Towards a Circular Economy – Should we follow in Sweden’s footsteps?

Tax incentives

In January 2017 Sweden passed a new law to encourage consumers to be more sustainable with the resources they own. The law puts tax breaks for repairs on everyday items such as bikes and clothing, cutting the VAT by half. Therefore, instead of paying an extra 25% in VAT on repairs, consumers only pay 12%. This acts as an incentive to repair broken or worn-out items rather than throwing them away and replacing them. If we take note of these types of initiatives in the UK, could it bring us closer towards a circular economy?

Breaking barriers

In the UK, we are beginning to realise the potential of using products in a more circular way. But there are many barriers in our way that are slowing down the journey towards a circular economy. Although the circular economy is expected to bring the EU €1.8 trillion by 2030, there will be costs involved at the start. For example, the outlays associated with changing business models to allow for material take back, setting up repair facilities, and investing in renewable energy. Not to mention the cost to the consumer of repairing and maintaining the products they own. Taking a leaf out of Sweden’s book could go some way to breaking down these barriers.

Changing behaviour

Encouraging people to send their products for repair could lead to less demand for ‘new’ products made from virgin raw materials. This, in turn, could reduce environmental pressures such as resource use, emissions from manufacturing, and impacts of global transportation. There will be a reduction in the amount of materials that are wasted after one use and then sent to landfill. The growth in the repair industry itself will also bring benefits to local economies and communities, and will boost employment opportunities and the skilled labour sector.

The Swedish government’s changes to tax may not seem enough to spark this shift from disposal, to repair and maintenance. But importantly, it applies to expensive products such as white goods, along with cheaper items like clothing. Therefore, anyone that owns a washing machine or fridge can claim back 50% of the VAT on the cost of labour for repair. This is important, as a big money saving could be a significant factor in someone’s decision on whether to buy a new appliance, or improve the one they already have. Sweden’s approach starts to trigger this vital behaviour change. They are encouraging people to think about the products they own in a different way and move away from the throwaway culture we have become so accustomed to. Consumers are probably less happy about another recent law change in Sweden that increases the tax rates on alcohol… but that’s another blog post…back to the circular economy.

Accelerating the journey towards a circular economy

Sweden already generates most of its electricity from renewables and what they are doing around circularity seems to be working. In fact, Europe as a whole is already showing signs of developing into a more circular economy. Estimates suggest that we could be living in entirely ‘circular’ cities by 2040. Perhaps the UK needs to take some lessons from Sweden’s approach. There is no doubt that the private sector has a huge part to play. But to really drive behaviour change, there seems to be a real need for efforts to come from all sides: business, government, and consumers alike. Let’s not get left on the back foot.

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For more about the circular economy, read our other blogs here:
What goes around comes around, Part 1: What is the circular economy?
What goes around comes around, Part 2: The three enablers for a circular economy