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European Commission

Janez Potočnik

European Commissioner for Environment

Raw Materials: Not just about economics but physics!

3rd Annual European Raw Materials Conference

Brussels, 19 March 2013

Ladies and gentlemen,

Let me start by welcoming you to the third session of this conference on Raw Materials which is devoted to one my favourite topics, and one that I have placed at the centre of my mandate: ‘Resource efficiency and the use of secondary raw materials’. And you will understand why in a minute.

There is no doubt that raw materials are the life-blood of EU industry. At least 30 million jobs in the EU depend on access and on the availability raw materials.

But as all of you know, Europe imports most of its raw materials, and this makes Europe’s industry very dependent on international markets to secure the raw materials it requires. And today these markets have become a place of fierce competition that involves both the developed countries and the fast growing emerging economies.

What does this mean for our industry?

Well, the combination of increasing global demands, pressures on resources and Europe's import-dependency, means that European companies have to pay a lot more than they used to for the relative cost of resources, such as materials and energy. 75 % of European businesses have experienced an increase in material costs in the past five years. And 87 % of European companies said that they expected the costs of their material inputs to continue to increase in the medium term.

This trend is clearly undermining Europe's competitiveness. We cannot reduce our dependency by producing ourselves more resources, because this is just not feasible. But what we can do, is make better use of what we have and what we buy from other countries: What we can do, is promote a more efficient use of the raw materials we have, and where possible recycle and reuse.

This is why I have placed ‘Resource efficiency’ at the centre of my mandate as European Commissioner.

Resource efficiency is a key element of a successful strategy for future competitiveness. It is not simply about protecting the environment. Through resource efficiency policies, we can reduce our import dependency, create new business opportunities, make Europe an attractive place for industrial investment and bring European companies to the forefront in innovation. And yes, at the same time we address negative environmental and social impacts associated with raw material extraction and production.

In an era marked by unprecedented population growth, increased consumption and production and an increasing exploitation and scarcity of natural resources, including raw materials… We need to have a comprehensive approach, which combines better use of natural resources, secures fair access to global resources and improves resource efficiency.

I was very encouraged to see the support of industry for the Roadmap to a Resource Efficient Europe and the readiness of a number of individual companies, as well as business organisations, to work together to advance the life-cycle approach and closed-loop economy. The industry has rightly understood its key role in the transition to a resource efficient economy, confirming that resource efficiency… does not mean de-industrialisation… on the contrary. Resource efficiency has a strong business case;

Resource efficiency can contribute to competitiveness, both in the short-term by cutting costs for business, and in the long-term by responding strategically to rising resource prices and risks of supply shocks.

The analysis of our 2012 Competiveness Report found that "Eco-innovating firms are, on the whole, more successful than conventional innovators".

  1. Our analysis shows potential gains for businesses of between 3 % and 8 % of turnover by using resources more efficiently.

  2. Our modelling shows that a one percentage point reduction in material use in Europe would be worth up to € 23 billion to business and between 100,000 and 200,000 new jobs.

Just to give you an example, full implementation of EU waste management policy, i.e. a policy that aims at diverting waste from landfills and returning it into the economy as valuable materials, could create an additional 400,000 jobs by 2020 and increase the annual turnover of the waste sector by € 42 billion1. Eliminating landfilling and ensuring that incineration is limited to waste that cannot be recycled could increase the benefits to around 520,000 jobs and € 55 billion.

***

Ladies and gentlemen,

The argument that our high environmental standards put EU firms at a disadvantage is simply wrong. And even the countries, like China, have clearly understood this. China uses the Euro norms for vehicle emissions, its chemicals legislation has been influenced by REACH as well as our legislation on WEEE, biodiversity and water. And critical air pollution in biggest cities is simply not allowing the 'no action' policy.

Resource efficiency is also good for trade. We still have a first mover advantage to be exploited in many sectors and many high added value goods and services. For example Europe has a strong export position in the eco-industry market. The global market for eco-industries was worth roughly 1.15 trillion Euros a year in 2010, and was forecast to double by 2020. And ensuring that products put on the European market meet high standards is not handicapping European industry, on the contrary it favours higher quality, higher added-value products. A resource poor and knowledge rich continent should have no interest in trying to compete by a regulatory race to the bottom.

The potential of resource efficiency and in particular, of innovative resource efficient technology is recognised in the recently adopted Industrial Policy Update. In our new industrial policy, we are focusing our efforts on six priority areas where we see significant opportunities for growth. These include advanced manufacturing technologies for clean production; key enabling technologies; bio-based product markets; sustainable products, construction and raw materials; clean vehicles and vessels; and smart grids. Perhaps it is no surprise given the track record of companies which are highly competitive in these sectors.

Resource prices

Some of you may be thinking “isn’t there an elephant in the room?” If we are more resource efficient doesn’t that mean we need fewer primary resources? And doesn't that mean our mining companies will suffer? For those of you that follow these things closely, this is what we call the "absolute decoupling" issue: should we try to increase GDP while using fewer resources?

Well, let me tackle this head on, because I think that this issue needs to be de-mystified.

We are heading for a world of 9 billion people by 2050, and 3 million extra middle class consumers in emerging economies by 2030. There will be plenty of demand for primary resources; I do not have too many worries for the extractive industries – they have a profitable future. But this also means that the era of cheaper and cheaper resources is over. On average, real prices for resources increased by more than 300 % between 1998 and 2011. Even since 2000, prices have increased by almost 6 % per annum in real terms. At the same time, resource price volatility has also increased.

So, for a Europe whose manufacturing industry is so dependent on imported materials, it is inevitable that we must use fewer resources for each Euro of output, if we want to stay competitive.

To be frank, without decoupling, our economies simply won't be able to grow much more in the future. And I talk about absolute decoupling. Not due to the soft laws of economy, but due to the hard laws of physics.

The innovation challenge for Europe for the next decades will be in increasing our resource productivity with the same creativity and dynamism as we did in previous decades in raising labour productivity.

While mining is seen as a key approach to tap Europe's unexploited minerals, recycling will be essential for reducing European demand, including for non-EU raw materials. There is potential to extract sizeable quantities of raw materials from end-of-life industrial and consumer goods in Europe such as the rare earths found in computers, platinum found in car exhausts or wood from furniture.

In addition, Europe is a world leader in technological Research and Development (R&D) in the field of substitution of critical raw materials. This means replacing an industrial component with a more readily-available raw material in the EU, whether it is a rare metal or an import dependent material such as natural rubber.

Towards a circular economy

Resource productivity alone – getting more value from fewer resources – will not be enough. The McKinsey report estimated that the achievable improvements in resource efficiency it identified could provide for about 30 % of the increased demand we can expect by 2030.

How do we fill the gap? By using the same resources again and again. That means creating a closed loop economy. It means designing for recyclability, repair and re-use; It means developing industrial symbiosis; It means new business models, for example using peer-to-peer leasing, better markets for secondary raw materials, and sustainable sourcing. In short, seeking inspiration from the way that nature works to drive a system change in our economies and societies, based on millions of years of gains of experience and adaptation.

In order to achieve that, we have to get business on board. Some may argue that "the job of business is to do business" and not to take care of the environment. Yet resource efficiency goes to the core of the drive for profit and success; challenging the creativity of companies and systems to re-invent the ways they actually get there.

Companies harvest and extract materials, use them to manufacture a product, and sell the product to a consumer – who then discards it when no longer needed. In terms of volume, some 65 billion tonnes of raw materials entered the global economic system in 2010, and this figure is expected to grow to about 82 billion tonnes in 2020.

Throughout its evolution and diversification, our industrial economy has scarcely moved beyond the fundamental characteristic established in the early days of industrialisation: a linear model of resource consumption that follows that ‘take-make-use-throw away' pattern. Today, in Europe, we use 16 tons of materials per capita annually, we throw away 6 tons, and half of that waste is then landfilled.

This linear model was feasible for as long as only a fairly small proportion of the world was growing rich. Fortunately today many more billions are on a path to comfortable middle-class consumer lifestyles. And fortunately our companies will be able to satisfy many of those new markets. But unlimited growth on a limited planet means that this linear approach will inevitably lead to scarcity, price-volatility, supply disruptions and pricing levels that are unaffordable for our economy’s industrial base.

The answer is, instead of burying or burning those materials at the end of their life, we have to bring them back into the economy. So our second innovation challenge for the coming decades, after increasing the productivity of our resource use, will be to move to a circular economy. And it is businesses like yours that will be at the forefront of that innovation.

Sustainable sourcing

But if we keep this in perspective, even if we could achieve a 100 % circular economy, most of our resource input will still be primary resources. So, to these two innovation challenges I would add a third: to develop stewardship and sustainable sourcing for both renewable and non-renewable materials.

Waste policy role in Resource Efficiency agenda

Environmental legislation has a role to play in improving our resource efficiency and our material efficiency. Our waste legislation has already driven the beginning of a revolution in European waste management; we are composting and recycling more than ever, and landfill is progressively falling – even if the story significantly varies from country-to-country.

Our ambition is to accelerate that move up the waste hierarchy. In the Resource Efficiency Roadmap and the 7th Environmental Action Programme we set out our aspirational objectives to be achieved by 2020:

  1. waste generated per person should be in decline;

  2. Re-use and recycling should be at their maximum level – already today some Member States are recycling and composting more than 60 % of their municipal waste. This implies the generalisation of separate collection and the development of attractive markets for secondary raw materials;

  3. Incineration should be limited to non-recyclable materials;

  4. And last but not least, landfilling should be virtually eliminated as a waste management option.

These aspirational targets for 2020 may seem ambitious but already today several Member States are close: for instance, 6 Member States are landfilling less than 1 % of the waste they generate. They have shown what instruments work; and in some cases what instruments we should avoid.

We are now translating these into more specific waste targets as we look at the review clauses in our waste legislation2 and we will present results next year.

The Commission will work towards this mid-term vision, through its own instruments, for example:

  1. Using the Ecodesign Directive to ensure that products are designed to be dismantled and recycled.

  2. Encouraging companies to measure and improve the life cycle performance of their products in order to build a single market for green products.

  3. Using economic instruments to promote resource efficiency so that we get the price of resources right, taking into account the true cost of their use and their environmental impacts.

  4. Expanding and clarifying the concept of producer responsibility.

  5. Developing further End-of-Waste criteria in order to boost confidence in recycled materials.

On top of specially adapted fiscal policies (such as landfill and incineration taxes, pay as you thrown schemes), producer responsibility schemes are essential. There are large differences in the cost effectiveness of the various systems in place in the European Union and we are now preparing guidance on Extended Producer Responsibility (EPR) on the basis of these experiences.

Taking the Roadmap's aspirational objectives as a basis, the Commission is launching a review of key targets in EU waste legislation this year. The results of this review will be presented in 2014. I would strongly encourage you to participate in the consultation process on this review before the summer.

***

Ladies and Gentlemen,

You will have seen that recycling and resource efficiency are integrated into the Commission's Raw Materials Initiative, and into the mandate for the European Innovation Partnership on Raw Materials. I hope that I have made it clear this afternoon why this makes sense, and why I am working so closely with my colleague, Antonio Tajani, to make sure that Europe's industry has access to sustainable and secure supplies of raw materials.

The challenge Europe is facing is very complex and demanding.

1 :

Source: IP/12/18

2 :

Waste Framework Directive, the Landfill Directive and the Packaging Directive.


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