Circular Economy

A circular economy is a way of running the economy where things are used again and again instead of being thrown away. Products are designed to last longer, be repaired, be shared, and finally be recycled so that their materials become raw material for new products. The opposite is the linear economy, which follows a straight line: take resources, make a product, use it, and throw it away. The circular economy tries to "close the loop", so that waste from one step becomes input for another.

Why does it exist?

The Earth has limited resources: limited iron ore, limited coal, limited land and water. A linear economy uses them up fast and creates huge heaps of waste and pollution. Think of a family that buys a new steel tiffin box every week and throws the old one in a drain. It wastes money and clogs the drain.

A circular family washes, repairs and reuses the tiffin, and when it finally breaks, sells it to the kabadiwala, who sends the metal for melting. The circular economy asks the whole country to behave like the second family. It saves resources, reduces pollution, cuts imports and creates new jobs in repair and recycling.

Where did the idea come from?

• 1966: Economist Kenneth Boulding wrote "The Economics of the Coming Spaceship Earth". He said we must stop acting like "cowboys" on an endless frontier and act like astronauts on a spaceship, where everything must be recycled.
• 1989-1990: British environmental economists David Pearce and R. Kerry Turner used the term "circular economy" in their work on natural resource economics.
• 2010: The Ellen MacArthur Foundation was set up in the UK. It made the idea popular with businesses and governments and created the well-known "butterfly diagram".
• 2015 and 2020: The European Union adopted Circular Economy Action Plans, making circularity a main part of its economic policy.
• In India, the idea is old in daily life: repairing clothes, reusing bottles and selling old newspapers and metal to the kabadiwala are traditional circular habits.

How does it work? The R principles

The circular economy is often explained through a ladder of "R"s, from the best option to the last option:

1. Refuse / Reduce: use less material in the first place (for example, lighter but stronger steel in cars).
2. Reuse: use the same product again (a second-hand car, a refilled water bottle).
3. Repair / Refurbish: fix a product so it works again.
4. Remanufacture: rebuild a product from used parts to be "as good as new" (for example, rebuilt engines).
5. Recycle: break the product down into raw material and make new products from it (melting scrap steel to make new steel).
6. Recover: if nothing else is possible, recover energy (for example, burning some waste to make power).

Indian policy documents often speak of the 6R approach: reduce, reuse, recycle, recover, redesign and remanufacture. The key idea is that recycling is good, but keeping a product in use for longer is even better.

The butterfly diagram: two kinds of loops

The Ellen MacArthur Foundation divides material flows into two cycles:

• Technical cycle: for things that do not rot, such as metals, plastics and electronics. They are kept in use through sharing, repair, remanufacture and recycling.
• Biological cycle: for things that come from nature and can rot, such as food, crop waste and wood. They return safely to the soil (through composting) or are turned into biogas.

Why steel is a perfect circular material

Steel can be recycled again and again without losing its quality. Old cars, ships, railway tracks and buildings are all sources of steel scrap. Scrap is melted in an Electric Arc Furnace (EAF) or an Induction Furnace (IF) to make new steel. Making steel from scrap uses far less energy and releases far less CO2 than making it from iron ore and coal in a blast furnace.

It also reduces the need to mine iron ore and import coking coal. This is why steel policy and circular economy policy are closely linked.

India's key circular economy steps

• Steel Scrap Recycling Policy, 2019 (Ministry of Steel): set up a framework for scientific collection, dismantling and processing of scrap through organised centres, to raise domestic scrap supply and cut imports.
• Vehicle Scrappage Policy (launched 13 August 2021): private vehicles over 20 years old and commercial vehicles over 15 years old must pass fitness tests at automated centres. Unfit vehicles go to Registered Vehicle Scrapping Facilities (RVSFs). Owners who scrap get a scrapping certificate that brings road-tax rebates and waiver of registration fees on a new vehicle.
• Recycling of Ships Act, 2019: rules for safe and environment-friendly ship breaking. Alang in Gujarat is one of the world's largest ship-recycling yards.
• Environment Protection (End-of-Life Vehicles) Rules, 2025: notified on 6 January 2025 and in force from April 2025. Vehicle makers must meet Extended Producer Responsibility (EPR) targets for scrapping old vehicles, measured as the steel recovered.
• EPR rules in other sectors: plastic packaging (Plastic Waste Management Rules, 2016, with EPR guidelines in 2022), e-waste (E-Waste (Management) Rules, 2022), batteries (Battery Waste Management Rules, 2022) and waste tyres.
• 11 committees on circular economy: set up under NITI Aayog and the ministries for focus areas such as municipal waste, e-waste, scrap metal, solar panels, lithium-ion batteries, gypsum, agricultural waste, used oil, tyres and rubber, and end-of-life vehicles.
• Mission LiFE (Lifestyle for Environment), October 2022: a people's movement asking citizens to adopt mindful use instead of wasteful use.
• G20 Presidency, 2023: India launched the Resource Efficiency Circular Economy Industry Coalition (RECEIC) in Chennai in July 2023, with 39 founding companies from 11 countries.
• A 2016 Ellen MacArthur Foundation study estimated that a circular path could bring India benefits of about US$624 billion a year by 2050.

Commonly confused concepts

• Circular economy vs recycling: Recycling is only one step. The circular economy is a whole system that first tries to reduce use, then reuse and repair, and only then recycle.
• Circular economy vs green economy: A green economy is any economy that grows while reducing pollution and protecting nature (it includes renewable energy, clean transport and more). The circular economy is one part of it, focused on materials and waste.
• Circular economy vs sharing economy: The sharing economy (ride-sharing, renting tools) is one tool of circularity because it makes each product do more work. It is not the whole idea.
• EPR vs polluter pays principle: The polluter pays principle says whoever causes pollution must bear the cost of it. EPR applies this specifically to producers, making them responsible for collecting and recycling their products after use.
• Primary vs secondary steel: Primary steel is made from iron ore (mainly in blast furnaces by big integrated plants). Secondary steel is made mainly from scrap and sponge iron in electric arc or induction furnaces, mostly by smaller units.

Issues, criticism and the way forward

• Not enough domestic scrap: India is a young steel user. Fewer old cars and buildings exist to scrap, so India still imports a lot of scrap.
• Informal sector: Much of India's recycling is done by informal kabadiwalas and small workshops. They are efficient at collecting, but they often lack safety, fair pay and clean methods. Formalising them without destroying their livelihoods is a challenge.
• Quality and sorting: Mixed and dirty scrap gives poor-quality steel. Proper sorting and processing centres are still few.
• Weak enforcement of EPR: Fake EPR certificates and poor tracking have been reported in some sectors. Strong digital tracking and audits are needed.
• Design for recycling: Many products are not designed to be taken apart easily. Rules and incentives are needed to make products easier to repair and recycle.
• Way forward: experts suggest more scrap processing centres, digital tracking of materials, standards for recycled products, tax benefits for recycled inputs, public buying that prefers recycled goods, and skill training for informal recyclers.

Concepts to Know

• Linear economy: The "take, make, throw" model, in which products are made from new resources, used once and then discarded.
• Extended Producer Responsibility (EPR): A rule that makes the company that produces or sells a product responsible for collecting and recycling it after the consumer has finished using it.
• Electric Arc Furnace (EAF): A furnace that melts scrap steel using a powerful electric current. It can run on renewable electricity, which makes it much cleaner than a coal-based blast furnace.
• Blast furnace: A tall furnace in which iron ore is heated with coke (made from coking coal) to make liquid iron. It releases a lot of CO2.
• Emission intensity: The amount of greenhouse gas released for each unit of product, for example tonnes of CO2 per tonne of steel.
• Kabadiwala: A local scrap dealer who buys old paper, metal, plastic and other used items from homes and shops.