What is a circular economy?
A circular economy is a system to keep materials and products in circulation,leading to more effective use of resources, in contrast with a linear economy with a ‘take-make-consume-throw away’ pattern. Through designing its process and product itself, it eliminates wastes in a value chain and creates a new value on those wastes. Application of the concept of a circular economy allows us to reduce material use, redesign materials and products to be less resource intensive, and recapture wastes as a resource to manufacture new materials and products.
Diagram 1: Mechanism of Circular Economy
Reference: Ellen Macarthur Foundation, Circular economy system diagram (February 2019), https://www.ellenmacarthurfoundation.org
Current situation in Japan
2.1. Overview
Japan’s energy self-sufficiency rate in 2021 was 13.3%, which was ranked 37th out of 38 OECD countries. This situation is mainly caused by the following reasons:
- High foreign dependence on fossil fuels due to scarcity of domestic resource
- Oil: 99.7%
- Coal: 99.7%
- Natural gas: 97.8%
- Shutdown of nuclear power plants: After the Great East Japan Earthquake, nuclear power plants in Japan ceased operations, significantly lowering the energy self-sufficiency rate.
- Limitation of renewable energy implementation: While renewable energy such as solar and wind power has been implemented, it is still under development and has not reached to the same level of domestic energy production as the time before the Great East Japan Earthquake.
Diagram 2: Component of energy supply in Japan
Reference: METI, 2021 – Understanding the current energy situation in Japan (Part 1) (2022), https://www.enecho.meti.go.jp/en/category/special/article/detail_171.html
Japan, as a country with a low resource self-sufficiency rate, has maintained the highest purchasing power for those resources in the world. It is, however, expected that Japan will lose its ability to procure fossil fuels from foreign countries, due to growth in emerging countries. It implies that not only emerging countries have higher procurement power toward the resources but also demand on resources in such emerging countries is increasing and therefore pushing up commodity prices. Given the current political situation over the world, natural resources can be also used as a diplomatic tool or as a way of protectionism, causing resource-producing countries to limit their exports. Japan, therefore, is urged to be less dependent on foreign resources and mechanisms of the circular economy is considered to be one of the most efficient approaches to tackle the situation.
2.2. Governmental policy
To address those situations, the government of Japan set up policies on circular economy. Since Japan is also one of the companies exporting large amounts of recyclable resources overseas, the application of a circular economy in Japan will lower environmental burdens indirectly in other countries. By balancing both economic growth and environmental conservation, the following actions are implemented in Japan.
- Circular Economy Vision 2020
Formulated by the Ministry of Economy, Trade and Industry in May 2020, it is an important guideline for accelerating the transition to a circular economy. Its main features include:
- Resource circulation: Promoting product longevity, reuse, and recycling
- Business model transformation: Shifting from ownership to sharing
- Utilization of digital technology: Efficient resource management using IoT and AI
- Plastic Resource Circulation Strategy
It is formulated in 2019 to target specifically on plastic waste issues.
- Reduce: Decreasing disposable plastics
- Reuse and Recycle: Promoting the reuse and recycling of plastic products
- Development of alternative materials: Research and development of environmentally friendly materials such as biodegradable plastics
- Basic Plan for Establishing a Sound Material-Cycle Society
This plan sets out comprehensive measures for the formation of a circular society.
- 3Rs of waste: Promoting Reduce, Reuse, and Recycle
- Ensuring proper treatment: Appropriate waste treatment and management
- Creation of regional circular and ecological spheres: Building self-reliant and decentralized societies utilizing local resources
Reference: https://www.env.go.jp/policy/hakusyo/r06/html/hj24010204.html#n1_2_4
2.3. Comparison with other countries
For a deeper understanding about which direction Japan is going, here is a comparison between Japan and the EU with the most advanced governmental intervention in the world.
| EU | Japan | |
| Policy approach | CE Package (2015) : Financial suppor:Specific targets for 2030: eg. to recycle 75% of packaging wastePriority areas: plastics, food waste, critical raw materials, construction and demolition, biomass and bio-based productsEstimated economic benefits:€600 billion in savings for companies in EU Creation of jobs for 580,000CE Action Plan (2020) :as part of the European Green Deal, aiming to create a cleaner and more competitive Europe. Key features include:Sustainable product policy frameworkFocus on key product value chains such as Electronics and ICT, Batteries and vehicles, and packagingWaste reduction initiativesCross-cutting actions | Circular Economy Vision 2020: aiming to transition to a circular economy as an economic activity |
| Regulatory framework | Stricter regulations implemented; eg. regulating plastic products and setting standards for product recyclability | Soft law, emphasizIng on voluntary initiatives by companies |
| Private sector efforts | Adopting a more proactive circular economy model with consideration of recycling and reuse from the product design stageStrengthening their efforts in the circular economy from the perspective of ESG investment | Arterial industry: creating new markets through environmentally conscious design and servitization (leasing, sharing, etc.).Venous industry: aiming to transition from a recycling industry to a resourcing industry |
| International Standardization | Both countries participate in the standardization of the circular economy in ISO/TC323, while the EU plays a more leading role | |
| Role of Consumers | Consumer rights and responsibilities defined more clearlyConcepts such as “the Right to Repair” introduced | Encouraged to purchase products with low environmental impact and minimize wastes |
Although both Japan and the EU aim to transition to a circular economy, the EU takes a more regulatory-led approach whereas Japan adopts an approach to maximize corporate autonomy. It is also noted that both agree on the goal of achieving both economic growth and environmental protection.
Reference: https://www.meti.go.jp/shingikai/sankoshin/sangyo_gijutsu/resource_circulation/pdf/001_05_00.pdf