By 2050, the global population is expected to soar beyond 9 billion people, 66 percent of whom may live in cities. Accompanying this stunning pace of urbanization will be a complex web of challenges related to consumption, pollution, and water and energy stresses.
Recently, the concept of a circular economy has gained traction as a solution that would ameliorate the burden on natural resources while still encouraging economic growth. The concept is simple: minimize the disposal of waste and the need for raw materials by keeping existing materials and assets in the production cycle. This alternative economic system transforms our current linear economy, which “takes, makes and wastes” into one that reuses, recycles and repairs.
Though China embraced the circular economy from the mid-2000s, conversations about the circular economy are now taking place in many countries around the world, in particular developed countries. Large corporations, foundations and local governments have gotten behind the CE as the new way forward. But given that most of urban growth will take place in less developed countries, their rapidly urbanizing cities need to be included, and even prioritized.
Concept of Circular Economy
Today’s linear ‘take, make, dispose’ economic model relies on large quantities of cheap, easily accessible materials and energy, and is a model that is reaching its physical limits. A circular economy is an attractive and viable alternative that businesses have already started exploring today.
The circular economy rests on three principles, each addressing several of the resource and system challenges that industrial economies faces.
Principle 1: Preserve and enhance natural capital
Principle 2: Optimise resource yields
Principle 3: Foster system effectiveness
Circular Solutions in Developing Countries
People in developing country cities use “circular economy” principles every day—picking through waste, using less and repairing more. As Deputy Director for the UN Environment Programme, Ibrahim Thiaw, noted, “repairing is part of the DNA of developing countries.”
These practices are, by and large, driven by poverty: necessity is the mother of invention. But as these countries develop, the challenge will be to find ways to deploy systematically circular solutions that drive economic, environmental and social value. Here are three examples of CE in practice.
- In Xiangyang, China, government and business leaders came together to implement a sludge-to-energy program. Through this public-private partnership, the city built a biorefinery on the site of an existing wastewater treatment facility. The refinery takes sludge from the wastewater treatment process and combines it with local food waste to produce biochar and compressed natural gas. The project is reducing greenhouse gas emissions by 95-98 percent and financially breaking even by including sales of biochar and natural gas.
- The Integrated Waste Exchange in Cape Town, South Africa is a free online system that connects individuals, schools and businesses that wish to exchange their waste or excess materials. Developed by the city, this peer-to-peer exchange platform facilitates a circular flow of materials like batteries, textiles, metals and other materials while saving users money, conserving energy and reducing pressure on already constrained landfills.
- In Kolkata, India, several stakeholders came together to launch a bus service that runs entirely on renewable biogas. The firm that produces the biogas (from animal and plant waste) worked with the government to place biogas pumps around the city and partnered with Ashok Leyland, a major vehicle manufacturing company, to produce the buses. Riding the bus isn’t just sustainable, it’s cost-effective: because biogas is significantly less expensive than other fuels, bus fares will begin at just Re 1 (less than $0.02), a twelfth the cost of the next-cheapest bus.
These case studies illustrate three core principles often associated with successful CE programs:
- Collaborate outside your comfort zone. The circular economy often begets solutions that are cross-sector by nature. Implementing these solutions will require business models that are prepared to consider and involve stakeholders from various sectors throughout a supply chain.
- Work at the appropriate scale. In the example of an Integrated Waste Exchange, success at the city level is only possible through the development of an effective household program. Projects could be aimed at businesses, households or public services. Ultimately, the circular economy will transform each of these areas.
- Establish priority sectors. Inadequate waste management, energy access and food are persistent problems in developing country cities, making these sectors logical entry points to begin implementing a circular model.
Making Habits into Systems
While these instances of circular projects are encouraging, they remain largely isolated and disjointed. For developing cities to fully participate in the circular economy, they must be able to extend informal repair networks and isolated projects to a more intentional approach, systematized through policies.
The first step will be recognizing the circular economy as an opportunity that could offer a better path for development. Once incentives are established, cities should plan to enact the three lessons above – establish priority sectors, choose the right scale and collaborate. City governments in both developed and developing countries play a significant role in facilitating projects, and the circular economy is no exception.
Lastly, the emerging global network of circular economy experts should expand its horizons to include more work among developing-country cities. Securing funding for pilot projects will be crucial, as it was in the sludge-to-energy example. With this support network in place, developing cities can increase the pace at which they are able to pilot projects and scale them to a systems-level circular economy.
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.