By Paul Davies and Michael Green

A new European Parliament briefing highlights the benefits of, and difficulties associated with, transitioning the chemicals industry to a circular economy.

The traditional economy typically involves purchasing and using a product, and then disposing that product when it no longer has utility (i.e. the “take-make-dispose” approach to resources). Conversely, a circular economy seeks to extend the life cycle of products by aiming to both extract and retain the maximum value of their component materials.

A greater emphasis on product re-use and mechanical recycling in the chemicals industry requires developing new solutions and manufacturing products intentionally designed for re-use. This presents a growth opportunity and a new source of competitiveness for European operators compared with raw material-rich regions, whilst providing the more obvious benefits of preserving increasingly scarce resources and injecting renewed value into waste products.

The briefing also notes a number of challenges associated with shifting the European chemicals industry to a circular economy. Broadly, these difficulties relate to the potential presence of “substances of concern” (substances that could cause serious effects on human health and the environment) in products with consumer-exposure risk. More specifically, the European Parliament highlighted consumers’ lack of knowledge about chemicals (of concern) present in products. Often the exact composition of a given product is intellectual property that the law protects. The European Parliament believes that even when the law requires manufacturers to release information about the presence of certain substances in products, such standards are not systematically implemented.

The briefing also notes a number of potential remedies. For instance, the use of “product passports”— as proposed in 2013 by the European Resource Efficiency Platform — may enable widespread availability of information regarding the presence of substances of concern in products. However, as a number of stakeholders have noted, the associated administrative burden of this initiative could prove prohibitive.

Designing an enforceable legal framework may prove especially challenging because technologies and processes for chemical recycling are still far from mature. A large number of EU laws are relevant to substances of concern, such as those relating to chemicals, products, and waste. The European Commission is expected to publish a communication on the interface of the relevant laws by the end of 2017, which may enhance understanding of the regulatory landscape while helping the chemicals industry transition to a circular economy.

This post was prepared with the assistance of Tegan Creedy in the London office of Latham & Watkins.