Developing an Indicator for the Circular Economy

Draft Report

Niels Schoenaker

Roel Delahaye

*This is a draft report, this report contains preliminary results

project number

remarks

National Accounts

13 augustus 2015

The views expressed in this paper are those of the author(s) and do not necessarily reflect the

policies of Statistics Netherlands.

CBS Den Haag

Henri Faasdreef 312

2492 JP The Hague

P.O. Box 24500

2490 HA The Hague

+31 70 337 38 00

www.cbs.nl

Developing an Indicator for the Circular Economy 3

Index

1. Introduction 4

2. Methodology and data 6

2.1 Calculating the cyclical use rate: An example of the Czech Republic 6

2.2 Calculating the cyclical use rate indicator for the Netherlands 7

2.2.1 The ‘basic’ cyclical use rate indicator for the Netherlands ....................................... 7

2.2.2 Modifications ............................................................................................................ 8

2.2.3 The cyclical use rate indicator adjusted for the Netherlands ................................... 8

2.3 Building a time series 9

2.4 Data sources 9

2.5 Allocation of waste streams to material categories 10

2.6 Scope of material flows included 11

3. Results 13

3.1 Results for the Netherlands 13

3.2 Comparison of the results 14

3.2.1 Comparison with Japan and the Czech Republic .................................................... 14

3.2.2 Comparing the cyclical use rate indicator and the recycling rate .......................... 15

4. Discussion 16

5. Conclusion 21

6. References 22

Appendix 23

Developing an Indicator for the Circular Economy 4

1. Introduction

The circular economy is an economic system designed to maximize reusability of raw materials

and products and minimizing value destruction. It is about the transition from a linear economy,

characterized as ‘take, make and waste’, to a circular economy in which resources cycle in the

economy because of repair, reuse, remanufacturing, and recycling.

The circular economy is very popular among policymakers in the Netherlands and the EU as a

contribution to the solution of the raw material shortages that may arise in the near future by

increasing prosperity and population growth.

Several studies by the Ellen MacArthur Foundation (2012, 2013, 2014) show the many facets of

the circular economy. Encouraging maintenance, repair, reuse and recycling of products is key.

One of the ideas is that consumers no longer buy a product, but instead pay for the service to

use the product.

The circular economy is a comprehensive concept, and one could think of many indicators that

tell something about the circular economy (See ‘material flow monitor plus (MM+)’, which is

under production). The goal of this report is to develop an indicator for the Netherlands with

respect to the use of secondary materials, based on the developments at Eurostat (Task Force

on Material Flows, 2014) and the report by Kovanda (2014). A major advantage of such

indicator is the availability of potential useful source data.

Currently there is no indicator available in the Netherlands or the EU that measures the use of

secondary materials with respect to primary material input. For instance, the recycling rate

shows the share of waste that is recycled or reused. However, it focuses on the output of the

economy. A recycling rate of 100% implies that all waste is recycled and used as input in the

economy. However, it says nothing about the level of secondary material inputs as compared to

total material input. Furthermore, it says nothing about the value losses, and value creation of

such recycling activity.

The cyclical use rate indicator is developed for the Japanese Fundamental Plan for Establishing a

Sound Material-Cycle Society (2003), and measures the amount of secondary materials used in

the economy, relative to total material input. This indicator tells more about the input side of

the economy. The cyclical use rate indicator measures the cyclical use of materials (Uc)

relative to the total amount of material input into the economy (Uc+DMI1). So it shows the

share of cyclical use of materials in total use of materials.

A hypothetical cyclical use rate of 100% would imply that all material input into the economy is

secondary and no raw materials enter the economy. However, this indicator says nothing about

the waste streams from the economy to the environment. In an increasingly resource efficient

economy, there can still be waste as the total amount of inputs decreases. So the circular

economy is a broad concept and cannot be captured by a single indicator, a set of indicators

would be required to cover all aspects of the circular economy. This same conclusion is drawn

Geng et al. (2012), who developed an indicator system consisting of a set of circular economy

indicators.

The main aim of this paper is to explore the possibility to calculate the cyclical use rate indicator

for the Netherlands, and to evaluate whether it has the potential to be included as an official

statistic which may contribute to the mapping of the circular economy. This paper should be

seen as a discussion paper in which all bottlenecks and findings for calculating the indicator are

elaborated and open for discussion, rather than a final methodological report.

1 Direct Material Input

Developing an Indicator for the Circular Economy 5

The remainder of this paper is organized as follows. The following section describes how this

cyclical use rate indicator is calculated for the Czech Republic, based on the paper by Kovanda

(2014). Further, based on the work by Kovanda, it elaborates how the indicator is calculated

specifically for the Netherlands, and which data sources were used. The third section presents

the results of the cyclical use rate indicator for the Netherlands, and includes an international

comparison of these results. The fourth section comprises a discussion of the methodological

choices made and of the final results. In the last section conclusions are drawn.

Developing an Indicator for the Circular Economy 6

2. Methodology and data

2 . 1 C a l c u l a t i n g t h e c y c l i c a l u s e r a t e : A n e x a m p l e o f t h e C z e c h R e p u b l i c The cyclical use rate is an indicator that presents the ratio of cyclical use to total input of an

economy. It connects the topic of material consumption and waste management, and can be

calculated as follows (Ministry of the Environment – Government of Japan, 2003):

PUc =

PUc is the indicator of the cyclical use rate in percent. Uc is the cyclical use, and is defined as the

flow of materials that became waste, but which were fed back to the economy and used for

production and/or consumption purposes, thus saving on the use of primary raw materials.

DMI is defined by EW-MFA (Economy Wide Material Flow Accounting and Analysis) (Eurostat,

2001, 2012) and comprises the amount of domestically extracted raw material, harvested

biomass and total imports (which includes raw materials, products and waste). The

measurement unit of these material streams is kg. An overview of these material flows is

presented in figure 1.

Figure 1. Material balance of the economy depicting the components of the cyclical use rate

indicator (PUc) (Kovanda, 2014).

Initially, the cyclical use rate indicator was developed by Japan. In his research Jan Kovanda

(2014) investigated whether the cyclical use rate could also be calculated for countries other

than Japan. Although some methodological issues were encountered and two modifications

were made, it was shown that it can be calculated for other countries as well.

The methodological issues were related to the Czech waste management system. The main

issue was to determine what should, and what should not be attributed to the cyclical use of

materials Uc. For example, whether waste incineration for energy recovery and the use of

manure as fertilizer should be attributed to Uc or not (the first was excluded, the latter

included). Determining the Uc component was also the main issue for developing the cyclical

use rate indicator for the Netherlands, as will become clear in this paper.

Furthermore, two modifications were made to improve the indicator. The goal of the cyclical

use rate indicator is to present the ratio of secondary material consumption with respect to

total material consumption (primary plus secondary). However, DMI was chosen to represent

the consumption of primary raw materials, but it also includes imports of waste, secondary

materials and scrap for further manufacturing. These are not primary but secondary materials,

Developing an Indicator for the Circular Economy 7

and should therefore be subtracted from DMI and added to Uc. The result is the first

modification as presented by formula 1.

1)

A second modification was made for the Czech Republic with respect to the use of domestically

produced secondary materials. ‘’These are materials which are of the nature of side products, by-products, and treated waste, which ceased to be waste the moment they became compliant with the conditions and criteria for materials obtained from products and which are subject of a retake.’’ (Kovanda, 2014, p.80)

These materials are not reported as waste in the Czech Republic waste statistics. However,

these materials are used for production and consumption purposes, and replace the use of

primary raw materials in production. So, these materials are included in the cyclical use of

materials component, Uc. The final result after including the second modification is presented

by formula 2.

2)

2 . 2 C a l c u l a t i n g t h e c y c l i c a l u s e r a t e i n d i c a t o r f o r t h e N e t h e r l a n d s

2.2.1 The ‘basic’ cyclical use rate indicator for the Netherlands2

For the calculation of the Dutch cyclical use rate indicator, the same approach was used as for

the Czech Republic. Firstly, the cyclical use rate indicator was calculated for the Netherlands as

a whole, without any further modifications. Secondly, further modifications were considered so

the indicator would best suit the specific situation of the Netherlands.

So, the two components (Uc and DMI) of the cyclical use rate indicator had to be determined.

Determination of DMI was straightforward, as DMI is very well defined by Eurostat (2001,

2012). However, determining the cyclical use component (Uc) turned out to be more difficult. As

described in chapter 2.1, Uc is defined as the flow of materials that became waste, but which

were fed back to the economy and used for production and/or consumption purposes, thus

saving on the use of primary raw materials. This definition is useful to identify whether material

flows should be included in Uc or not, however, some aspects remain disputable (e.g. should

waste incineration for energy recovery be included in the Uc component?). Choices had to be

made to compile the indicator, which leaves room for discussion. An overview of the choices

made for calculating the indicator are presented in chapter 2.5 and 2.6, and a more extensive

discussion of these choices can be found in chapter 4. Note that the of this paper is to explore

the possibilities to compile a cyclical use rate indicator for the Netherlands, and that the choices

made are not cast in stone.

As a starting point to determine Uc, all waste streams used in the Dutch economy were

included3, then several corrections were made. First, the waste used in the ‘materials recovery

services sector’ was replaced by actual recycling statistics4, because part of the input (waste)

into ‘materials recovery services sector’ will be released again as waste. Secondly, the total

2 I.e. the cyclical use rate indicator, without any (country-specific) modifications (as is done by Kovanda (2014) for the

Czech Republic before any modification was made). 3 Data obtained from PSUT (Physical Supply and Use Tables) of the Monitor Material Flows (Delahaye and Zult, 2013). 4 Data from the waste accounts

Developing an Indicator for the Circular Economy 8

amount of waste used was corrected by subtracting the waste used in the ‘sectors’ exports,

accumulation, electricity companies and waste disposal services, because the materials (waste)

used for these economic activities were not recycled, but were exported, landfilled or

incinerated. Furthermore, for calculating the final indicator some other adjustments were made

based on findings gained during the process of developing this indicator. An overview of all

other adjustments is presented in chapter 2.6, ‘scope of material flows included’.

With the Uc and DMI components determined, the ‘basic’ cyclical use rate indicator was

calculated.

2.2.2 Modifications

Then several modifications were made to optimize the indicator specifically for the

Netherlands. Re-exportation in the Netherlands has a significant impact on import and export

figures. Generally speaking these imports were included in DMI, even though they were not

consumed or used in the Netherlands. Therefore, the first modification was to exclude re-

exports from DMI. 1) Correct DMI for re-exportation (imports excluding re-exports)

Moreover, part of the import consists of waste rather than products. Just as in the case of the

Czech Republic (Kovanda, 2014), a modification was made to correct total import for the import

of waste. So, for the second modification the import of waste was subtracted from DMI5. Some

secondary materials were not labelled waste in the international trade statistic and can

therefore not be subtracted from DMI. 2) Subtract the imports of waste (secondary materials) from DMI.

Finally, Eurostat proposes (Task Force on Material Flows, 2014) to distinguish four material

categories, biomass, metals, non-metallic minerals and fossil fuels. Therefore, this distinction

was also made in this paper. This distinction was made for all material streams of both

components of the cyclical use rate indicator, ‘DMI’ and ‘Uc’. This way, four cyclical use rate

indicators were calculated, one for each of the material categories. This provided insights into

the differences in circularity between these different material categories. 3) Distinguish four material categories.

2.2.3 The cyclical use rate indicator adjusted for the Netherlands

After the inclusion of the modifications as proposed in section 2.2.2 the cyclical use rate

indicator for the Netherlands looks somewhat different than for the Czech Republic. Therefore,

figure 1 requires an update that includes the changes made for the Netherlands. An adjusted

overview of all material flows required for calculating the indicator for the Netherlands is

presented in figure 2.

The cyclical use component (Uc) now equals the sum of the domestic cyclical use of materials

and the import of secondary resources. DMI is adjusted for re-exportation and the import of

secondary resources, and is now called DMIa.

5 For the Czech Republic the import of secondary materials was subtracted from DMI and then added to Uc. However,

for the Netherlands the import of waste was already included in the Uc component, so it is subtracted from DMI but not

added to Uc.

Developing an Indicator for the Circular Economy 9

Figure 2. Material balance of the economy depicting the components of the cyclical use rate

indicator, including the modifications made for the Netherlands.

2 . 3 B u i l d i n g a t i m e s e r i e s The ‘basic’ cyclical use rate indicator, adapted by the three modifications as presented in the

previous paragraph, finally lead to the cyclical use rate indicator for the Netherlands. The

indicator was constructed for the whole economy, and for the four material categories

separately, for the years 2008, 2010 and 2012. This way a short time series was constructed

which provided some insight in the developments over time.

2 . 4 D a t a s o u r c e s The input used to estimate the cyclical use rate indicator is derived from the Monitor Material

Flows (MFM) (Delahaye and Zult, 2013). The MFM consists of physical (in kg) supply and use

tables that are in accordance with concepts and definition of the monetary supply and use

tables of the national accounts. In turn figures from the Material Flow Accounts (MFA) and the

waste accounts are also part of the MFM. Instead of using the Monitor Material Flows the

amount of recycled waste taken from the waste statistics can also be used as data source. In

addition secondary materials that are not part of the waste statistics need to be added.

The estimation of the DMIa was straight forward: data on imports and domestic extraction (as

provided by the MFA) were used to determine DMI, which was then corrected for re-

exportation and imports of secondary resources to determine DMIa. With regard to estimating

the cyclical use of materials (Uc) the amount of secondary materials used in production

processes was needed. In the MFM these figures were taken from different data sources that

vary in quality. One important data source is the waste accounts based on the RWS

(Rijkswaterstaat) data. The total amount of recycled waste in the Netherlands was taken from

the waste accounts. In addition secondary materials that were not covered in the RWS data

were added. These secondary materials are often by products or left overs in the food industry.

Data on these secondary materials was, among others, taken from CBS statistics on livestock

manure and the association on animal feed.

Developing an Indicator for the Circular Economy 10

Although the Monitor Material Flows was the primary data source used to develop the cyclical

use rate indicator for the Netherlands in this paper, it is not necessarily required to develop the

cyclical use rate indicator. Instead, data could be retrieved from other sources like the waste

statistics, and the Material Flow Accounts.

2 . 5 A l l o c a t i o n o f w a s t e s t r e a m s t o m a t e r i a l c a t e g o r i e s In order to calculate the indicator separately for the four material categories as proposed by

Eurostat, all waste has to be allocated to one of these four material categories. Sixteen waste

(and recycling) categories are distinguished in the Material Flow Monitor. Some of these waste

categories can directly be allocated to one of the material categories. However, this allocation is

not straightforward for all of the waste categories. Mixed waste for instance may consist of

many different materials, and is more difficult to allocate.

Table 1 provides an overview of the 16 waste categories distinguished in the Material Flow

Monitor, and the choices made with respect to their allocation to one of the four material

categories. Although some waste categories may include different type of materials, all of them

are allocated to one material category, except chemical and healthcare waste. Chemical waste

may include fossil fuels and heavy metals, which makes it difficult to allocate. So, some waste

categories are difficult to allocate to a single material category. Therefore, to determine the

cyclical use rate for each of the material categories more precise, more detailed information is

required about these waste categories. So that a distinction of type of materials could be made

within each waste category.

Table 1. Waste categories allocated to material category6

Code? Waste category Allocated to Remarks

W01-05 Chemical and healthcare waste Not allocated ?Fossil?

W061 Metallic waste ferro Metals

W062 Metallic waste non-ferro Metals

W063 Metallic mixed waste Metals

W071 Glass waste Mineral

W072 Paper waste Biomass

W073 Rubber waste Biomass Synthetic?

W074 Plastic waste Fossil fuels Bioplastic?

W075 Wood waste Biomass

W076 Textile waste Biomass Synthetic?

W077 Other non-metallic waste Mineral Only mineral?

W08A Discarded equipment Metals

W09 Animal and vegetal waste Biomass

W10 Mixed waste Biomass Could be anything

W11 Common sludge Biomass Mineral?

W12-13 Mineral waste Mineral

6 Codes from waste statistics Eurostat, see: http://appsso.eurostat.ec.europa.eu/nui/show.do

Developing an Indicator for the Circular Economy 11

2 . 6 S c o p e o f m a t e r i a l f l o w s i n c l u d e d Figure 2 provides a clear overview of the different material flows that should be taken into

account for calculating the cyclical use rate indicator. However, the composition of some of

these material flows is not that clear. Problems arise especially when it comes to determining

the cyclical use of materials, both for the domestic cyclical use and the imported secondary

material flows. Although in theory there is a clear definition about what is regarded as cyclical

use, ‘the flow of materials that became waste, but which were fed back to the economy and

used for production and/or consumption purposes, thus saving on the use of primary raw

materials’, this is not as straightforward in practice. Further, problems were encountered with

respect to data availability, and the allocation of material streams to the four material

categories as proposed by Eurostat.

Table 2 presents an overview of the encountered problems, the decisions made and the impact

of these decisions on the cyclical use rate indicator for the Netherlands. The second column

shows an overview of those components that were problematic for calculating the cyclical use

rate, and the first column shows whether this component affects DMIa or Uc.. The third column

shows whether this component was included in the calculation of the indicator. An extensive

discussion of the decisions made can be found in the discussion section (chapter 4). The final

column indicates the magnitude of the effect on the total cyclical use rate if another decision

(shown in column 5) was made.

Table 2. Overview scope of materials

DMIa

or Uc

Component Included Comment Other

options

Impact

Uc

Manure Yes In terms of dry

product

Excluded Low

Wet product High

Uc

Renewable energy

(Wind/solar/etc.)

No Cannot be

measured in kg

Uc

Energy recovery by

waste incineration

(biotic and non-biotic)

No Not regarded as

cyclical use

Included High

DMIa

Sand and gravel used for

land raising purposes

No Not regarded as

cyclical use

Included High

Uc

Demolition waste used

for land raising purposes

No Excluded from Uc Included High

Uc

Chemical waste No Difficult to allocate

to one of the four

material categories

Included Low

Uc

Mixed waste Yes,

allocated

to

‘biomass’

Difficult to allocate,

however, largest

part is incinerated

for energy recovery

Exclude, or

allocate

differently

Low

Uc

The import of secondary

resources not classified

as waste

No Data problem (e.g.

by-products)

Included ?

Developing an Indicator for the Circular Economy 12

Developing an Indicator for the Circular Economy 13

3. Results

3 . 1 R e s u l t s f o r t h e N e t h e r l a n d s The interim results of the ‘basic’ indicator and the first modifications will be skipped in this

section, and only the final results of the time series will be presented here. In order to build this

time series, the cyclical use rate indicator was constructed for the four material categories

separately and for the economy as a whole, for the years 2008, 2010 and 2012.

The final results of the time series are presented in table 3 and figure 3. A more detailed table

that shows the different material flows for each material category for all years can be found in

the Appendix. For the Dutch economy as a whole the cyclical use rate indicator increased from

8,01% in 2008 to 8,41% in 2010, after which it increased to 8,47% in 2012. So, in the period

2008 to 2012 the cyclical use rate increased about a half percentage point since, thus a small

but positive trend can be observed.

Distinguishing the four material categories provides better insights in the cyclical use rate for

the Dutch economy. The first eye-catching result is the very limited contribution of fossil fuels

(<0,5% for all years) to the cyclical use rate. However, as fossil fuels are mainly used for energy

generation, this result is not surprising. The highest cyclical use rate indicator in the Netherlands

is observed for biomass. For biomass the cyclical use rate indicator was around 17,29% in 2008,

and rising since then. This increase for both years was caused by an increase of the ‘Uc’

component (DMIa remained relatively constant), caused by an increase of recycled biomass

(which also includes imported secondary biomass) and by an increase in the use of manure.For

the material category metal, the indicator increased from 7,91% in 2008, to 11,77% in 2010, and

then it fell back to 7,79% in 2012. This increase in 2010 is caused both by a higher ‘Uc’

component and a lower ‘DMIa’ component, as compared to the other two years. The decrease

of the ‘DMIa’ component is solely caused by a decrease in the import of raw metals. The import

of scrap metals, and the amount of metal recycled increased during this period, which explains

the higher ‘Uc’ component.

Finally, the second highest cyclical use rate indicator is found for the material category minerals.

The indicator decreased from 14,99% in 2008, to 14,78% in 2010, after which it increased to

16,27% in 2012. This small decrease in 2010 was caused by a decrease in the ‘Uc’ component,

the ‘DMIa’ component also decreased but relatively less than the ‘Uc’ component (the decrease

in DMIa is solely caused by less imports, because total domestic extraction increased). This

decrease in ‘Uc’ is caused both by less imports of secondary minerals, and due to lesser recycling

of minerals. In 2012, the ‘DMIa’ component of minerals declined again (again caused by a

decrease in imports, as total domestic extraction increased again). Further, ‘Uc’ increased with

respect to 2010, due to a combination of increased imports of secondary minerals and an

increase in recycled minerals. The combination of a lower DMIa and a higher Uc led to an

increase in the cyclical use rate.

Table 3. The cyclical use rate indicator by material category calculated for the Netherlands for

the years 2008, 2010 and 2012.

2008 2010 2012

Biomass 17,29% 18,63% 19,18%

Metal 7,91% 11,77% 7,79%

Mineral 14,99% 14,78% 16,27%

Fossil 0,30% 0,27% 0,31%

Total 8,01% 8,41% 8,47%

Developing an Indicator for the Circular Economy 14

Figure 3. The cyclical use rate indicator by material category calculated for the Netherlands for

the years 2008, 2010 and 2012.

3 . 2 C o m p a r i s o n o f t h e r e s u l t s

3.2.1 Comparison with Japan and the Czech Republic

It is difficult to compare the results of the cyclical use rate indicator for the Netherlands with

those for Japan and the Czech Republic precisely, because different methods were applied to

calculate the indicator for each country. Furthermore, detailed information on the results of

Japan and the Czech Republic is only provided for the years 2007 and 2011, while the

calculations for the Netherlands were made for the years 2008, 2010 and 2012.

However, some similarities in the results can be observed. For instance, for all countries the

highest cyclical use rate was recorded for biomass (above 17% for all), while by far the lowest

rate was recorded for fossil fuels. The cyclical use rate for metals and minerals differs by

country. For instance, the Netherlands records a higher rate for minerals, while the Czech

Republic shows a higher rate for metals.

Furthermore, the cyclical use rate indicator for Japan, which developed a Fundamental Plan for

Establishing a Sound Material-Cycle Society (Ministry of the Environment – Government of

Japan, 2003), shows a clear upward trend since 2004 (from about 12% to over 15%). Such a

clear upward trend cannot be observed for the Netherlands or the Czech Republic. However,

the cyclical use rate indicator also seems to increase for the Czech Republic and the

Netherlands, although less significant. For the Czech Republic the cyclical use rate increased

from over 8% in 2002 to about 9% in 2011, and for the Netherlands the indicator increased

about half a percentage point in the period 2008 to 2012.

A closer look could also be taken to some of the different choices made, and their impact on the

indicator. When looking at the modified cyclical use rate indicator for the Czech Republic,

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

2008 2010 2012

PUc TotalEconomy

PUcBiomass

PUc Metal

PUc Mineral

Developing an Indicator for the Circular Economy 15

biomass has the highest value (24.54%), and fossil fuels has by far the lowest value (1.19%)7.

Firstly, this high biomass value is largely caused by the inclusion of manure in the cyclical use

component. When excluding manure, the biomass value would fall to 2.76%. A similar scenario

holds for the Netherlands, when including manure as wet product the indicator for biomass

increases from about 17% to over 27%8. Therefore, manure was included in terms of dry

product for the Netherlands.

Secondly, the cyclical use rate indicator for fossil fuels has a low value (<1,27%) for all three

countries. However, the second modification made by the Czech Republic has a significant

impact on the indicator with respect to the reuse of fossil fuels. The survey of domestically

produced secondary materials held in the Czech Republic increases the indicator for fossil fuels

to 13,58%. The explanation given by Kovanda (2014) is that more than half of the domestically

produced secondary materials consists of wastes from thermal processes such as fly ash and

slag from the combustion of fossil fuels, which are being used for production of cement,

concrete and other building materials and products. Fly ash and slag might be waste per se, but

never actually enter waste statistics and are reported separately under the heading of

secondary materials. In the Netherlands, this fly ash and slag is already included in the waste

statistics, but it has a much smaller effect on the indicator than for the Czech Republic.

3.2.2 Comparing the cyclical use rate indicator and the recycling rate

The Netherlands recycled about 81% of its total waste in 20129. This ratio is much higher than

the outcome of the circular use rate indicator (<9%), which clarifies the difference between the

two indicators as discussed in the introduction. Although increased recycling efforts positively

affect the circular use rate, recycling efforts alone are not sufficient for a fully circular economy.

7 The modified cyclical use rate, calculated for the Czech Republic for the year 2011 (Kovanda, 2014). 8 Calculated for the year 2008 9 Source: http://statline.cbs.nl/Statweb/publication/?VW=T&DM=SLNL&PA=83128NED&D1=0&D2=3-4&D3=10-

11&HD=150825-1356&HDR=T,G1&STB=G2 Total recycling as a share of total processing of producers: 53056 / 65327 = 81,22%.

Developing an Indicator for the Circular Economy 16

4. Discussion

While developing the cyclical use rate indicator for the Netherlands, several issues were

encountered. Especially the question what should and what should not be included in the Uc

component of the cyclical use rate is highly debatable. Different choices made with respect to

the determination of the Uc component may greatly affect the outcome of the cyclical use rate

indicator. The main issues encountered during this research are discussed in this chapter.

Furthermore, some methodological choices and options are discussed.

Manure used as fertilizer

Manure is a waste stream which can replace industrial fertilizers in agriculture, therefore it

could be considered as part of the circular economy. The material streams identified to

calculate the cyclical use rate are measured in kg. Therefore, whether taking into account wet

manure (about 17.252 mln kg) or dry manure (1.878 mln kg)10

, significantly affects the outcome

of the indicator. The same result was found for the Czech Republic (Kovanda, 2014, p82). To

compare these numbers, the total amount of industrial fertilizer (which can be replaced by

using manure) used in the Netherlands is about 3.452 mln kg11

. Another point one can make is

that, with regard to the replacement of manure by industrial fertilizer, one should not consider

weight but instead the phosphorous and nitrogen content. So, it probably makes more sense to

include dry manure rather than wet manure but it would even be better to look at the active

substances that are being replaced.

Energy generation

The use of renewable energy is also considered part of the circular economy (Ellen MacArthur

Foundation, 2014). However, some types of renewable energy such as wind and solar energy

cannot be expressed in physical terms, and are not included in the cyclical use rate (Uc).

However, increasing the generation of these types of renewable energy will lead to a reduction

in the use of primary resources such as oil, coal and gas. So, solar and wind energy have a

decreasing effect on DMI, no effect on Uc, thus positively influences the cyclical use rate to

some extent, even though they cannot be included in the cyclical use rate indicator.

Furthermore, waste incineration for energy recovery may also be part of the circular economy,

although, with respect to cascading the use of materials, it is regarded as the final, least good

option. Waste should only be incinerated for energy recovery when no other options remain,

such as recycling (Ellen MacArthur Foundation, 2014). However, energy recovery from waste

streams is preferred over using primary resources, such as energy carriers as oil, coal and gas,

because it reduces the input of raw materials. However, it is debatable whether waste

incineration for energy recovery should be included in Uc, the cyclical use of materials. Kovanda

(2014) decided not to include it for the Czech Republic.

One could argue to only include biotic waste incineration for energy recovery because biotic

waste is renewable, and the use of renewable resources is considered part of the circular

economy. However, in line with this argument also (non-waste) biomass used for energy

recovery should be included. In this case basically all biomass used in the economy could be

included in the cyclical indicator because it is renewable, but this is not desirable for this

indicator. Furthermore, biotic waste incineration for energy recovery reduces DMI because it

replaces fossil fuels, just as solar and wind energy. However, in contrast to wind and solar

energy biotic waste can be expressed in physical terms and can be included in Uc. Therefore,

10 Data from the year 2010 11 In total 8.164 mln kg is used, from which 4.712 mln kg is export or re-exportation.

Developing an Indicator for the Circular Economy 17

biotic waste incineration for energy recovery results in a lower DMI and a higher Uc component,

while wind and solar energy only result in a lower DMI component. So, if biotic waste

incineration for energy recovery is included in the cyclical use rate indicator, it has a larger

impact than the cleaner generation of wind and solar energy.

In this research, energy recovery from (biotic) waste incineration is excluded from the cyclical

use rate indicator, so it is not included in ‘DMI’ or in ‘Uc’. However, this waste stream is used for

energy generation, which implies that less ‘DMI’ (e.g. fossil fuels) is required to generate the

same amount of energy. So, even if energy recovery from incineration is excluded from ‘Uc’, it

still has a positive impact on the cyclical use rate indicator (just as solar and wind energy).

So, for calculating the cyclical use rate indicator it is important to make a clear distinction

between reuse of materials (included) and renewable resources (excluded), although both are

considered part of the circular economy. This energy generation example also shows the need

for a set of indicators to cover the circular economy as a whole, rather than a single indicator.

So, in this research energy recovery from (biotic) waste incineration is excluded from the

cyclical use rate indicator. But to cover this gap, supplementary information on energy

generation is available at the energy accounts.

Actual material flows, or material flows expressed in Raw Material Equivalents?

One of the issues that has not been addressed in this paper so far, but which received

significant attention during this research, is whether the actual material flows should be

converted into their raw material equivalents (RMEs), i.e. the amount of raw materials that are

needed to produce the good in question. The reason for this is that imports (a part of DMI)

include not only raw materials, but also semi-manufactured products and final products, while

domestic extraction (which includes domestically extracted raw materials and harvested

biomass) only includes raw materials. However, as is shown in a report by Eurostat (2014), there

can be large differences between the actual total weight of goods, and the weight of the same

goods expressed in raw material equivalents. These imported goods may have been processed,

and the total weight of raw material extraction required to produce manufactured goods is

higher than the weight of the goods themselves (Eurostat, 2014). So, a discrepancy exists

between the domestic extraction of material resources, which is measured in tonnes of gross

ore or gross harvest, and imports and exports that are measured in the weight of goods crossing

the border.

A solution for this could be to convert the traded goods into their raw material equivalents. By

definition, DMI comprises the amount of domestically extracted raw materials, harvested

biomass and total imports (imports of raw materials, products and waste). By converting the

actual imports into their RMEs, the so called Raw Material Input (RMI) is calculated. So, for

comparison purposes it seems that expressing both imports and domestically extracted

resources in equal terms, RMEs, makes most sense.

Further, in case of replacing DMI with RMI for calculating the cyclical use rate indicator, also the

secondary materials in the cyclical use component (Uc) should be converted into RMEs. If this

cannot be achieved, it is questionable whether it makes sense to convert the other streams to

RMEs. In this research, an attempt was made to convert all streams into their RMEs. For the

DMI component this was possible, although data was only available for the year 2010. However,

it turned out to be more difficult to convert the material streams of the Uc component into

RMEs. So no further results of this modification have been presented in this paper. However, it

might be an interesting option for further research.

Developing an Indicator for the Circular Economy 18

DMI versus Uc, comparing apples and oranges

The previous discussion point emphasized the need for RMEs, because material flows of DMI

and imports cannot be compared. It is also mentioned that the secondary materials in the

cyclical use component (Uc) should be converted into RMEs. This is required because it has

implications for the outcome of the cyclical use rate indicator, which will be shown by the

following example.

If the Netherlands imports 100kg iron ore, it can produce 20kg steel12

. The remaining 80kg

becomes a by-product of the production process, it is converted into CO2 or other gases, steam,

or slag. Some, but not all of these by-products can be reused. This steel can be used for a

variety of products, but eventually it will turn into waste. Now, recycling all steel (20kg) with

respect to material input (100kg) would imply that the cyclical use rate can impossibly reach the

100%. However, if the Netherlands decides to import steel instead of iron ore, then its material

input is only 20kg. In case all steel (20kg) is recycled, a cyclical use rate of 100% could be

reached.

This example shows that the structure of the economy is of crucial importance to the outcome

of the cyclical use indicator. This makes international comparison difficult. The cyclical use rate

will be relatively low for countries that import raw materials or extract them domestically, as

compared to countries that import semi-finished or finished goods. Therefore, comparing the

cyclical use of steel with respect to the raw material input of iron ore, is like comparing apples

and oranges. Converting all material flows, especially the Uc flow, into RMEs could solve this

problem.

Input indicator versus consumption indicator

Another point for discussion is whether the cyclical use rate should be calculated as an input

indicator (DMI) or as a consumption indicator (DMC, Domestic Material Consumption). The first

includes all materials used in the Dutch economy, i.e. total imports plus domestic extraction,

regardless of where the materials are actually consumed. The latter corrects this input indicator

by subtracting total exports, so it includes only those materials that are actually consumed in

the Netherlands.

The same issue holds when using material flows expressed in RMEs instead of actual material

flows. In this case, both exports and imports should be converted into RMEs. This way, DMI

becomes RMI (Raw Material Input), and DMC become RMC (Raw Material Consumption).

Both variants, the input- and consumption indicator, could be considered for calculating the

cyclical use rate indicator. However, a consumption indicator seems to fit best for international

implementation, because double counting takes place when the input indicator is used. For

example, part of Germany’s imports are the Netherlands’ exports. If both imports and exports

are included in the indicator, the same resources are counted twice.

Difficult to distinguish secondary materials in the international trade data.

Import of secondary materials which are clearly classified as (the reuse of) waste are taken into

account. However, it is difficult to distinguish imports of non-waste secondary materials in the

international trade data from ‘’regular’’ products. For instance, when a by-product of a

manufacturing process in Germany is exported to the Netherlands, it is regarded as an input for

the Dutch economy in the MFA. Such input is not labelled ‘secondary’, and therefore will be

added to DMI rather than the cyclical use component. Therefore imported secondary materials

will only be taken partly into account in the Uc. There is no easy solution for this mismatch.

12 The numbers presented are not realistic, but are only used to give an example.

Developing an Indicator for the Circular Economy 19

Sand and gravel use for construction purposes excluded

The domestic extraction of natural resources in the Netherlands (366 bn kg in 2011), consists for

90% of sand and gravel, which is used in infrastructural projects to raise roads and land for the

construction of buildings or to strengthen dikes and coastal defences (Environmental Accounts

of the Netherlands, 2012). In the period 2009-2011, 61% of this sand and gravel was needed for

the expansion of the port of Rotterdam, the so called ‘Tweede Maasvlakte’. The remainder is

used in the production of concrete and cement. The sand and gravel used to raise roads and

land for construction is left out of the DMI component. This is done because the use of sand and

gravel for construction purposes (i.e. land raising) is typically Dutch, and because of the large

volumes used it may greatly affect the outcome of the cyclical use rate indicator for the

Netherlands. Including sand and gravel use for this purpose would make international

comparison of the indicator more difficult, because it would show a distorted image.

Reuse of demolition waste for land raising purposes excluded

The previous paragraph explained why sand and gravel use for construction purposes (i.e.

raising roads and lands for the construction of buildings or to strengthen dikes and coastal

defences) was excluded for the Netherlands. However, if raw materials used for this purpose

are excluded from the indicator, then it makes no sense to include the use of secondary

materials for this same purpose. So, in case sand and gravel use for construction purposes (land

raising) are excluded from DMI, also the cyclical use streams used for this same purpose should

be excluded from the Uc component.

In practice, for the Netherlands this means that the reuse of demolition waste (e.g. from

buildings) used for land raising purposes should be excluded from the Uc component. This is

done by excluding the reuse of mineral waste for the construction sectors.

Chemical waste excluded

Chemical waste could not be assigned to one of the four material categories as proposed by

Eurostat. Therefore, it was not included in the cyclical use component (Uc) of the indicator. So, if

chemical waste would have been included the cyclical use rate indicator for the Dutch economy

would have been somewhat higher. It would be optional to create a fifth material category

‘remaining’, to include all waste streams which cannot clearly be assigned to one of the four

material categories.

Although only chemical waste was not assigned to one of the material categories, there were

other waste categories like mixed waste, other non-metallic waste, rubber waste and plastic

waste, for which the allocation to a material category was not that straightforward. This

allocation of waste to material categories requires more attention in order to further improve

the indicator.

Robustness of the cyclical use rate indicator

One final point that has to be made is that the outcome of the cyclical use rate indicator

fluctuates quite strongly for metal. From about 8% in 2008, it increases about 50% to almost

12% in 2010 and then back to about 8% in 2012. This raise questions about the robustness of

the cyclical use rate indicator. There is no problem if this fluctuation represents an actual

change in the economy, or maybe a special event, for instance caused by changes in policy.

However, if such large fluctuation is caused by a lack of reliable data, then this could be

problematic for the reliability of the indicator. Extending the timeline of the cyclical use rate

Developing an Indicator for the Circular Economy 20

indicator by calculating it also for the year 2000 and onwards could provide more information

about the robustness of the indicator.

Developing an Indicator for the Circular Economy 21

5. Conclusion

The cyclical use rate indicator is developed in order to tell something about the circular

economy. However, the circular economy, as described by the Ellen MacArthur Foundation

(2014), is a broad and comprehensive concept and it is hard, if not impossible, to measure it by

a single indicator. One issue faced in this research that clearly shows this, is energy recovery

from incineration. Renewable energy such as wind and solar energy is regarded as circular

because it is renewable, however it cannot be measured in kg because there is no physical flow.

Therefore, generating solar and wind energy is not included in the Uc component, while waste

incineration for energy recovery should be included in the Uc component if the definition of Uc

(Chapter 2.2) is applied. The result would be that energy generated from waste incineration is

regarded more circular than solar and wind energy. Therefore, it might be useful to develop

separate indicators for reuse (cyclical use rate) and renewables13

(e.g. renewable energy

indicator)14

, which both cover a part of the circular economy. A set of indicators would be

required to cover all aspects of the circular economy, as was also proposed by Geng et al.

(2012).

This research shows that the cyclical use rate indicator can be calculated for the Netherlands as

well, although some modifications had to be made to improve the indicator, and to adjust it for

the specific case of the Netherlands. First of all, DMI was corrected for re-exportation, and

secondly, the import of waste was subtracted from DMI and included in the Uc component. It is

likely that such country-specific modifications also have to be made for other countries.

The main issue encountered was the indistinctness about what should be included in the Uc

component. In order to develop an internationally comparable indicator it should be clearly

specified what material flows should be included, because different choices with respect to the

cyclical use component may greatly affect the outcomes.

Further, several methodological and data issues were encountered and discussed. The results of

the cyclical use rate indicator of the Netherlands were similar to those of the Czech Republic

and Japan. The highest cyclical use rate was recorded for biomass, and the lowest for fossil

fuels. The cyclical use rates for metal and minerals differed by country. A clear upward trend in

the cyclical use rate could only be observed for Japan. However, also the cyclical use rate for the

Netherlands and the Czech Republic increased slowly over time.

Although the cyclical use rate indicator was calculated successfully for the Netherlands, there

are still some issues open for discussion. Like whether to use an input- or consumption

indicator, and whether conversion of material streams into their RMEs would improve the

indicator. Furthermore, the outlier of metal for the Netherlands in 2010, raise questions about

the robustness of the cyclical use rate indicator. Extending the timeline of the cyclical use rate

indicator by calculating it also for the year 2000 and onwards could provide more information

about the robustness of the indicator.

13 A similar problem may for instance occur for plastics made from fossil fuels, and bio plastics which are regarded more

circular according to the Ellen MacArthur Foundation (2014). 14 Could also be an existing indicator

Developing an Indicator for the Circular Economy 22

6. References

Delahaye, R. & Zult. D. (2013). Monitor Materiaalstromen, Den Haag/Heerlen. Ellen MacArthur Foundation. (2012). Towards the Circular Economy, Economic and business rationale for an accelerated transition. Ellen MacArthur Foundation. (2013). Towards the Circular Economy, Opportunities for the Consumer Goods Sector.

Ellen MacArthur Foundation. (2014). Towards the Circular Economy, Accelerating the scale-up

across global supply chains. Prepared in collaboration with the World Economic Forum and

McKinsey & Company.

Eurostat. (2001). Economy-wide material flow accounts and derived indicators: a

methodological guide. Luxembourg

Eurostat. (2012) Economy-wide material flow accounts: compilation guide 2012. Luxembourg

Eurostat (2014). Material Flow Accounts – flow in raw material equivalents.

http://ec.europa.eu/eurostat/statistics-explained/index.php/Material_flow_accounts_-

_flows_in_raw_material_equivalents#Comparison_between_actual_material_flows_and_mater

ial_flows_in_RME

Geng, Y., Fu, J., Sarkis, J., & Xue, B. (2012). Towards a national circular economy indicator system

in China: an evaluation and critical analysis. Journal of Cleaner Production, 23(1), 216-224.

Kovanda, J. (2014). Incorporation of recycling flows into economy-wide material flow accounting

and analysis: A case study for the Czech Republic. Resources, Conservation and Recycling, 92,

78-84.

Ministry of the Environment – Government of Japan (2003). Establishing a sound material-cycle

society: milestone toward a sound material-cycle society through changes in business and life

styles. Tokyo.

Statistics Netherlands. (2013). Environmental Accounts of the Netherlands 2012. The Hague.

Related to material flow accounts and RMEs:

http://ec.europa.eu/eurostat/statistics-

explained/extensions/EurostatPDFGenerator/getfile.php?file=212.108.16.124_1434466795_1.p

df

http://ec.europa.eu/eurostat/documents/1798247/6191533/3-Economy-wide-material-flow-

accounts...-A-methodological-guide-2000-edition.pdf/9dfae42d-0831-4522-9fe5-571785f8fecf

Task Force on Material Flows (2014), Meeting 7-8 November 2014. Minutes (final, 19 December

2014).

Developing an Indicator for the Circular Economy 23

Appendix

Determination of DMIa by material category and total (in mln kg).

Category Components 2008 2010 2012

Biomass

Harvested biomass (+) 40753 40437 40579

Total imports (+) 54036 53535 56562

Minus secondary imports (-) 6932 7456 8895

Total Biomass 87857 86515 88246

Metal

Domestically extracted raw material (+) 0 0 0

Total imports (+) 41658 31766 35162

Minus secondary imports (-) 1782 2832 1995

Total Metal 39875 28934 33167

Mineral

Domestically extracted raw material (+) 29500 31643 33702

Total imports (+) 42192 36107 30069

Minus secondary imports (-) 1331 259 457

Total Mineral 70361 67491 63314

Fossil

Domestically extracted raw material (+) 66970 70049 63573

Total imports (+) 135059 138570 148383

Minus secondary imports (-) 245 211 245

Total Fossil 201784 208408 211711

Total DMIa 399877 391348 396438

Determination of Uc (cyclical use of materials) by material category (in mln kg)15

Category Components 2008 2010 2012

Biomass

Recycled 16670 17858 18899

Dry manure domestic 1633 1878 1915

Import of dry manure 59 78 123

Total Biomass 18362 19813 20937

Metal Recycled 3424 3858 2801

Total Metal 3424 3858 2801

Mineral Recycled 12403 11707 12303

Total Mineral 12403 11707 12303

Fossil Recycled 617 555 650

Total Fossil 617 555 650

Total Uc 34806 35934 36691

15 The secondary imports shown in the upper table, are included in the ‘recycled’ component in the lower table.