Building a morecircular Australia
The opportunity of transitioning to a circular economy

March 2021
www.pwc.com.au

As the world emerges from the COVID-19 pandemic we face the challenge offinding our ‘next normal’. This is both a significant challenge and great
opportunity.

“

With this restart, a window of hope and opportunity opens… an opportunity fornations to green their recovery packages and shape the 21st century economy inways that are clean, green, healthy, safe and more resilient– UN Climate Chief

PwC’s modelling indicates that Australia could generate $1,860 billion in direct
economic benefits over twenty years and save 165 million tonnes of CO2 peryear by 2040.
This report explores the opportunity for Australia to adopt the concept of acircular economy, establishing a robust and holistic framework for sustainablegrowth.

About us
A team of more than 8,000 people in Australia, working together to build trust insociety and solve important problems.
PricewaterhouseCoopers (Australia) or PwC Australia is one of Australia's
leading professional services firms, bringing the power of our global network offirms to help Australian businesses, not-for-profit organisations and governments.
We’re a network of firms in 158 countries with more than 250,000 people who arecommitted to delivering quality in assurance, advisory and tax services.
At PwC Australia our purpose is to build trust in society and solve important
problems. Find out more and tell us what matters to you by visiting us atwww.pwc.com.

Contents

Foreword

4

Part 1: What is a circular economy, and why now?

5

1.1 Introduction

6

1.2 What’s the problem?

8

Part 2: Why go circular? The economic perspective

10

2.1 Summary of results

11

2.2 Built environment

14

2.3 Mobility

19

2.4 Community

23

2.5 Industry

27

Part 3: A way forward - going circular29

3.1 Embracing the challenge

30

3.2 The road to circular infrastructure

32

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

3Foreword
We are in a time of enormous challenge and how we respond will have a great impact on the future of oureconomy, our society and the planet as a whole.
Australia has experienced rapid economic development and population growth. This has placed pressure on
our cities, infrastructure, services and resources that are all based on the prevalent linear economic model of'take, make, use, waste’.
Australia is depleting its resources at an accelerated rate, whilst generating unprecedented waste andemissions, to the detriment of the region not just environmentally, but socially and economically. There is a
growing realisation that climate risk represents financial, environmental and social risk, and that transition
towards a lower carbon, more circular economic models represents a historic opportunity.
As Australia emerges from the COVID-19 pandemic we face the challenge of finding our ‘next normal’. This isboth a significant challenge and great opportunity. Indeed, as the United Nations has implored, this is achance to ‘Build Back Better’.
To address this, Australia has started to explore sustainable solutions, such as alternative sources of energy,
curbing excessive consumption, implementing greater efficiency in the built environment, and expanding on
existing recycling efforts. However, reversing the current pattern of development requires a truly holistic
approach.
In this report, we explore the opportunity for Australia to adopt the concept of a circular economy, establishinga robust and holistic framework for sustainable growth. This involves creating closed-loop material cycles
across the production and consumption value chain, and treating waste as a leakage of value to be avoided
rather than dismissed.
PwC has defined a framework for circular economic infrastructure, governed by three principles: optimising
the consumption of finite resources, maximising product utilisation, and recovering by-products and waste.
Given the expansion of urban areas and forecasted growth of our cities, it is only logical that the journey
towards circularity should focus on the built environment, transport and housing.
The potential environmental and economic benefit of adopting a circular economy model for Australia has
been quantified in this report. Our modelling suggests that Australia could generate $1,860 billion in direct
economic benefits over twenty years and save 165 million tonnes of CO2 per year by 2040.
The nations and companies that make early progress towards lower carbon, more circular economic models
will be the ones to capture the value articulated in this report from the shift in mainstream capital flows
towards a growing emphasis on environmental and social impacts.
PwC has a clear ambition to play a role in this paradigm shift and is uniquely placed to help catalyse andorchestrate the construction of a more ‘circular’ economy in Australia - that decouples economic activity fromthe consumption of finite resources, to create an abundant future, without waste.

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

4Part 1
What is a circular economy,
and why now?

1.1

Introduction

Australia has taken its
place among the world's
most developed countries
and it now faces theresulting challenges – areturn to a rapidly growing
population post COVID-19
concentrated in cities anda heavy reliance on finite
natural resources.

Reflecting today’s global economic system, Australia has delivered its
growth on a linear model of production that became dominant after the
introduction of mass production during the industrial revolution. In
terms of economic growth this has been a story of success andprosperity.
However, the transition over the last 200 years to a one-way
production model – a linear economy – has caused a strain on
finite resources and introduced significant quantities of waste.
The linear economy model involves extracting natural resources tomake products that are used for a limited period of time, before being
discarded as waste – as shown in Figure 1. Within the same period,
the planet's ecosystems have begun to show signs of strain.

Figure 1: Linear economy model

Source

Make

Use

Waste

Since the end of the 1940s, technological and social innovation has
boosted living standards, which increased consumption, required agreater supply of consumer goods and increased waste. Population
growth is leading to increased amounts of waste and emissions. Risksof serious environmental, health, and economic problems are only
beginning to emerge.
The linear economy model’s dependence on finite resources has also
led to their near depletion and to rising and less predictablecommodity prices. Companies and economies that rely on scarcenatural resources are becoming more exposed to price volatility andare pressured to find alternatives that are both economical andsustainable.
The linear economy model is becoming increasingly
unsustainable and there is a need for an alternative economy
model that is sustainable.
In contrast, the circular economy has emerged as a more sustainable
alternative, and has attracted interest and support from governments
over the last two decades, and a growing number of businesses.

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

6

A circular economy is an alternative economic
model that derives its inspiration from nature’s
ecological cycle – creating a closed loop of material
and energy cycles where all materials operate
within a closed system.
A truly circular economy is driven by renewable
flows, rather than finite stocks – with two types ofmaterial flows:1.

organic material, designed to re-enter andregenerate the environment safely (such ascompost)2.

materials, designed to circulate for as long as
possible through repair and reuse, without
entering the environment for disposal (such as
metals, paper and plastic).

The circular economy concept involves various
stakeholders including but not limited to
manufacturers, distributors, consumers, andgovernments, and can be applied across allindustries. Making the transition to a circular
economy means changing the way we source,
design, manufacture, distribute, use, and discardmaterials.

A circular economy model represents asignificant opportunity, as well as a challenge.
In a circular economy, every resource moves
through in such a way that it becomes food foranother process, and in so doing, unlocks vast
amounts of previously lost or inaccessible value, tocreate lasting abundance - for people, economies
and the planet as a whole. A move towards thiseconomy now can help organisations address theirmost immediate needs in new ways that unlock
capital and labour to build competitive advantage,
create new profit pools and drive innovation. This
enables organisation to grow their competitive edge
and be fit for long term and sustainable success.
Across an entire economy, this move creates anabundance of jobs, systemic resilience andresource security.
The circular economy is often depicted as a seriesof loops, each representing a different way ofmanaging products that are no longer required bytheir owners (because they are damaged, defective,
or simply unwanted). The loops represent ahierarchy. The closer to the centre the loop is, theless waste and environmental pollution created andthe more economic value retained in the product ormaterials.

Figure 2 Circular economy concept
1. Recycling

2. Remanufacturing

Recovering materials from end-of-life
products for use as raw materials in
another process, excluding
incineration to generate energy. Thiscan lead to recovered materials of
the same quality, lower quality(down-cycling) or higher quality(upcycling).

Disassembling products at thecomponent level rather than into
separate materials, replacing broken
or out-dated parts to make a new
product for sale or lease. This avoids
a new product having to be
manufactured.

4. Maintenance
Extending the life of a product with
its first owner, either via repair or
refurbishment service, or by making
it easier for users to repair itthemselves. This delays thepurchase of a replacement product.

3. Reuse
Selling or donating a product in its
original form, or with little change,
which avoids a new product having to
be manufactured. May also include
redistribution of unwanted food.
5. Redesign

Source: PwC UK, Going Circular: Our 10 Year Journey

Developing products that use fewer materials or have a smaller
environment footprint that are designed to be more durable, or to
be offered as a service through a leasing or take-back model.
Also includes adaptations to make products easier to maintain,
reuse, remanufacture or disassemble and recycle at end-of-life.
Aims to tackle the most material impacts, based on lifecycle
analysis.

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

7

1.2

What’s the problem?

The growth generated
through the linear economy
model allowed most of theworld to access goods andservices that have
improved our lives.
This has, however, comeat the cost of depleting
natural resources andenvironmental damage
impacting our planet.

The problems generated through the linear economy model have
impacted the planet, the environment, natural resources, industry andthe economy – with impacts seen in the following ways.

The planet
Since the 1970s, humankind has effectively been running an
ecological deficit in terms of its impact on the environment. Thismeans that the global annual demand for resources has exceeded
what the Earth can regenerate each year.

1.7
planets to produce global
output and absorb waste.

Source: PwC analysis based on Global Footprint Network

Today the global economy uses
This trend is estimated to grow exponentially. If these developments
are allowed to continue, the environmental damage caused may
become irreversible, or even reach ‘tipping points’ whereself-reinforcing feedback loops produce above-proportionate effects.

The environment
The most fundamental problem caused by the linear economy modelis accelerating environmental degradation resulting from economic
activity. Multiple other measures point to large-scale environmental
damage, showing alarming rates of biodiversity loss, deforestation,
land degradation, depletion of stocks of finite resources, disruption of
the Earth’s freshwater cycle, chemical pollution and climate change, toname just a few examples. Waste and pollution are the main factors
leading to this environmental degradation.

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

8Improving Australia’s domestic resource
recovery capacity and sustainableconsumption is critical to avoiding
environmental degradation. Every year
millions of tonnes of materials are lost tolandfill, such as plastics, paper, glass, metals,
textiles, masonry, food and other organic
materials. These are all potential sources ofsignificant value and resources that are goingto waste.

As an example, Australia generates

74
million tonnes of waste per annum
Source: PwC analysis based on Global Footprint Network andNational Waste Report 2020

Natural resources
Consuming more resources than the Earthcan provide will inevitably lead to shortages ofsome resources. With half of the global
population now middle class or wealthier, thepressure on our planet’s resources andecosystems will be even greater in the future.

90.9%
Of all raw materials do not find their
way back into the economy
Source: Global Circularity

Industry and the economy
Price volatility can be associated with three
types of scarcity: physical scarcity such as theavailability and depletion of stocks; economic
scarcity referring to supply and demand; andgeographical scarcity referring to who controls
the availability of resources. The three typesof scarcity are interlinked and all drive thevolatility of prices – impacting on businesses
and the economy in different ways.
Linear economy models are dependent onabundant resources feeding them, and thenegative impacts arising from waste,environmental degradation and scarcity havebeen borne by the environment and society as
a whole.

180%
Percentage increase in commodities
prices since January 2000

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

Source: Australian Bureau of Statistics

9

Part 2
Why go circular?
The economic perspective

2.1

Summary of results
Circular potential
Concepts of sustainability are not new to policy or business decisions
across Australia. In fact, many of the opportunities quantified andexplored in the following pages already have government targets or
expected take ups without further action – such as government goals
for halving food waste, or the expected increase in electric vehicle(EV) ownership.
However, they still lack a holistic approach for increasing circularity inline with the three principles of the circular economy. This section aims
to show the quantum of the potential benefits of fully embracing
circularity in a coordinated way.

Category of opportunities
To demonstrate the size of the opportunity that going circularpresents, we have examined the impact within four key components ofa circular economy, as follows:• A built environment based on circular economy principles would
optimise land utilisation, and integrate durable, mixed-use buildings
designed in a modular way and constructed with recycled andbiological materials. Spaces would consume less power and water,
and would be highly-utilised thanks to sharing and multi-purposing.
• A circular mobility system would be interconnected and shared,
electrified, autonomous, and multi-modal. Public transport would
make up a large proportion of citizens’ mode of travel while
individualised mobility would be mostly provided as a service.
• A circular community is one that is mindful of resource
consumption, use and disposal. It is a community where
consumers reduce consumption of energy, water and biomass,
extend the life cycle of their assets as long as possible and practiceactive recycling.
• Australian industry working in a circular manner. Businesses
transform their business model to be circular, including designingand innovating new products and services.
These categories are used to demonstrate the magnitude of thebenefits that could come from embracing the opportunities within eachcategory.

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

11

Identifying opportunities

Quantifying impact

Within these categories, this report does not aim tocapture every circular opportunity, but rather
demonstrate the magnitude of the benefits that
could come from embracing the opportunities ineach category. We have quantified only the highimpact priority opportunities.

For the identified priority opportunities, we havesized the potential for twenty years from 2021 to2040 in terms of:Prioritisation of initiatives based on:•

the potential impact in terms of wealth creationand pollution reduction•

barriers for implementation:-

economic barriers relating to profitability,
and capital requirements-

technology barriers relating to lack oftechnology and infrastructure, for
implementation-

regulatory barriers relating to existing
policy and regulations.

•direct benefits (savings to households, industry
and governments and positive externalities)•

reduction of CO2 emissions.

Direct benefits have been used to measure against
investment or costs of implementing policy changes
from a government perspective. This helps
understand the investment that could be made andstill generate a positive cost benefit ratio in total
economic terms.
All the benefits captured in this report are presented
as an incremental above the business as usual thata circular economy could deliver. This recognisesthat progress will be made in many of these areas
without policy or attitude change. This allows us todemonstrate the true benefit of doing things
differently, above and beyond what is alreadyhappening.

For most of the categories of opportunities,
quantifying the high priority opportunities gives asense of the quantum of benefits.

It is important to note that these forecasts are all
made on a pre-COVID-19 basis, with any particular
COVID-19 impacts called out qualitatively.

The one exception to this is industry. This is for two
reasons. The first is that information on both theimpact and potential barriers is internal within
businesses. This varies greatly based on the type ofbusiness and the industry in which they operate.
The second is that the largest opportunities in thiscategory will come from innovations that are not yet
known. The true potential is in industry redesigning
what they produce and this will only happen at alarge scale when the attitudes of circularity areembraced.

Direct benefits
Direct benefits presented by state and category are
shown below and explored in more detail across thefollowing pages.

Cumulative benefits to 2040 (billions $)Average benefit (2021-2040) as
proportion of GSP

NSW

648

3.48%

VIC

285

2.08%

QLD

705

6.54%

SA

67

2.04%

WA

109

1.36%

TAS

20

2.05%

NT

10

1.21%

ACT

17

1.33%

1860

3.25%

Australia

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

12

High priority opportunities

Built
environment

Quantified benefits

Modular construction
3D printing
Sharing space
District coolingHigh value recycling and reuse$ material savings* CO2 reduction

20 yearcumulative
benefits

Intermodal Transport Systems$ accident reduction$111 billion$773 billion$ labour savings$ electricity savings% faster time to market$ congestion savings

Mobility

Electric Vehicles
Autonomous Vehicles

Community% lives saved* CO2 reduction

Energy consumption andpurchasing attitudes$ electricity savings

Sorting and recycling$ increased value of recycling

Food waste reduction
Increased use of renewableenergy in production

Industry$ fuel savings

New markets for value add
product such as green steel

20 yearcumulative
benefits$175 billion* CO2 reduction

20 yearcumulative
benefits$801 billion$ electricity savings$ increased potential market* CO2 reduction

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

20 yearcumulative
benefits

13

2.2

Built environment
A circular built environment could
generate $773 billion in direct economic
benefits over twenty years and save
3.6 million tonnes of CO2 per year inAustralia by 2040

2.2

Built environment

Built environment benefits

Built environment opportunities

Our analysis suggests that, if city planning, modesof construction and real estate management
implement the circular economy opportunities
below, this could generate direct benefits of$85 billion in 2040, or an average of 1.31% of grossdomestic product (GDP) each year for the next 20
years.

The following opportunities were identified formaking our built environment more circular. The five
shown in bold are those that are deemed to be highpriority and have associated benefits quantified:A circular built environment optimises land
utilisation, and integrates durable, flexible, andmodular spaces. It is designed to facilitate closed
loops of water, nutrients, materials, and energy, andis constructed through sourcing bio-based andrecycled materials.
However, the National Waste Database shows that
construction and demolition created over
23 megatonnes of ‘core waste’ in 2018-19.1 This isroughly the same amount as all other commercial
and industrial core waste combined. Additionally,
what is already built is not used as efficiently as it
could be if it was managed under circular principles.
Embracing circular opportunities in the built
environment is not just about how we design andbuild for the future, but also retrofitting andencouraging better use in the environment wealready have. Incorporating circular opportunities inthe built environment during the construction andthroughout the asset life of buildings allows for
optimal usage of construction materials, reduced
utilisation of finite resources, and substantial
reductions in waste.
The current COVID-19 situation has demonstrated
how fundamentally our assumption about the built
environment can change with regards toteleworking (which is an example of circular use in
the built environment, but has not been quantified inthis report).

•

Urban planning to optimise land utilisation(e.g. use of brownfield sites)•

Use of biological and non-toxic elements inarchitecture (i.e. sustainable building materials
with a biological origin can contribute todesigning smarter buildings)•

Industrialised production of modules(i.e. modular production off-site for rapid
assembly on-site)•

3D printing of building modules•

Equipment/materials sharing platform(i.e. supply and demand of equipment/materials
can be aligned)•

Sharing of building space (e.g. multi-use
building)•

Increased teleworking to reduce need for officefloor space•

Building and infrastructure for effective energy,
nutrient and material cycle (e.g. districtcooling, insulation, solar water heating
systems, building management systems)•

Selective demolition/refurbishing of existingbuildings•

High-value recycling and re-use of
construction modules (i.e. deconstruct vs.
demolish) and material (e.g. steel)•

Looping of organic construction material tobiosphere

1. Australian Government (2020) National Waste Report 2020

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

15Modular construction
Wider adoption of modular construction is an
example of circularity in the built environment.
Modular construction and prefabricated buildings
involve off-site production and then on-site
assembly of building units. This technique increases
construction process speed, enhances quality andconsistency of output, and reduces material
wastage.
Modular construction reduces on-site material andlabor costs and allows for faster delivery. During theconstruction phase alone, the usage of modules
can bring savings of up to 15% in material costs
and close to 75% in labour costs.2 This in return fora slight increase in capital and operating
expenditure compared to conventional construction
methods.
Modular and prefabricated buildings are not new
concepts, however wider adoption of theopportunity could bring about significant savingsand economic benefits. The challenge is to increase
the adoption of modular construction across theinfrastructure and built environment sector.

Benefits in 2040 Cumulative benefits(millions $) to 2040 (millions $)
NSW

8358

68,176

VIC

5566

45,401

QLD

6925

56,486

SA

1208

9857

WA

3346

27,294

TAS

276

2250

NT

479

3908

ACT

559

4563

26,717217,935

Australia

3D printing of modules
3D printing technology allows for printing andassembly of houses and building spaces in a
reduced timeframe. It involves only a fraction of thetypical associated costs and construction materialand can cut down on transport requirements.
With increased adoption, 3D printing in theAustralian construction sector can save labour andmaterial costs. The technology allows forconstruction at a fraction of the cost and reducesmaterial consumption significantly. While 3D printing
adds ~12% in associated capital and operating
expenditures, it results in ~20% material savingsand ~32% labour savings.3

Benefits in 2040 Cumulative benefits(millions $) to 2040 (millions $)
NSW
VIC
QLD
SA
WA
TAS
NT
ACT
Australia

1791

14,609

1148

9361

1618

13,197

264

2155

763

6223

59

480

96

780

126

1029

5864

47,834

2. Strategy& (2019) Putting GCC Cities in the Loop
3. Ellen MacArthur Foundation (2015) Delivering the Circular Economy:
Toolkit for policymakers
PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

16

Sharing and multipurpose use of space

District cooling

Embracing circular opportunities in the built
environment is not just about how we design andbuild for the future, but also retrofitting andencouraging better use in the environment wealready have.

Energy efficiency in operations of the built
environment offers many circular opportunities.
These include use of high performance insulation,
optimisation of natural light, use of solar water
heating, design to ensure energy and water
efficiency coupled with use of renewable sources ofenergy.

Sharing and multi-purposing of spaces is key tomaximising the use of the buildings we alreadyhave, and also reduces the need for new building
construction.
Multi-purposing applies mainly to commercial
spaces through co-working (offices shared byworkers from multiple organisations). It can also
apply to residential spaces being used as analternative to traditional hospitality spaces. Digitalapplications can also facilitate the sharing of spaces
and allow versatile utilisation throughout asset
lifetime.
It is acknowledged that while COVID-19 may haveaccelerated the adoption of some circular ideas in
the built environment (such as teleworking), it may
slow others, like sharing. Public health measures
are likely to reduce this opportunity in the short term
and influence longer term attitudes. However, we donot believe this eliminates the potential of sharing(although processes and policies may lookdifferent). In the medium term, as organisation
realise their built environment requirements havebeen disrupted by COVID-19, the potential forsharing with a smaller footprint may increase.

Benefits in 2040 Cumulative benefits(millions $) to 2040 (millions $)
NSW

360

3,776

VIC

289

3,032

QLD

219

2,302

SA

43

455

WA

86

907

TAS

12

123

NT

5

56

ACT

19

203

1,034

10,855Australia

District cooling is one opportunity that offers great
potential to increase energy efficiency where
cooling can consume significant energy. This has
already been adopted in the Australian context.
Brisbane was the first city to adopt a district cooling
network, with energy savings ranging between 10%
to 30% for individual buildings as well as C02
emissions reductions of up to 24,000.4

Benefits in 2040 Cumulative benefits(millions $) to 2040 (millions $)
NSW

458

3697

VIC

423

3422

QLD

289

2347

SA

102

832

WA

187

1468

TAS

20

174

NT

11

84

ACT

32

252

1521

12,276Australia

4. Brisbane City Council (2017) Clean and Green Strategy 2017-2030

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

17

High value recycling and reuse of modules
As mentioned, construction and demolition currently
produces the same amount of core waste as allother industry sectors combined. Approximately
65% of that is currently recovered.5 There is scope
to reduce waste through reuse, and to increase therecycling rate of that waste that is produced.
At the point of end-of-use, disassembly should befavored ahead of demolition. The resulting
high-value recycling reduces waste, and captures
value that would otherwise be destroyed. This
process can save up to 30% of material costs, while
increasing associated labour costs by only
approximately 5%.6
Recycling of construction modules also reduces thedemand for virgin, non-renewable resources, andthe energy needed to extract and process them.

Benefits in 2040 Cumulative benefits(millions $) to 2040 (millions $)NSW

17,672

170,642

VIC

12,911

124,674

QLD

10,05097,049SA

3109

30,021

WA

4228

40,825

TAS

992

9580

NT

317

3061

ACT

818

7894

50,097483,747

Australia

5. Australian Government (2020) National Waste Report 2020
6. Ellen MacArthur Foundation (2015) Delivering the Circular Economy:
Toolkit for policymakers

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

18

2.3

Mobility
A circular transport system could
generate $111 billion in direct economic
benefits over twenty years and save 144
million tonnes of CO2 per year inAustralia by 2040

2.3

Mobility

Mobility benefits

Mobility opportunities

Our analysis suggests that a more circular mobility
system could generate direct benefits of $13 billion
in 2040, or an average of 0.19% of GDP each year
for the next 20 years. These benefits span
economic, social, and environmental value by
reducing congestion, traffic accidents, and fuelconsumption, along with the costs associated withthem. It can also achieve a substantial reduction in
CO2 emissions, by up to 144 million tonnes in 2040
(compared to business as usual projections).

The following opportunities were identified formaking our mobility system more circular. The first
three, shown in bold, are those that are deemed tobe high priority and have associated benefits
quantified:A circular mobility system provides interconnected
and ubiquitous public transportation solutions. It
provides safe, clean, and energy-efficient
alternatives to the traditional petrol-based cars, andpromotes ride sharing.
A circular mobility system requires technology
improvements, public infrastructure investments
and a shift in community attitudes. However, this isa lower area of potential benefits because of theamount of attention that this area receives by policy
markers, making the business as usual casealready ambitious in efficiency and benefits.

•

increased use of personal electric vehicles•

increase adoption of connected andautonomous cars•

increased use of intermodal transportation
systems, through a system-level integration of
all transport modes, combined with last mileconnectivity•

use of clean and renewable energy sources
across all transport modes•

increased usage of shared personal and transit
transportation systems•

increased car repair and used parts sale•predictive transport asset maintenance throughsmart asset management systems for cars andpublic transport modes.

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

20Autonomous vehicles

Electric vehicles

Autonomous driving is becoming increasingly closer
to a reality in our personal transport systems. The
technology is being advanced by both traditional
automotive industry and technology giants.

Electric vehicles (EVs), including battery-powered,hydrogen-powered and plug-in hybrid vehicles, areexpected to grow rapidly in Australia, as they areworldwide.

With increased adoption, autonomous vehicles
could improve the mobility system throughreduction in congestion by 50% by closing space
between cars and reducing accidents by 90%
through avoiding human error.7

EVs can reduce pollution and car-associated fuelconsumption, and as part of a city system, electricvehicles can support renewable energy production.
EVs are also safer, due to their lower speed, lack of
combustion risk, and the integration of basic
automation features that help to prevent accidents.

These benefits will come with increase purchasecosts of vehicles, but will still result in net direct
benefits in the long term, as prices of the vehicles
come down through advancements and production
scale, as shown below.
These benefits are expected to be the furthest awayof those examined in this report, with mass
production not expected to start until 10 to 15 years
from now. Therefore the benefits are generally only
realised in the last few years of those examined.
Governments can start now in creating the rightconditions for their adoption.

Additionally, operations and maintenance costs of
EVs are lower than those of petrol and diesel
vehicles (as electricity is cheaper than fuel and EVs
require less maintenance as they have fewer
moving parts).
As with autonomous vehicles, these benefits do
initially come with an increased purchase price forelectric vehicles. However, these prices are alreadyfalling rapidly thanks to continuing reductions inbattery prices.

Benefits in 2040 Cumulative benefits(millions $)to 2040 (millions $)Benefits in 2040 Cumulative benefits(millions $)to 2040 (millions $)

NSW

232

491

NSW

3087

27,254

VIC

166

341

VIC

3122

27,144

QLD

129

267

QLD

2312

20,222

SA

39

79

SA

688

6247

WA

75

155

WA

1240

10724

TAS

7

13

TAS

217

2,013

NT

6

13

NT

75

659

ACT

5

10

ACT

150

1304

659

1,371010,892

95,567Australia

Australia

7. Swinburne University of Technology (2017) “Self-driving cars could
dramatically reduce the road toll,” Swinburne University of Technology,
Sep. 26, 2017
PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

21

Intermodal public transport
A connected, multi-modal transportation systemwith sufficient capacity, speed and comfort provides
the fundamental basis for a circular mobility system.
This system relies on the availability of public
transport and on a digital interface to manage theprovision of a transport related services and let
people shift between personal, shared, and public
transportation in an optimised mobility system.
This expands customer travel choice and supports
greater efficiency in how our transport services areprovided leading to increased use of public
transport systems.
This can reduce travel in personal vehicles withassociated emissions and accident risk and reduceoverall congestion. Intermodal commuting is often
used to combine the strengths of varioustransportation options, and reduce dependence on
the car.

Benefits in 2040 Cumulative benefits(millions $)to 2040 (millions $)
NSW

782

7,013

VIC

367

3,305

QLD

193

1,691

SA

66

602

WA

125

1,106

TAS

5

44

NT

10

83

ACT

8

72

1555

13,916Australia

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

22

2.4

Community
Circular communities could generate$175 billion in direct economic benefits
over twenty years and save 16.7 million
tonnes of CO2 per year in Australia
by 2040

2.4

Community

Community benefits

Community opportunities

Our analysis suggests that circular behaviours
adopted in our community could generate direct
benefits of $15 billion in 2040, or an average of
0.29% of GDP each year for the next 20 years.

The following opportunities were identified forrealising circular benefits in our community. The first
three, shown in bold, are those that are deemed tobe high priority and have associated benefits
quantified:Circular strategies at the household level will
generate multiple benefits. It minimises the usageof finite resources; reduces costs associated withexcessive consumption of electricity and purchaseof food; extracts greater value from recycled waste;
and substantially reduces CO2 emissions.
More than the other categories examined, creatinga circular community, one that is mindful of
resource consumption, use, and disposal is mostdependent on individual attitudes, rather than broad
investments or policies. Governments caninfluence, but not guarantee, these attitudes
through the provision of information, setting
incentives through policy and reducing costs ofthese behaviour through supportive recycling
infrastructure.

•

Improving energy consumption attitudes(e.g. turning off AC when not in use, unplugging
appliances when not in use, sourcing
low-energy consumption fittings)•

Sorting and recycling of materials (e.g. water,organic, plastic, glass, paper, metal)•

Reducing avoidable food waste•

Sourcing products made of bio-based,recycled material•

Increased focus on household appliance repair•

Sharing of durable assets (e.g. lawnmower,
tools)•

Extending water use cycle (e.g. using grey
water for greening and landscaping)PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

24Community energy attitudes
Adopting efficient energy consumption behaviours
is essential to reducing associated energy wastage.
These include turning off the lights in vacant rooms,
adjusting the air-conditioning thermostat, andunplugging appliances that are not in use, coupledwith adoption of proven technologies (such as lightsensors and home automation) and conscious
selection of energy efficient fittings and appliances.
Fittings that consume little energy, such as LED
lights, can bring savings of up to 70% to 90% inelectricity consumption and associated CO2
savings.8 Similarly, water-efficient fittings can
reduce water consumption by more than 60% forshowers and faucets.9
Awareness on efficient energy consumption
behaviours coupled with adoption of proventechnologies are necessary to reduce theassociated energy wasted.

Benefits in 2040 Cumulative benefits(millions $)to 2040 (millions $)
NSW

2187

21,405VIC

3029

29,094QLD

1089

10,557

SA

578

5840

WA

637

6091

TAS

119

1224

NT

53

513

ACT

61

591

7754

75,315Australia

8. International Energy Agency (2020) Lighting, IEA, Paris
https://www.iea.org/reports/lighting
9. Australian Government (2020) Your Home - Reducing Water Demand

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

25

Food waste

Efficient recycling

Preventing the generation of organic waste
represents another significant opportunity.
Reducing avoidable food waste reduces the energy
and resources required to produce food that isnever consumed, reduces the emissions fromtransporting that food and then reduces therequirement to process that waste.

Recycling rates of household waste current vary
state to state. Not only is there potential to increase
these rates, but also ways to more efficient capture
the true value of recyclable materials if they aresorted and treated effectively.

The savings could be achieved by a number ofconsumer and retail activities such as right-sizing
the shopping basket and buying per unit, betterawareness on optimal food preservation practices,
optimised ordering and pricing at retail stores, andsmart packaging for incrementing shelf-life.

A transition towards increased recycling of materials
can achieve significant value and reduce landfilling
practices.

In addition to the value associated with the wasted
food, reduced food waste leads to significant
greenhouse gas savings at all stages of the cycle(less transport, less cold storage, less landfill).
Australia already has high goals for reduction of
avoidable food waste. Australia has set a goal tohalve its food waste by 2030, aligning with the UN's
Sustainable Development Goal 12.3.

Benefits in 2040 Cumulative benefits(millions $)to 2040 (millions $)Benefits in 2040 Cumulative benefits(millions $)to 2040 (millions $)

NSW

1258

18,033

NSW

897

8002

VIC

1716

24,104

VIC

420

3626

QLD

1469

20,814

QLD

242

2104

SA

490

7287

SA

119

1070

WA

649

9050

WA

139

1191

TAS

199

3038

TAS

19

172

NT

29

413

NT

2

18

ACT

26

364

ACT

38

330

5836

83,102

1876

16,513Australia

Australia

10. Australian Government (2017) National Food Waste Strategy

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

26

2.5

Industry

Industry benefits

Manufacturing use of renewables

Our limited analysis of potential benefits fromcircular industry suggests direct benefits of $801
billion in 2040.

Grattan Institute research shows the potential
savings if Australia’s manufacturing industry usedrenewables to replace their coal and gas
energy use.11

Circular industry adopts conscious policies in theway they work, in the energy they consume andthey waste they produce. But circular industry also
provides the next wave of innovation to promote a
future circular economy. Circular organisations will
design the products and services that will we
require to keep advancing in a circular journey.

Benefits in 2040 Cumulative benefits(millions $)to 2040 (millions $)
NSW

232

491

Industry opportunities

VIC

166

341

As discussed above, the identification of circular
opportunities will depend on the innovation andattitudes of the organisations in industry. Therefore,
we have included just two known opportunities in
our analysis, anticipating that there will be many
more to be identified in the future:

QLD

129

267

SA

39

79

WA

75

155

TAS

7

13

NT

6

13

ACT

5

10

659

1,369

•

the manufacturing industry switching to
renewable energy sources over coal and gas•

production of green steel in Australia replacingsome iron ore exports for manufacturing
overseas.

Australia

11. Grattan Institute (2020) Start with steel: A practical plan to support
carbon workers and cut emissions

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

27

Green steel‘Green steel’ or steel that is produced using
renewables and efficient practices presents a large
opportunity for Australia.
The direct benefit estimate below shows the export
opportunity of green steel, netted from the resulting
reduction in exports of iron ore.

Benefits in 2040 Cumulative benefits(millions $)to 2040 (millions $)NSW

21,485294,349

VIC

0

0

QLD

34,377

470,959

SA

0

0

WA

0

0

TAS

0

0

NT

0

0

ACT

0

0

55,862

765,308

Australia

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

28

Part 3
A way forward going circular3.1

Embracing the challenge

To set in motion thetransition to a circular
economy and reap the
potential benefits, anintegrated andcomprehensive nationalframework is required toensure government andindustry contribute toward
a solution.

The challenge is to now reinvent our economy to grow our standard ofliving without depleting natural resources and harming the naturalenvironment.
In order to address this challenge, at a high-level, there are three
ways to drive change:
1.

stopping certain activities, or the use of certain products, andfinding substitutes or new technological solutions

2.

where technological solutions or substitutes do not exist, or are
not sufficient, efficiency improvements should lead todecoupling of resource use and economic growth3.

where neither stopping certain activities or generating efficiency
improvements is enough, processes would need to go fully
circular by closing all loops and eliminating all negative
externalities in order to avoid an ecological collapse.

Australia has already started on this journey, protecting theenvironment by banning certain activities and in some cases
decoupling them from economic growth. Concepts of sustainability are
not new to policy or business decisions across Australia. For instance
all levels of government have committed to reduce, reuse and recycle
the goods and products we no longer need, and set dedicated targets
to reduce waste by 2030.
However, we still lack a holistic approach for incentivising circularity inAustralia. Figure 3 illustrates the key pillars required to facilitate
Australia’s transition towards a more circular economy.

Figure 3
Benefits from the developmentof a circular economy
3

4

5

6

Regulatory
framework

Fiscalframework

Private-sector
outreach andpublicawareness

Publicprocurement
and asset
management

2

Institutional framework

1

National policies and plans

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy30In order for the benefits articulated in this report,
government and industry should focus on four
actions to drive change.

1. A national circular economy framework
Despite circular economy principles underpinning
the national waste policy, the focus of that policy iswaste, and not a plan targeted to the end-to-end
nature of transitioning to a circular economy. To
compliment waste and energy policy, governments
should integrate their efforts in a comprehensive
national framework that will ensure all relevant
stakeholders contribute toward a solution.
A dedicated and comprehensive circular economy
strategy is a crucial step in the transition toward a
circular economy. As part of this strategy,
policymakers at all levels should agree and define
priority initiatives to spearhead the transition. At thenational level, this includes achieving resource
efficiency and increasing the use of renewable
inputs into product design. Similar frameworks canbe seen in France, the Netherlands, and Scotland,
among other countries.

2. Developing market dynamics andincentives for change
Private sector investment has rapidly shifted
mainstream investment towards
sustainability-focused companies in recent years.
This shift in the market is born out of the growing
understanding that climate risk presents investment
risk, but also a historic investment opportunity.
The nations and companies that are the earlymovers towards lower carbon, more circular
economic models will be the ones to capture thevalue from these new and growing markets. This
includes the rapid growth of the ESG (Environment,
Social and Governance) investment sector.
However, as discussed in Part 1 of this reportmarket failures exists and in the presence of amarket failure, free markets will not produce efficientor socially optimal outcomes. This is why
governments also need to step in to regulate
activities that otherwise lead to excessive negative
externalities.
Resource scarcity is a problem that cannot be
solved by the free market. In a free market
economy scarcity will lead to higher prices for raw
material and energy inputs, which in turn will force
companies to improve their resource efficiency andinnovate.

Higher prices will also create incentives forcollection and re-use, which creates markets forsecond hand materials. Unfortunately, the majorityof markets operate with market failures resulting in
negative externalities for society as a whole.
Taxes or levies on polluting activities are one way
for governments to make companies assume theexternal costs of their production activities. In
addition to this, incentives that create positive
externalities could be explored, for example
innovative ideas that reduce the negative impact on
the environment could be subsidised.

3. Creating markets for second-handproducts and materials
For a circular economy model to work, markets forsecond-hand products and materials must exist. A
challenge today is that not all second-handmaterials are price competitive. The price of virgin
input materials may be too low and the markets forrecycled materials may be too small. A potential
solution, could be through industry driving change
through looking for new ways of turning waste into
new input materials.
By incentivising the types of economic activity that
help nature’s ecosystems rather than deplete them,national and supra-national legislation has thepower to protect the environment and accelerate
the transition to a circular economy.

4. Focus on infrastructure and the built
environment
Australia’s cities contain 68% of the national
population, with this expected to reach 74% by
2066.12 In addition, Australia is entering a decade ofunprecedented levels of investment in infrastructure
and city-shaping projects. This is demonstrated by
the Australian Government’s $110 billion
investments in transport infrastructure acrossAustralia over the next 10 years.
The unprecedented levels of investments ininfrastructure in Australia, presents a significant
opportunity for government and industry to
implement the circular economic principles andstrategies into infrastructure. The following page
presents PwC’s Circular Infrastructure Framework,
exploring the strategies to deliver circular cities andinfrastructure in Australia.

12. ABS (2018) Projected population, Australia, 2017–2066

PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

31

3.2

The road to circular infrastructure

PwC’s Circular Infrastructure Framework
3 principles and 10 corresponding strategies
Principles
Prioritiserenewable
inputsMaximiseproduct use

Circular strategies
1. Circularsourcing

Replace construction materials with renewable,
bio-based, or recycled materials

2. Sustainable
designDesign infrastructure and buildings for disassembly

3. Resource
efficiency

Optimise usage of raw materials to minimise waste in
the construction process (e.g. opting for prefabricatedcomponents or modular construction)

4. Product as aservice

Provide a service in areas that were traditionally sold as
products (i.e. a developer pays a periodic fee for theuse of a product rather than purchasing the productoutright, for example modular facades)1

Raw material
extraction

2

5. Sharing/virtualising

Sharing or multi-purposing of assets (sharing ofcommercial and residential space through co-working
and co-living)

6. Usage
optimisation/
maintenance

Increase the performance and efficiency of product tomaximise its life span

7. Reuse/
distribution

Purchase and sell second-hand materials

Design3
9Construction

10
8
Retail4
7
Utilisation

Recover
8. Refurbishing/ Remanufacture or refurbish existing buildings/
by-products remanufacturecomponents for new usage, rather than down-cycling
and waste
9. Recycling from Down-cycling waste or by-products from construction to
manufacturing
be used for another product10. Recycling
fromconsumption

Infrastructure lifecycle

5
6

Value leakage /waste

Recycle discarded materials after demolition/
deconstruction

The anticipated pipeline of infrastructure in Australia expected to be deliver over the next decade presents asignificant opportunity for government and industry to rapidly implement circular economic principles andstrategies into the built environment. This is crucial as the construction and demolition sector in Australia
currently accounts for 31% (23 metric tonnes) of the waste in Australia.13 This is partly due to the nature of
sector, but also because of the conventional design and construction methods currently adopted leading tosignificant waste.
As illustrated in this report, there are significant benefits generated by government and industry transitioning
toward a circular economy. The framework above presents a pathway to a more circular infrastructure andbuilt environment in Australia.
Incorporating circular opportunities throughout the asset life of infrastructure and the built environment createsvalue for the economy, provides opportunities for industry to create new revenue streams, products andservices, and better outcomes for our environment.
13. Australian Government (2020) National Waste Report 2020
PwC Australia | Building Australia back better | The opportunity of transitioning to a circular economy

32

Contacts
For more information

Jeremy Thorpe
Chief Economist+61 (2) 8266 4611
jeremy.thorpe@pwc.com

Dr Lucas Carmody
Associate Director+61 (2) 6271 3269
lucas.carmody@pwc.com

PwC commits to net zero by 2030
PwC announced a science-based commitment to achieve net zero greenhouse gas (GHG)
emissions by 2030.
Our net zero ambition will require us to reduce our total GHG emissions by 50% in absolute terms
over the next decade. We’ll achieve this by driving energy efficiency improvements in our offices
and reducing the GHG emissions associated with our business travel.
PwC’s commitment to net zero builds on our 2018 environment ambition to drive efficiencies, go
100% renewable, and offset 100% air travel emissions from FY19 and residual energy use by
FY22. It is also an extension of our commitment to be carbon neutral, which we have continued
since 2008.
We recognise that healthy environmental ecosystems are of great importance to First Nations
populations globally and acknowledge Aboriginal and Torres Strait Islander peoples' profoundspiritual connection to land. To find out more visit www.pwc.com.au

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