6 ways that Gulf cities can turn waste into wealth

Most of the cities in the Cooperation Council for the Arab States of the Gulf (GCC) have enforced either a complete or a partial lockdown to protect themselves from COVID-19. While economic activities are severely affected, digital channels have become busier, letting government and businesses operate remotely.

Significant advances towards e-government, e-commerce and, most recently, fintech, have seen some advanced urban infrastructure emerge. Abu Dhabi, Doha, Dubai, Kuwait City, Manama, Riyadh and Sharjah exemplify how cities continue to reinvent themselves – and environmentally sustainable projects are at core of strategic plans.

But with improved quality of life and increased economic activity comes an undesirable outcome: urban waste. During lockdown, quantities of municipal waste may have temporarily decreased, but medical waste has significantly increased. But could waste become an economic advantage for Gulf cities? Or even a new economic stimulus to help revive markets affected by the pandemic?

The current industrial and consumption model is based on a process of extract-make-use-dispose – best known as the “linear model”. This one-way production path has dominated the globe since the Industrial Revolution. But if the world’s population reaches 9.6 billion by 2050, says the UN, then three planets would be needed to sustain these consumption patterns. The linear model has put pressure on the supply of raw materials, causing commodity prices to increase and remain volatile. As a result, there are growing calls to rethink the model and replace it with an extract-make-use-recycle model – also known as the circular economy.

Cities are becoming the globe’s economic engines and its largest producers of waste. The World Economic Forum’s white paper on the Circular Economy in Cities estimates that, by 2050, more than 70% of the global population will be living in cities and generating more than 80% of global GDP – along with over 1.3 billion tons of solid waste annually. Even today, the Organisation for Economic Co-operation and Development (OECD) estimates that the cities generate 50% of global waste.

Cities must, therefore, take immediate measures to lower waste generation – and, even better, to turn waste into wealth, proactively developing circular ecosystems to unlock business opportunities.

High-income GCC cities are facing a steady increase in per-person waste. The UN Environment Programme (UNEP) estimated last year that the annual solid municipal waste generated in GCC was around 27 million tons at the end of 2016, with an up to 5% year-on-year increase. These cities are allocating significant budgets every year for waste management, and are also incurring growing environmental costs in the form of landfills.

That same UNEP study suggests a strong correlation between high income and high waste generation, and estimates the annual waste management cost in the West Asia region to be around $3.6 billion. The cost of an integrated system to divert 85% of waste from landfill in the region would be up to $7.86 billion annually – creating market opportunity of up to $4.7 billon per year. A report by the World Government Summit, meanwhile, estimates that GCC countries could save $138 billion by 2030 through a circular economy. Globally, the business opportunity remains in excess of $4.5 trillion from focusing on four distinct categories of waste: wasted capacity, wasted lifecycle, wasted embedded value and wasted resources.

GCC cities already have invested significantly in improving their waste management infrastructure. Across the GCC, waste-to-power projects are being developed, while recycling plants have started to segregate waste for reuse employ technologies for integrated waste management.

Abu Dhabi currently recycles 28% of non-hazardous waste and composts 6%. Dubai’s Smart Sustainability Oasis recycling project segregates 18 types of household waste. Sharjah’s Bee’ah waste management company has the highest landfill diversion ratio in the GCC at 76% – and is aiming for 100% landfill diversion by 2021.

Also in 2021, Aluminium Bahrain (Alba), in collaboration with an Australian company, will start treating hazardous waste and converting it into raw materials for the construction and steel industries. Bahrain is also in the advanced tendering stage of a waste-to-power energy plant. Saudi Arabia and UAE, meanwhile, are developing eco-parks which will use recycled materials. Saudi Arabia is also finalizing its national strategy for the circular economy.

All of these initiatives seem to be headed in the right direction. But what more could the GCC cities do in their journey to convert waste to wealth as part of a circular economy? Here are some potential strategies.

1) A “100 Circular Entrepreneurs” strategy

GCC cities are ideally positioned to develop an integrated circular ecosystem, and circular entrepreneurs should be at the heart of it. Each city should give itself a target of developing, say, 100 circular entrepreneurs in five years, in niche circular economy areas.

The GCC’s integrated business ecosystem will allow these circular entrepreneurs to collaborate within the region. Several new circular businesses have already emerged, and better collaboration among them will likely have a snowball effect. DGrade turns recycled plastic into quick-drying T-shirts and cloth bags. Hand Industries recycles used textiles. West Coast Group recycles plastic bottles. Crown Industries recycles plastics and metals. Crescent Petroleum recycles hazardous waste. Falcon Pack and Nabeel Perfumes Group use biodegradable and recycled materials.

Cities targeting zero waste or low carbon emissions should prioritize the success of circular entrepreneurs as a key objective.

2) Cities themselves should act as entrepreneurs

GCC cities should consider an integrated circular strategy to collaborate and complement each other, based on their unique strengths. When designing this ecosystem, the cities should themselves think and act like entrepreneurs. This will enable a much larger market for circular startups and entrepreneurs, which will be able to scale much faster across the GCC, leveraging economies of scale.

A multi-pronged policy in each city will provide the right enabling ecosystem for innovative circular businesses. Other cities around the world are already implementing their strategies. Brussels’s Regional Programme for the Circular Economy, Copenhagen’s Resource and Waste Management Plan 2024, the Circular Economy Route Map for London, Paris’s Circular Economy Plan and Singapore’s Zero Waste Masterplan are some of the leading examples of such strategic frameworks.

In addition to cities’ individual strategic plans, the European Union’s Circular Economy Action Plan offers an example to other regional inter-governmental entities (such as the GCC) as to how to develop and pursue regional strategies.

3) Forging global partnerships for circularity

Enterprise-support programmes help ideas to become businesses. These programmes connect ideas to markets using incubation and acceleration strategies. Since the adverse effects of the linear model are felt everywhere, circular businesses could scale much faster across the GCC region.

GCC cities should also collaborate with other leading circular cities, in the way that cities around the world have already started learning from each other. The Cities Cooperating for Circular Economy (FORCE), sponsored by the European Commission, is a partnership between Copenhagen, Hamburg, Lisbon and Genoa to foster collaborations between them. Singapore, meanwhile, has signed a memorandum of understanding with the Netherlands to jointly explore resource recovery solutions for the circular economy. Denmark and China are also collaborating on circular initiatives. The Nordic countries are exploring joint initiatives with Malaysia. In addition, the OECD has launched a series of Roundtables on the Circular Economy in Cities and Regions.

4) Developing new economic value chains

Waste is currently a significant cost item in national budgets. But more efficient segregation could turn waste into valuable raw materials.

Waste segregation at a household level can help create a more efficient economic value chain. Local startups could collaborate with global entrepreneurs in using technology for waste collection and segregation.

Bee’ah is already using smart waste bins sensors for waste collection, along with a fleet of 1,200 eco-friendly vehicles. Meanwhile, the company’s recycling plant is producing rubber matting for children playgrounds out of rubber powder from shredded tires.

Dubai’s smart Bigbelly bins are equipped with self-compaction technology, which makes waste sorting and segregation more efficient. Saudi Aramco is recycling chemical waste to be used as raw material for plastic products, and using recycled plastic in roads. Having acquired Converge polyol technology in 2016, Saudi Aramco uses the material created from captured CO2 in products such as food packaging and insulation. Abu Dhabi’s Tadweer waste management centre has started an online recycling auction of waste materials.

5) Introducing import and waste tariffs

A number of consumer and imported items are sold thanks to their attractive pricing but their burden on the waste management budget is overlooked. Products with shorter lifespans overload the waste management system. Several fiscal policy adjustments and social behavior changes would be needed to correct this imbalance. Based on the annual waste management cost, GCC cities could develop a tariff strategy and implement it gradually. For the GCC countries, the UNEP estimates the per-resident waste management cost to be around $31. This could serve as the baseline to develop an optimal tariff mechanism in the GCC cities.

Waste collection charges, waste generation taxes, along with the introduction of tariffs and fees, have been successful in modelling individual and corporate behaviours. Washington, DC, saw a 60% drop in use after the city introduced a charge (of 5 cents) on single-use bags. San Francisco is charging businesses a fee based on waste discarded, and offers discounts if they use separate collection bins. In Turin, businesses pay a fine for abandoning their waste or not sorting it properly.

As for tax breaks, Shanghai has granted VAT reductions to a recycling company, while Cleveland and Cincinnati offered 100% tax cut for green-certified construction projects. Milan provides a 20% waste-tax reduction to businesses that donate their food waste. Most OECD countries have implemented household waste collection charge and waste treatment taxes.

In line with global trends, data-driven waste tariffs should be aimed at reducing the cost of waste management. Abu Dhabi has implemented a waste tariff, entitled the Nadafa Programme, which helps fund an integrated waste-management system that tracks and monitors all vehicles carrying all waste types. Meanwhile, Bahrain imposes fines on unauthorized waste disposal.

Another way to minimize waste would be to leverage something called extended producer responsibility, which applies all of the environmental costs associated with a product throughout its lifecycle to its market price. This approach would be more effective if the GCC cities could apply it jointly, making it easier for the producers to develop innovative products for a larger market rather than for each city. France already requires manufacturers to design products that are easier to fix as a measure for landfill diversion.

In addition, a preferential tariff should be considered for items that are aligned with the circular economy, making non-circular items gradually more expensive.

6) Mainstreaming circular finance

Individual governments should issue policy instruments to implement this integrated strategy. After the policy framework is in place, market-based financing mechanisms will emerge.

Blended finance could be one such policy instruments, to strengthen bankability of projects and help unlock the private investments. For this, local development finance institutions in the GCC could tailor credit support and enhancement programmes to help unlock bank financing for the circular economy projects.

Bahrain’s Tamkeen enterprise development fund has recently introduced a blended finance programme for banks to finance solar projects. The same programme could easily be expanded for circular economy projects. In the US, a consortium of major corporations has established the Closed Loop fund of $100 million. The fund provides zero-interest rate loans for developing recycling infrastructure, and has unlocked more than $50 million in co-investments from various stakeholders, including impact investors – as outlined in this Ellen MacArthur Foundation paper.

The enterprise-support ecosystem is key to unlocking various types of seed funding to generate market-ready circular solutions. In the UK, the Advance London programme currently provides advisory support and co-investment opportunities for qualifying circular enterprises. Supported by innovation labs, incubators and accelerators, venture capital and private equity funds could ramp up support for circular startups. Bahrain’s Tanmu angel investment firm provides early-stage investments to Bahraini startups, and its mandate could easily be expanded to circular startups.

GCC cities could also lead by issuing circular bonds, or Sukuk, to finance circular projects.

Questions will naturally arise about the cost of building such waste-to-wealth ecosystem in these cities. We can get a fair idea of this by first lining up the annual costs of waste management, rising unemployment, low market growth and the rising cost of raw materials and commodities. In other words, the cost of building such an ecosystem is the cost of surviving in the future – not just being relevant in the decades to come. The World Bank estimates that the GCC economies will start to rebound in 2021. Now is the right time, therefore, to start thinking about the best long-term economic strategies to ensure growth for local economies and a brighter future for young entrepreneurs.

The use of digital technologies in waste management and online recycling auctions are some trends signifying how industry 4.0 is influencing the circular economy. Just as the digital platforms are inverting the traditional business model, the circular economy is disrupting the linear economic model of consumption and production. It also offers a great opportunity to embrace stakeholder capitalism at the onset of a global discourse on the Great Reset.

To stimulate post-pandemic economic rebound, it is now clear that GCC cities should leverage a digitally empowered circular economy in their pursuit of the future.

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