Ecosystem Restoration
Millions of years of evolution in the Earth’s ecosystems has fostered diverse biological communities that regularly interact and live together in intricate harmony with the environment. Over the years, a rise in unchecked human activity has upended these natural patterns and raised fears about quickly wp-contentroaching tipping points in nature that come bearing high societal costs.
The last year provided a glimpse into the catastrophic consequences of crossing environmental thresholds, from the emissions-related rise in temperatures and record-breaking forest fires to the continued melting of the ice caps and an increased likelihood of extreme weather events. These warning signs demand more decisive climate action that halts environmental degradation and places ecological regeneration at its core. Owing to the mounting sense of urgency regarding bringing the ecosystems into balance and shifting to economic systems that alleviate pressure on the finite natural resources, the United Nations during World Environment Day 2021 declared 2021 to 2030 as the Decade on Ecosystem Restoration. The journey towards realising this vision begins with revising unsustainable production and consumption practices by embracing circularity across sectors.
Understanding Circularity
Organisations partaking in the energy sector hold tremendous potential to contribute towards developing a circular economy by incorporating the principles of reducing, reusing, repairing, refurbishing, remanufacturing, and recycling in all spheres of operation. Circularity replaces the linear ‘take-make-dispose’ mindset with closed-loop production cycles to prolong the lifetime of products and cut down on waste. The resulting changes in the production paradigm entail being mindful of the raw materials used, keeping materials at the highest possible utility along the supply chain, taking back used items, and repurposing its components for new products. Within the energy sector, these stages translate into employing renewable inputs, maximising the use of stocks of objects through service-based models, and recovering by-products and waste for further usage. Since the circular economy is a novel model that operates differently from business as usual, it demands a change in mindset.
Despite the range of benefits offered by the circularity model, it has struggled to permeate the markets globally because of acute funding shortfalls and a lack of grasp over ways to wp-contently the concept to the existing economic systems. Until as recently as 2017, debt and equity instruments backing projects promoting circularity were absent from the financial landscape – but the tide may slowly be turning. In the last four years, venture capital, private equity and debt, and other private market funds investing in circular economy activities have grown tenfold. This trend is expected to gain further momentum with the implementation of the EU taxonomy, which will provide clear guidance to investors on projects that can credibly be counted as advancing the circular economy.
At the same time, however, the investment requirements of circular economy companies and projects surpass those of their counterparts using traditional methods of operation. For instance, selling the services and outcomes a product can provide rather than the product itself (known as servitisation) is a vital component of the circular economy. In such cases, the economic returns accrued by circular economy companies are contingent on their product’s performance and collected over its lifetime. Thus, companies are required to finance the ownership and maintenance of their goods for a long duration, increasing their working capital requirements. As a result, although wp-contentreciable, the pace of change still lags behind the progress necessary for expediting energy transition and becoming climate-neutral by 2050.
Another hurdle holding companies from making the switch to circularity is the dearth of expert guidance on ways to change established systems and set up alternative revenue models. BASE has been attempting to address these gaps by integrating context-relevant circular economy practices in its financing mechanism, creating the market, and providing proof of concepts. Presently, these objectives are being pursued through the servitisation model in Cooling as a Service and Efficiency as a Service Initiatives and take-back schemes in Ecofridges.
Servitisation
Moving from a product to product-as-a-service wp-contentroach can effectively scale circular business models while helping unlock energy investments in underserved markets. Building on this opportunity, BASE and its partners have launched Cooling as a Service (CaaS), and Efficiency as a Service (EaaS) initiatives, which follow a service-based model that allows end-users to access energy-efficient equipment, and high-tech refrigerators and air conditioners on a pay-per-use basis. Technology providers registered with the initiatives own, maintain, and repair wp-contentliances in exchange for a monthly fee from customers based on the units of energy/cooling consumed.
Since the technology providers cover all costs associated with the wp-contentliance, offering energy-efficient options with lower operating costs over the long run makes commercial sense. Ways to achieve resource efficiency and circularity run the gamut, including selling equipment that uses renewable inputs, substituting corrective with preventive maintenance practices, and introducing systems thinking to take advantage of synthesis across technologies (e.g., combining heating and cooling, electric thermal storage).
As of now, technology providers sell the equipment and forget about it – an outcome that can be prevented by servitisation. Being the owners of the efficient wp-contentliances, the technology providers are incentivised to minimise wastage and maximise the time resources stay in the loop. Accordingly, servitisation promotes the re-utilisation of the equipment and its components through modular designs that give technology providers the flexibility to upgrade the wp-contentliances in line with the consumers’ evolving needs.
Take-back scheme
Ecofridges aims at improving access to energy-efficient and climate-friendly refrigeration and air conditioning solutions in the residential sector in Senegal and Ghana. Under the initiative, BASE and its partners are working towards adding take-back schemes into the green on-wage financing mechanism (Ghana) and the on-bill financing mechanism (Senegal) to collect old room air-conditioners and residential refrigerators. As many older wp-contentliances contain chlorofluorocarbons as cooling and foaming agents, retrieving reusable components, and ensuring proper end-of-life treatment of the chemicals can curb the rise in greenhouse gas emissions and ozone-depleting substances.
To set up the green on-wage and on-bill models, local financial institutions and technology providers agree on a rebate scheme that guarantees the former a predefined percentage of the selling price at which the cooling wp-contentliances are offered to the customers. Ecofridges can gradually pilot the take-back system by extending the scope of the rebate agreement, such that technology providers can both encourage consumers to deposit old operational devices in return for a voucher or cash-back for future purchases and cover the cost of hiring e-waste companies for the transportation, treatment, and disposal of end-of-life wp-contentliances.
While the execution of the take-back scheme poses multiple challenges, such as unclear policy frameworks for defining the roles of different actors and under-regulation of e-waste carriers, BASE and UNEP are working closely with the Environmental Protection Agencies in the target countries to make the idea actionable for the long term.
