeing the
innovation comprehensively or at scale. More commercialisation process.”29 The business
importantly, the evidence of effective These risks can’t be priced, and can model and co-ordination needed to deliver
Improving access to finance matchmaking institutions elsewhere, like determine the success or failure of a a circular economy requires path-breaking
The clear conclusion from our discussions the London Waste and Recycling Board, is project, driving away most investors. In the innovations to be fostered through
with finance professionals is that the finance that they need to be able to fund innovative UK, according to the LSE’s Growth commercialisation.
sector is very unlikely to seek out higher companies directly to leverage significant Commission, investment is already “heavily
risk, higher value activities alone. Achieving private finance. skewed towards property and buildings, If led by the state, these institutions – which
either more infrastructure in Scotland or, rather than equipment, innovation and new would have to encompass a broader set of
more optimistically, a more adventurous The government could consider supporting technologies” due to lower perceived risks goals than simply providing finance – would
Scottish finance sector which funds circular these organisations or creating a new in property.28 In this context, a more active almost inevitably seek to secure investment
economy infrastructure projects abroad institution with a mandate to link investors, institution, pursuing targeted innovation to in Scotland, though it would be constrained
needs much more intervention. which could also provide or co-ordinate deliver a circular economy, will be needed. by Scotland’s scale (see page five).
co-funding where appropriate.
A finance finding institution Using innovation institutions Finland’s Tekes innovation agency is a
A minimal intervention would be to create Government led financing Really driving innovation with suitable highly relevant model which combines
or support an institution to match existing Finance finding would help projects that funding requires specialist institutions, foresight, strategic steer and risk capital.
cleantech investors with those seeking are close to being financed already. But directed to commercialising circular A Scottish version of Tekes could help to
funding. This could increase the quantity these projects are dominated by low value economy opportunities. It is likely that diffuse circular economy finance lessons to
and quality of interaction in the sector and combustion and downcycling, with limited leadership would need to come from the project developers and financiers interested
reduce fragmentation, enabling business investment in the higher value circular state. As Professor Mariana Mazzucato in investing in Scotland.
links to be made across supply chains. It loops we have described. This is because the outlines in The entrepreneurial state, “Not only
would improve new entrants’ understanding returns are uncertain and many of the risks has government funded the riskiest This model could also, in a very optimistic
of finance, and make finding suitable are binary: unproven technologies may or research, whether applied or basic, but it scenario, develop exportable expertise in
finance easier. may not scale up; feedstock availability is has indeed often been the source of the circular economy project development and
uncertain; the durability for a market for most radical, path-breaking types of finance.
EcoConnect, a not-for-profit company, remanufactured and reused goods is viewed innovation.” Her research shows that these
Scottish Enterprise and Highlands and Islands with scepticism; and there can be a large innovations happened not just through
19Lessons for Scotland
The circular economy presents two types of Learning from energy policy Four strategies for change
opportunity, which each require a different
approach:
Policy is driving the energy sector toward Change strategy Interventions
Resource efficiency opportunities, both incremental and transformational
characterised by the diffusion of near change, driven by the need to decarbonise. Focus on research Fund R&D
commercial or established technologies, Four strategies have been used to foster this Tax externalities (eg carbon tax)
and increased collaboration within broadly change, which provide useful lessons for
the range of policy options that Scotland Let the market do the rest
established business models. In our sector
analyses, examples of these included: could choose to promote the circular Avoid lock-in Fund R&D
economy. Regulate away bad choices (eg no new coal without CCS, landfill
• metal alloy separation to improve
bans and gCO2/km limits for cars)
recycling; and
Let the market do the rest
• the expansion of biowaste feedstock
analysis to improve AD viability. Create competition Fund R&D
Subsidise many technologies to prove commercial viability
Circular economy opportunities, (eg the UK government’s electricity market reform strategy to
characterised by innovation, to establish and promote renewables, nuclear and CCS)
commercialise novel technologies, and by
Auction mature technologies to find the cheapest
some degree of business model integration
along supply chains and between sectors. Pick winners Fund R&D, targeted on key sectors
In our sector analyses, these included: Analyse the viability/suitability of options early, and choose a
subset of the best to focus on (eg Germany’s Energiewende)
• business model integration: steel reuse in
construction, extending supermarket Support market competition within chosen technology families
distribution systems to food
redistributors; and
• new technology: CCS and biorefining to
create chemicals or extract proteins and
other valuable products. 20What is Scotland’s existing Adapting Scotland’s existing
strategy? strategy
The strategies shown on the previous page How could Scotland promote a circular
are ideal types. Countries have chosen parts economy, drawing on the strategies it has
of each strategy, and Scotland has operated used for low carbon energy?
within the UK’s overall strategy. However,
Scotland has focused on the following two:
Scotland’s strategies Interventions Scotland’s strategies Interventions
Avoid lock-in Banning new nuclear and non CCS coal power stations Avoid lock-in Foster agreement (or regulate) to achieve well known ‘resource
efficiency’ type opportunities, like separation of alloys in rig
Pick winners Consistently political promotion of wind and marine power, based decommissioning and plastics, or extension of supermarket IT
on an assessment of Scotland’s geography systems to food redistribution
Pick winners Move from business-led innovation to a more directed, challenge
Support for these technologies via enterprise agencies, planning
focused innovation system to capture ‘circular economy’ type
policy, and subsidy
opportunities, like CCS and biorefining
In doing so, Scotland has been consistently
much more successful at decarbonising Overall, greater resource efficiency challenges to increasing resource efficiency
than the rest of the UK, helped by its wealth opportunities can be achieved by improving opportunities for Scotland relate to its
of natural renewable resources and drawing the collaboration activities that Zero Waste relatively small scale and consequent
on 28 per cent of the total UK renewables Scotland and other entities, like Scottish challenge in attracting investment for projects
subsidy spending in 2012-13.30 Enterprise, already conduct. Scotland is which require large amounts of feedstock,
already ahead of other parts of the UK in and enforcing regulation that is not shared
policy terms. As noted above, the main with other parts of the UK or the EU.
21Achieving more radical circular economy A clear direction Creating courageous Instead, if Scotland wants to capture
opportunities requires institutions and significant circular economy opportunities,
policy to function as an innovation system,
institutions it should adopt a challenge led model. The
Innovation thrives on spending. Being a
with “interaction between companies and Saltire prize provides an initial step towards
relatively small country, neither Scotland’s The existing focus of Scotland’s innovation
publicly funded research, education, public this challenge led model, but Scotland
public sector nor the private sector will centres is not designed to deliver significant
infrastructure, venture capital and regional could learn from examples in both the
have deep pockets compared to circular economy opportunities: the
development agencies.” New innovation public and private sector.
international competitors like the US, Industrial Biotechnology Innovation Centre
research shows that the state can play an
China, or Germany. This means Scotland (IBioIC) states that its “industry partners For example, the US government’s
important role in investing and co-
will have to choose technology families have identified five major themes for advanced energy innovation centre,
ordinating research.
within the circular economy that are best IBioIC” and the Scottish Funding Council ARPA-E, sets its objectives via a deep dive
Developing such a system is necessarily suited to its comparative advantages, and states that “evidence of industry demand is into a particularly challenging energy
risky: innovation happens amidst a sea of develop a roadmap to fund and foster these. a fundamental requirement” for innovation problem, identifying the potential technical
good but failed projects. The main political This is risky and uncertain, but the centres.32 merit of technology solutions and their
challenge is to invent a ‘legitimising alternative, ‘spray and pray’ approach potential market pull and cost effectiveness.
rationale’ to justify investment in requires very deep pockets. While a connection to business experience The assessment incorporates detailed
technologies and business models which will is important for innovation to thrive, the workshops, involving academics, civil
Scotland has already invested in innovation ‘led by industry for industry’ model is
include failures. The main policy challenge servants who have specialist sector
centres and has a strong university sector. likely to encourage shorter time horizons,
is to build and maintain an innovation knowledge, and business experts. This
Critical to success will be to remain linked more incremental innovation and a focus
system which fosters interaction between problem led approach, along with a
to the wider UK innovation network. The on lower risk near-to-market opportunities.
public research, companies, venture capital mandate to avoid incremental improvements,
precedent set by Nordic Innovation and Existing industry is quite rightly embedded
and enterprise agencies. ensures a focus on advanced technology.
NordForsk, where relatively small Nordic in solving today’s problems. New
Scotland can improve its odds of success by countries collaborate on R&D, shows one technologies and business models for a In the private sector, an excellent example
taking a clear political direction, backed by way to balance the specialisation demanded circular economy are more likely to arise of a challenge led model comes from the
challenge oriented innovation bodies, by a small size with access to a wider from a focus on longer-term opportunities Confederation of European Paper
mandated to concentrate on areas where network.31 rather than existing business pressures. Industries‘ (CEPI) ‘two team’ project.33
Scotland is likely to have comparative This open innovation process started with a
advantages in the future.
22single challenge: to cut the industry’s CO2 Conclusion Scotland is in a strong position to benefit
emissions by 80 per cent while creating from first mover advantage in the
50 per cent more added value. CEPI then set development of a circular economy; the
Achieving a circular economy in Scotland
up two teams of scientists and business Scottish government’s plan to develop a
will involve a combination of diffusing
people and asked them to start building a roadmap is the opportunity to make it
established but not yet common business
common knowledge base, drawing on their happen.
practices and technologies, and the
own expertise and ideas from other sectors
development of radically new technologies
with carbon reduction targets, including
and business models.
the steel and chemicals industries. The
teams were then asked to compete to Scotland’s existing policies are beginning to
develop four technology ideas each, with a spread better resource management already.
view to being judged on their carbon Therefore, we have focused our
reduction, value add, innovativeness and recommendations on what more can be
feasibility potentials. The intellectual done to exploit more radical circular
property rights for the ideas were retained economy opportunities. We see Scotland’s
by CEPI, which will then license them to its industrial strategy for a circular economy
members to ensure the industry as a whole essentially as an innovation strategy,
benefits. grounded in a clear view of the country’s
characteristics and the global challenges
In both cases, a challenge was set externally
that face its businesses. We stress the
to ensure it was stretching, and the process
importance of institutions, and the
was characterised by the involvement of
connectedness needed to foster
numerous actors and significant knowledge
collaboration down supply chains and
sharing. These factors should form the basis
across sectors.
for more radical circular economy
innovation institutions.
23Endnotes
1 Sir Ian Wood, 2014, UKCS maximising recovery, Final report, 11 United States International Trade Commission, 2012, 19 Green Alliance calculations based on data from: WRAP, 2009, 27 www.mrw.co.uk/news/biffa-polymers-relaunches-redcar-
www.woodreview.co.uk Remanufactured Goods: An Overview of the U.S. and Global The food waste in Scotland, www.wrap.org.uk/sites/files/ recycling-facility/8656401.article
2 Oil & Gas UK, 2013, Oil and gas decommissioning insight Industries, Markets, and Trade, Investigation No. 332-525, wrap/Food%20waste%20in%20Scotland%20FINAL%20 28 Philippe Aghion, Tim Besley, John Browne, Francesco Caselli,
2013, www.oilandgasuk.co.uk/cmsfiles/modules/ Section 4-4 www.usitc.gov/publications/332/pub4356.pdf report%2028%20August%202009.pdf, Dustin Benton, Richard Lambert, Rachel Lomax, Chris Pissarides, Nick Stern
publications/pdfs/OP082.pdf 12 Example of gasholder to office, Naaldwijk: Sustainable in 2014, More jobs, less carbon: why we need landfill bans, and John Van Reenen, 2013, Investing for Prosperity: Skills,
Steel, 2014, Examples of reuse, www.sustainableinsteel. Green Alliance, http://www.green-alliance.org.uk/grea_p. Infrastructure and Innovation, Report of the LSE Growth
3 Sir Ian Wood, 2014, UKCS maximising recovery, Final report, aspx?id=7379, and ClimateXChange, 2014, Shaping our
www.woodreview.co.uk eu/p/539/examples_of_reuse.html, Example of BedZED, Commission, www.lse.ac.uk/researchAndExpertise/units/
London: Reuse-Steel, Reuse-Steel Case Study 4, Reuse of Energy Future: Energy Demand, www.climatexchange.org. growthCommission/documents/pdf/LSEGC-Report.pdf
4 The following are common alloying agents: (1) copper, tin, Structural Steel at BedZED (Beddington Zero Energy uk/files/1013/7356/0299/Shaping_our-energyfuture-
nickel and molybdenum; (2) chromium, manganese, zinc, energydemand.pdf 29 Mariana Mazzucato, 2011, The Entrepreneurial State, Demos,
Development), www.reuse-steel.org/files/projects/Bedzed/ www.demos.co.uk/files/Entrepreneurial_State_-_web.
and lead; and (3) aluminium, silicon and titanium. The BedZED%20case%20study%205-5.pdf Photo:http://upload. 20 Private correspondence with Horizon Proteins
alloying agents in category 1 are very hard to separate; those pdf?1310116014
wikimedia.org/wikipedia/commons/0/05/BedZED_2007.jpg 21 See www.ncbi.nlm.nih.gov/pmc/articles/PMC3774676/ for a
in category 2 are expensive to separate. See http://www. 30 Alistair Osborne and Emily Gosden, Vote No, Amec urges
sciencedirect.com/science/article/pii/S1462901111000669 13 Department of Energy and Climate Change, 2012, Potential useful overview of biorefining Scots amid worries over North Sea, The Telegraph, www.
for further details. cost reductions in CCS in the power sector, cdn. 22 Scottish Government, Economic report on Scottish telegraph.co.uk/finance/newsbysector/industry/10747063/
globalccsinstitute.com/sites/default/files/ agriculture, 2013, available from www.scotland.gov.uk/ Vote-No-Amec-urges-Scots-amid-worries-over-North-Sea.
5 BP, 2013, Schiehallion and Loyal Decommissioning publications/47086/deccpotentialcostreductionsinccs.pdf
Programmes Phase 1, (figure adapted from breakdown Publications/2013/06/5219/3 html
provided), www.gov.uk/government/uploads/system/ 14 Dustin Benton, 2012, The CCS challenge, Green Alliance, 23 AEA Energy & Environment, 2008, The Evaluation of Energy 31 Oxford Research A/S, 2011, Evaluation of Nordforsk, Report
uploads/attachment_data/file/207203/Schiehallion_Loyal_ www.green-alliance.org.uk/grea_p.aspx?id=6330 from Biowaste Arisings and Forest Residues in Scotland, to The Nordic Council of Ministers, www.oxfordresearch.no/
Fields_Phase_1_Decommissioning.pdf 15 Ton Bastein, Elsbeth Roelofs, Elmer Rietveld and Alwin Report to SEPA, www.sepa.org.uk/waste/waste_ media/43469/evaluation_of_nordforsk_-_final_report.pdf
6 BP, 2006, North West Decommissioning Programme 7th Hoogendoorn, 2013, Opportunities for a Circular Economy in publications/idoc.ashx?docid=f27bd8f1-4789-4b6d-9be2- 32 Quotes drawn from www.ibioic.com/ and www.praxisunico.
February 2006, www.gov.uk/government/uploads/system/ the Netherlands, The Netherlands Organisation for Applied a88c9f552512&version=-1 org.uk/uploads/A1%20-%20Stuart%20Fancey.pdf
uploads/attachment_data/file/43406/nw-hutton-dp.pdf Scientific Research (TNO), http://www.government.nl/files/ 24 Environmental Research of the Federal Ministry of the
documents-and-publications/reports/2013/10/04/ 33 Confederation of European Paper Industries, 2013, The Two
7 Jacob Sterling, 2011, Cradle to Cradle Passport – towards a Environment, Nature Conservation and Nuclear Safety, 2014, Team Project, www.cepi.org/system/files/public/
opportunities-for-a-circular-economy-in-the-netherlands/ Environmental Innovation Policy – Greater resource efficiency
new industry standard in ship building, Maersk Line, (OECD tno-circular-economy-for-ienm.pdf documents/publications/innovation/2013/
Workshop on Green Growth in Shipbuilding), www.oecd.org/ and climate protection through the sustainable material use finaltwoteamprojectreport_website_updated.pdf
sti/ind/48354596.pdf 16 Based on Fareshare private correspondence about of biomass, on behalf of the Federal Environment Agency
redistributable food arisings across the UK, and WRAP, 2013, (Germany), p25, www.umweltbundesamt.de/sites/default/
8 James J. Stachowiak, 2010, Portable EDXRF – How it has ‘Estimates of waste in the food and drink supply chain’ files/medien/378/publikationen/texte_03_2014_
changed the Metals Recycling Industry (The University of analysis that 15 per cent of UK food waste arises in Scotland. druckfassung_uba_stofflich_abschlussbericht_kurz_
Western Ontario, XRF Short Course 2010), www.uwo.ca/ englisch.pdf
earth/news/xrfcourse/20th%20Anniversary%20 17 House of Lords, EU Agriculture, Fisheries, Environment and
Symposium/Talk%2005%20-%20Jim%20Stachowiak%20 Energy Sub-Committee, 2013, The EU’s contribution to food 25 Ibid (Environmental Research of the Federal Ministry of the
-%20New%20Advances%20and%20Applications%20 waste prevention, Oral and written evidence, www. Environment, Nature Conservation and Nuclear Safety, 2014,
using%20X-ray%20Fluorescence%20Analyzer%20for%20 parliament.uk/documents/lords-committees/eu-sub- Environmental Innovation Policy – Greater resource efficiency
Metals%20Testing%20in%20the%20S.pdf com-d/food-waste-prevention/food-waste-evidence-volume. and climate protection through the sustainable material use
pdf of biomass, on behalf of the Federal Environment Agency
9 See, for example, www.2recycling.com/metalsorting.html (Germany), p25, www.umweltbundesamt.de/sites/default/
18 FAO, 2011, Global food losses and food waste – Extent,
10 Value calculations based on ZEP data on CO2 pipelines: causes and prevention, www.fao.org/docrep/014/mb060e/ files/medien/378/publikationen/texte_03_2014_
www.sitechar-co2.eu/FileDownLoad. mb060e00.pdf druckfassung_uba_stofflich_abschlussbericht_kurz_
aspx?From=Faq&IdFile=317. Assumes a 22 inch pipeline, englisch.pdf)
10MtCO2/year, carbon steel, 330kg/m. Carbon steel cost 26 See www.clickgreen.org.uk/news/international-
assumed at £800/t. Scrap value is £160/t. news/124470-british-biofuel-firm-switches-jobs-and-
investment-to-us-.html and http://www.hopewellnews.com/
article_6447.shtml#.U00OfaLLIrs for details
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