Introduction.

One of the key strategies in China’s Circular Economy (CE) initiative is to use eco-industrial parks to help generate much higher productivity and efficiency of resource utilization. This paper summarizes some of the key features of an EIP directly supporting the transition toward a more circular economy. It is a companion piece to our Defining Eco-Industrial Parks paper.

An ideal EIP has the following features:

• Infrastructure and buildings are designed, constructed, and managed in accordance with environmentally sound practices, equipment, systems, and materials.
• EIP tenant enterprises agree to follow international standards in regards to the minimization of pollution and the reuse, recycling, conversion and disposal of waste.
• Enterprises manage their resources using a life cycle framework so as to optimize their use of water, energy, and materials and minimize environmental damage.  Their practices will include recycling and reuse as well as minimizing waste products that can not be used by other enterprises located in the vicinity. 
• Synergistic linkage of the various enterprises to minimize the use of materials, energy, water, and transportation for a given output of production. Where possible, enterprises exchange by-products not recycled internally.
• Learning within and between tenant enterprises is an essential aspect of the EIP.  To that end, the EIP operates as a learning center on site.
• The EIP serves as a node for the region’s eco-industrial network of operations pursuing sustainable development and the responding to the LCEP.
• EIP Management provides services and leadership to assure that all of these characteristics are reflected over the life of the park.

The Circular Economy plan for Liaoning Province (and other provinces) explicitly sets objectives and tasks in regards to the role of EIPs. The relevant objectives and tasks include the following:

• “To apply the concepts of industrial ecology and recycling economy into building EIPs, increase the level and competition of economic development zones . . . and advance the economic transition of resource depleted areas and old industrial areas.” (Second of Major Tasks)
• “To carry out the EIP construction planning in four Liaoning Economic and Technological Development Zones, establish the chain connections among those enterprises to enter the park, and promote industrial upgrade in the park . . .
• “To build . . . a group of regional waste and used materials reproduction bases; and build bases for renewable resource recycling and reuse in equipment processing and manufacturing. (Near-term specific objective #4.)
• Improve efficiency of energy, water, and materials use and waste reduction in enterprises (near-term major targets # 2 and 3).
• Industrial water reuse reaching as high as 85 percent. (near-term major targets #2)
• Integrated use rate of industrial solid wastes reaching 50 percent, among which that for flying ash to 55 percent and for coal gangue to 50 percent. (near-term major targets #2)

The EIP design described below addresses all of these objectives and targets.

Summary of a Circular Economy EIP Concept

1. EIP Tenants Match CE Requirements

Eco-Industrial Park recruitment should emphasize three major industrial clusters and an additional supply chain group:

• Resource recovery firms: These enterprises produce value from major product and material waste flows. They include niche collection, recycling, equipment re-manufacturing, reuse of products and materials, bio-energy generation, composting, etc.
• Alternative energy firms: Tenants offering products and services to increase efficiency of energy use directly serve achievement of Circular Economy objectives. Renewable energy firms produce such products as bio-gas and bio-fuel, equipment for wind and solar energy, hydrogen fuel cell transportation and power generation, and energy system integrators. Their presence in the EIP could further a long-range goal of increasing the efficiency and reducing the environmental burdens of energy generation. R & D and business development in this field could create a platform for emerging sustainable technologies and build the technological know-how required to be competitive.
• Water technology and service companies: These companies support development of more efficient and integrated water management systems in public infrastructure, commercial buildings, and industrial plants.
• Companies in the supply chain of major industries: This recruitment target focuses on local suppliers of environmentally superior materials, components, or services to international and Chinese private firms and state-owned enterprises. In the case of components or sub-assemblies local access reduces transportation costs and environmental burdens.

2. Support to the Region in Meeting Targets of the Circular Economy

The Eco-Industrial Park would have a clear mission to support the business and social community of its region, including other industrial parks, development zones, and stand-alone firms and public infrastructure. This support could include marketing packages of products and services to State Owned Enterprises, multinationals, and government operations; facilitating creation of environmental and energy companies outside the EIP; managing chain connections or by-product exchanges among industries; and furthering social programs that benefit the citizens of the region.

The EIP’s development strategy could include programs for its tenants to help meet an important State and local priority: the increased efficiency and improved management of State Owned Enterprises (SOEs). With China’s entry to the World Trade Organization, the Government is concerned with achieving a stable transition for the SOEs and their large workforce.

The management of the EIP could work with its tenants to create integrated packages of products and services to support significant gains in efficiency of resource use and prevention of pollution by major SOEs in the region. The social implications of the viability of these firms could be important in reducing the loss of jobs and avoiding the resulting impacts on families. Multinationals could also benefit from such local products and services.

In some cases the EIP might be home base for tenants that operate facilities located outside the EIP.  For instance, some bioenergy functions need to be close to the source of materials, such as methane generation from sewage sludge. A parallel example is manufacture of building products from fly ash. EIP management should assure coordination in planning between park tenants and companies in the same industrial clusters outside the EIP.

Another activity of the EIP and its tenants important to the Circular Economy Plan could be to establish “chain connections” between plants within the park and its region. Chain connections might occur through the brokering of company to company transactions for by-product utilization or through collection and marketing activities of resource recovery companies. Such chain connections require electronic databases of materials available and support needed. With small flows of materials from many individual plants, an intermediary company might be cost-effective for the collection and accumulation of usable volumes.

3. Site Planning and Infrastructure

The physical design of the EIP site, infrastructure, and buildings for the Eco-Industrial Park would maximize energy efficiency in the design of infrastructure and buildings through optimal siting, building envelope efficiency, co-generation, energy or water cascading, and equipment choices. It would use renewable energy and material sources wherever feasible. Construction of the park will follow best environmental practices in materials selection and building technology. The EIP complex would also include demonstration applications of emerging environmental technologies to further research and public education.

The whole site will be conceived to function as an educational showcase for the Recycling Economy. Signage, exhibits, and classes will enable visitors to see sustainable design and advanced environmental and energy technologies in action.
Site landscaping plan should use species native to the region as much as possible. Drought-tolerant species minimize water consumption. Trees and shrubs improve micro-climates and energy efficiency by acting as shade and windbreaks. Enough trees can have a major cooling effect in the whole site. Carefully designed landscaping also reduces erosion and adds to biodiversity, which encourages wildlife settlement. Vegetation with appropriate species in wetlands helps filter pollutants from storm water runoff. Generally native plant landscaping reduces maintenance costs.

Three aspects of the EIP’s physical infrastructure would enhance its contribution to the success of its tenants as well as implementation of CE plans: The Commons Building and EIP Headquarters, the R&D Center, and the Business Incubator. We will discuss these facilities below under support services.

Materials Recovery Facility

EIP infrastructure will incorporate a materials recovery facility (MRF) for sorting of materials and used products and routing to the appropriate user in the park. The logistics of internal roads and the MRF will facilitate distribution and storage of niche materials such as surplus construction materials. Proximity of the park to a railroad and main highways will facilitate moving materials in and out of it. 

Employee housing

The housing for EIP employees could demonstrate high performance apartment building design. This would be a model of integrated resource management applied to design of habitat. Energy efficient building design would be combined with a system for sewage and solid waste management and energy generation. 

Recruitment Strategy and Targets

Recruitment to eco-industrial parks must meet the basic requirement of successful real estate development to fill the land in a timely manner. At the same time a strong value of eco-industrial development is supporting development of local firms and not focusing exclusively on international companies. Many effective Chinese technologies in the EIP’s target areas are being commercialized. Successful domestic firms usually contribute more to local economic and social development. 

With these values in mind, EIP recruitment strategy should balance three types of candidates in the core recruitment clusters:

• International firms in the target clusters able to set up plants under foreign direct investment.
• Chinese entrepreneurs with technologies ready for commercialization or expansion.
• Chinese ventures or joint ventures formed with technology and business model transfer from overseas companies.

Economic and investment uncertainties support taking a balanced approach and testing to see whether domestic companies with their own technologies and Chinese entrepreneurs receiving technology transfer from abroad can constitute a significant share of the tenants in the EIP. At the same time there are likely to be international firms who are eager to come into a strong market for their environmental products and services. First rounds of tenants from international and domestic sources would enable the park to be successfully operating at the time when international conditions become more favorable. This success would be a clear demonstration that the markets are available in China to attract greater foreign direct investment.

The EIP business services and especially the incubator described below would play an important role in recruitment. Major firms would see it as a source of service providers and supply chain partners important to their successful operation. It would enable smaller firms with innovative technologies to play a significant role in the development of the EIP.  

Market Research

While it is clear that the Liaoning Circular Economy Plan and the National Cleaner Production law create markets for companies in the EIP’s target clusters, the recruitment team will have to conduct market research to indicate the size of market for different types of companies and identify existing local firms already serving these markets. The specific demand for products and services has to be documented in order to successfully attract firms to the EIP. 

Primary Recruitment Clusters

The following sections summarize the three primary recruitment clusters of Resource Recovery, Alternative Energy, and Water Management, as well as the additional target group of firms in the supply chains of major companies in the region of the EIP.

Resource Recovery Cluster

This recruitment cluster for the Eco-Industrial Park will contribute directly to the goal of developing a Recycling Economy The EIP will promote long-term business development in the recycling and reuse of now discarded materials.
Resource recovery candidates to be considered include the following:

• Niche collectors who gather specific by-product streams like plastics, paper, glass, food scrap, solvents, cooking oils, and metals will require parking and office space.
• Recycling companies that process plastics, glass, and metals to generate usable feedstock.
• Plants manufacturing products from recycled materials (for example, a plant to make mats from tires or to shred tires into crumb rubber and steel; a factory to make building products from recycled paper, plastics, or wood).
• Manufacturing industries that use the outputs of other firms in the EIP to make recycled glass, plastic, and metal products. For instance, recycled plastic bins for recycling in factories, public facilities, and homes could be one major type of product of such industries.
• Remanufacturing companies that rehabilitate and upgrade used equipment for industrial, commercial, government, and home customers. 
•  Retail outlets to market used products. A construction yard to sell usable materials from construction surplus and demolition.  
• A computer and electronics disassembly plant that processes products that can no longer be used. (Careful process design is required to meet high environmental and health standards and avoid the pollution often generated by such facilities.)

The CE calls for development of eco-chains or by-product exchanges to encourage utilization of by-products among industries. Experience in North America has indicated that companies’ transaction costs of trading outputs not within the normal product range are an obstacle to this. A possible means of reducing such costs and streamlining utilization of by-products is to create a by-product utility in the EIP. This company would manage by-product energy, water, and materials procurement and disposal for its client companies. Its advantage lies in the capability and experience concentrated on by-product utilization and the firm’s ability to accumulate economic quantities of materials. By making this its core business, the utility could handle the technical, business, and economic issues of by-product utilization. It also would become a force in the political economy, supporting regulations and land fill fees that discourage wasting and increase the value of by-products.

Alternative Energy Cluster

Inclusion of energy efficiency technologies and services help client firms fulfill requirements of the Circular Economy directly, while renewable energy companies relate to it more indirectly. Companies in this cluster help create a long-range development path that enables the local economy to evolve new technologies and gain competitive advantage by moving up the technology learning curve before other cities.  

The primary categories for alternative energy business development include the following:

• Energy service companies for energy efficiency and conservation
• Manufacturers of equipment to support energy efficiency
• Manufacturers of equipment for renewable energy
• Wind energy generators and support equipment
• Photovoltaic cells
• Fuel cells for energy generation and transportation
• Solar water heaters
• Biomass energy
• Ocean energy from waves and thermal gradient
• System integration – design, installation, and maintenance
• Facilities generating renewable energy with many of the technologies outlined above.

This cluster is described in greater detail in a separate paper on energy and the circular economy.

Water Management Cluster

Many regions in China are experiencing a water crisis that calls for much more effective management of this scarce resource through systems level solutions. A water management recruitment cluster in the EIP, integrated with other firms in the region, would manufacture equipment and provide services to increase the efficiency of water use, re-use and treatment, in municipal, industrial, commercial, and residential systems.

Recruitment would focus on companies with products and services for:

• Industrial, commercial, and home equipment that reduces water demand
• Secondary water distribution systems (gray or middle water)
• Ecological water treatment systems, including constructed wetlands and Living Machines
• Water purification technologies, including toxic cleanup and home purification.
• Coastal energy systems for water treatment (salt gradient solar ponds, tidal and wave energy, etc.).
• Integrated water management consulting and engineering.

Resource Service Companies could provide packages of integrated solutions to industrial, government, and commercial clients. These could include audits and systems of water efficient hardware, conservation management practices, and system engineering.

Supply Chain Group

This recruitment target focuses on local suppliers of environmentally superior materials, components, or services to international and Chinese private firms and state-owned enterprises. Companies in this group could be competitive with overseas suppliers because of their knowledge of local conditions and reductions in shipping costs for components and sub-assemblies. Reduction of transportation requirements yields another environmental benefit. These tenants would serve major firms in the region, e.g. food processing, pharmaceutical, automotive, electronics, petrochemical processing, etc.

EIP Service Facilities

The Commons Building and EIP Headquarters

A commons building will house EIP management and provide space for meetings and training, a testing laboratory to meet client’s special needs, offices for service firms and public service organizations, and other common resources. A restaurant and dining hall would serve quality meals from organically grown meat, produce, and fruits.

The R&D Center

Ideally this could be established as a regional Circular Economy Research Laboratory, located in the EIP. The Lab might operate at three levels:

• Development of concepts, definitions, methodologies and policy studies to support evolution of the concept of the Circular Economy;
• Research and development to support emerging technologies and new enterprises vital to achieving the Circular Economy;
• Capacity building programs for public and private sector managers in integrated resource management and the Circular Economy.

In addition, this Center would track advances in the technologies represented by the park tenants and conduct market research.  Its applied research would support the evolution of these companies and the establishment of new ones based on emerging technologies.

Business Incubator

The EIP complex will feature a business incubator for start-up firms as well as ones ready for major expansion. These companies may be joint ventures between Chinese entrepreneurs and smaller foreign companies in the industrial clusters of the EIP. The incubator would enhance the business success of startup and expanding firms in the EIP’s target clusters through business services, access to capital and experienced guidance, and synergy among its tenants.
Development of the business incubator through a Public Private Partnership mobilizes direct financial and in-kind support from stakeholders who will benefit from the new businesses it supports.

An incubator in the EIP could help entrepreneurs in several areas:

• Support in venture financing through business plan development or evaluation, access to venture capital funds and public sources of venture funding, and dedicated funds structured for the EIP.
• Support in marketing, legal services, accounting, organization design and other business capabilities.
• Access to common legal, secretarial, and bookkeeping services and office and telecommunications equipment.
• Collaboration among businesses in the shared facility.
• Access to timely information on markets and emerging technical opportunities.
• Access to managerial training and coaching in business skills onsite and through local schools.
• Mentoring from entrepreneurs in the region.

Potential investors see participation in an effective incubator as a factor that will increase the success rate of new ventures. Research by the US-based National Business Incubator Association indicates a very high success rate for incubator supported enterprises, compared to startups without this systematic support.

The EIP development agency or company would mobilize a combination of public and private sources to provide startup funding for the incubator. Local utilities and banks have significant self-interest in seeing new businesses succeed and have helped seed the development of incubators in many areas. The usual sources of public grants are industrial development agencies and international development banks. The Ministry of Science and Technology, the State EPA, and province-level counterpart agencies may be sources, along with agencies such as the Ministry of Commerce. The budget for the incubator needs to cover:

• Forming of strategic public/private partnerships;
• Strategic planning and design, giving a focus and timeline;
• Feasibility study and budgeting of the operating entity;
• Identification and due diligence on candidate ventures;
• Space and equipment;
• Staffing.

“Such a system can nurture start-up and newly established firms by providing the above-mentioned services and office space on a shared, affordable basis. However, at its core is the financial, marketing and design support and the managerial training it gives to the emerging entrepreneur. Another by-product of a business incubator is the internal dynamics that come from working together in a shared physical space: the joint and cross-disciplinary learning that takes place and the opportunity to form the business networks and contacts are also critical to the launch of successful ventures.”  UNIDO incubator web site: http://www.unido.org/stdoc.cfm?did=300456 

back to Circular Economy