Wales to boost circular economy with launch of mutual credit system
A consultation on the new currency, which will be known as the Celyn, will begin at the Circular Economy Wales conference in Cardiff on 7 November, with a proposed pilot to take place in North Wales in 2020.
Circular Economy Wales is being awarded £100,000 from its £4-million Foundational Economy Challenge Fund to create a mutual credit system which will be targeted at Wales’ small-to-medium enterprises (SMEs).
The Celyn will be a digital currency network that helps businesses exchange surplus goods and services without using pound sterling or other state currencies. It is based on a business-to-business (B2B) electronic credit system in Sardinia, called the Sardex, which was set up in 2008 by a group of Sardinian locals and has begun to spread across the rest of Italy.
In the mutual credit system, businesses accept payments from other businesses in the form of credits – if a business has acquired goods or services through the system, the business owes debt to the system in the form of goods and services, while if a business has provided goods or services through the system, the business is owed credits, which can be used to acquire more goods and services.
Mutual credit systems differ to ‘alternative currencies’, such as the Bristol Pound or Brixton Pound, in that while there is a financial value attached to the goods and services traded, the credits used to purchase them cannot be exchanged back into national currency, as can be done with schemes such as the Bristol Pound or the Brixton Pound. This keeps money circulating within the local economy.
Through this form of exchange of surplus goods and services, participating SMEs are able to preserve their current account, weathering economic storms and maintaining local jobs, as well as promoting a circular economy by making full use of scarce materials and resources.
This commitment to a circular economy can be further imbued through membership of the mutual credit system being contingent on members adopting circular economy principles, while credits could be used by local authorities to incentivise participation in local recycling schemes, such as food waste collections.
Read more about mutual credit systems: How could a mutual credit system advance the circular economy?
‘Stronger and more resilient’ communities
Eifion Williams, CEO of Circular Economy Wales, said: “The Sardex benefited the Sardinian SME economy to the tune of 50 million Euros last year alone. Wales is similar to Sardinia in that SMEs make up 99 per cent of our businesses, so this has the potential to significantly boost our economy.
“If Wales had initiated a copy of the Sardex in 2008, and it had followed the same growth trajectory, Welsh SMEs would now be strengthened to the tune of £256 million in additional turnover.”
Lee Waters, Deputy Minister for Economy and Transport, added: “Our Economic Action Plan sets out the direction for a broader and more balanced approach to economic development focused on making communities stronger and more resilient. The Foundational Economy Challenge Fund is fundamental to this and I’m intrigued to see the results of this mutual credit system pilot by Circular Economy Wales.”
The pilot will be supported by Dr Paolo Dini, a research fellow at the London School of Economics who was also one of the Sardex founders.
Dr Dini said: “The Sardex has been replicated successfully in many parts of Italy, so it’s very exciting to be able to pilot this in Wales. This will be the first replication outside of Italy. I think the similar economic factors bode well, our challenge will be ensuring that businesses understand the benefits, and will begin consultation shortly.”
Wales on circular economy forefront
The introduction of a mutual credit system, the first of its kind in the UK, would be a significant innovation from the Welsh Government, which has shown a clear commitment to advancing the circular economy over the past two decades.
Wales is currently the leading recycling nation in the UK, posting a 62.7 per cent recycling rate in 2017/18, well ahead of the country’s national recycling target of 58 per cent for 2016/17 and on course to reach the Welsh Government’s targets of 64 per cent by 2019/20 and 70 per cent by 2024/25.
It has also been confirmed that Wales could be considering an ambitious 80 per cent municipal waste recycling target by 2035 as part of its ‘Towards Zero Waste’ strategy, which aims for Wales to become a zero waste nation by 2050.
This commitment to the circular economy has been reflected in public funding. In October 2018, Blythyn, then Welsh Environment Minister, announced more than £50 million in funding to develop Welsh recycling services and infrastructure. This was then followed in April 2019 by the news that £6.5 million of funding would be invested in building Wales’ circular economy, by providing grants between £25,000 and £750,000 to businesses looking to increase their use of recycled materials.
Further details of Circular Economy Wales’ ‘Beyond Zero Waste – Building a Truly Circular Economy’ conference taking place on 6-7 November can be found on the event page.