Circular economy: thinking about the environment, climate and economy together

The German automotive industry is internationally regarded as a pioneer in the circular economy. The discussions about a national circular economy strategy and the revision of the End-of-Life Vehicle Directive at European level now offer opportunities to further develop the previous political approaches. 

Vehicles are valuable consumer goods that are often used for over 20 years and resold several times. Consumers therefore have high expectations: excellent product quality, a long service life and comprehensive repairability over the entire service life. A car without a guarantee, without prospects for repairs and spare parts supply and without a network of workshops is hard to imagine.

The "design for recycling" principle is firmly anchored in the development processes of the automotive industry. In order for a vehicle to be approved, the manufacturer must prove that 85% of the vehicle is recyclable. Without this proof, a vehicle model will not receive type approval and may not be placed on the market.

The German automotive industry even goes beyond "design for recycling" and pursues a "design for sustainability" approach. This takes into account the entire value chain and its environmental impact, including the CO₂ footprint. From raw material extraction to production, repair, reuse and remanufacturing to recycling. This holistic approach covers the requirements of the circular economy better than the pure recycling approach.

In order to exploit the potential of the circular economy and to maintain the leading international position of the German automotive industry, two things are now crucial: a suitable regulatory framework and the digitalization of processes.

Let's start with the regulations: an important step would be a revised Circular Car Regulation. It should define more general, even ambitious targets and give companies sufficient scope to develop self-sustaining business models to achieve these goals. The following applies: Certain regulations - for example the precise definition of the use of recycled materials or strict requirements for the separation of components without clear environmental or economic benefits - slow down the development of an efficient circular economy. Rather, regulations on the use of recycled plastics must be technically feasible and economically viable. This shows whether we can successfully think of the environment and the economy together. The legislator should also recognize chemical recycling and thus expand the scope of action of companies. Although the big breakthrough in chemical recycling has not yet been achieved, this variant could separate several layers of different plastics from one another or break them down into individual molecules. In this way, new plastic could be made from plastics that currently have to be burned. Research and development can offer decisive progress here.

In order to achieve the ambitious goals, the regulatory framework must provide incentives and promote competition between companies. And this is where we come to the current main problem: Unfortunately, this idea of incentives is missing from both the current and the discussed Circular Car Regulation. By relying exclusively on the instrument of quotas, politics is depriving the circular economy of competition. What is needed is a system similar to CO₂ pricing. Depending on the design of such a system, companies would have a direct incentive to ensure a long product life, further close cycles and use larger quantities of secondary materials. But it also opens up a sufficiently large framework for entrepreneurial action. Promoting used and remanufactured components and parts by reducing VAT, as proposed in the current draft, can at least be a first step in the right direction.

Let's come to the second crucial point: the digitization of processes. Digitization is an important driver of the automotive circular economy. With Catena-X, automobile manufacturers, suppliers and partners from the IT and recycling industries have launched a platform. This platform is intended to improve cooperation along the entire automotive value chain - from the extraction of raw materials to the recycling of vehicles. The platform is based on digital marketplaces that will, among other things, trade in remanufactured used parts or secondary materials in the future. An important component of this platform is the so-called "digital product twin". This digital twin makes it possible to digitally map products and track all relevant information about a product throughout its entire life cycle. This is intended to achieve better transparency and efficiency along the value chain. One of the first concrete product passports is currently being developed together with representatives of the automotive industry as part of the "Battery Pass" project funded by the Federal Ministry of Economics.

In addition, interfaces between business players and authorities can be digitized, creating the basis for more transparency in the automotive circular economy. The automotive industry is therefore supporting the digitization of the certificate of destruction. It is currently issued by recycling companies when an old vehicle is disposed of and is to be presented by the last owner when the vehicle is de-registered by the registration authority. At least that is what is planned in theory. In practice, however, this analogue system is more than prone to errors. The digitization of the certificate of destruction strengthens legal, environmentally certified companies and promotes transparency about the whereabouts of vehicles. At the same time, digitization and automation can also change the processes of dismantling and recycling - away from small-scale manual work and towards corresponding recycling factories.

The automotive circular economy does not need to be invented, it is already in full swing. Nevertheless, there is still a lot to do - both for legislators and for industry. Cooperation between sectors is a key lever. It can drive automated and standardized processes and dismantling or further improve the recyclability of new vehicles and the materials used for them. The automotive industry is highly motivated to go down this path.