Signatories to the Paris Agreement face the dual challenge of achieving development while curtailing their a footprint with negative impacts on climate and the natural environment. At the same time, for low- and medium-income countries, economic growth is often essential if they are to be able to build up critical infrastructure and institutions.

By moving towards a circular economy, Lao PDR is pursuing both the objective of reducing global greenhouse gas (GHG) emissions, while securing the growth that will which allow the country to build up its material ‘stock’ of produced goods to meet societal needs, such as shelter, nutrition, mobility, healthcare and education. The transition to a circular economy involves a fundamental change in the current economic model: shifting to a system where materials are used such that they can be cycled indefinitely and on the smallest scale possible, durable products are designed to last longer and used more intensively; and development and well-being are decoupled from the use of natural resources. This makes it possible to reduce reducing emissions while supporting prosperity for current and future generations alike.

This report supports the next update of Lao PDR’s Nationally Determined Contribution by deploying circular economy interventions. The latest NDC update was submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in March 2021. This NDC lists the country’s voluntary GHG mitigation commitments under the Paris Agreement up to 2030.

UNDP has supported the development of this report through the NDC support programme4. Lao PDR is the third country (after The Gambia and Vanuatu) to adopt a metabolic analysis in order to raise its GHG ambition. The most promising circular economy opportunities from an environmental and a socio-economic perspective are:

Products that expire

1 Reduce food losses

2 Expand climate smart agriculture

3 Improve livestock productivity

4 Produce biogas and organic fertiliser

5 Support agroforestry

Products that last

6 Prioritize regenerative construction materials

7 Implement industrial symbiosis ...

8 Recycle construction waste

Products that flow

9 Promote active, shared and public transport

10 Electrify transport

11 Recycle municipal solid waste

Public services: the policy framework

12 Strengthen circular procurement

13 Align the tax regime

14 Develop a circular economy roadmap

15 Educate on the circular economy

Commercial services: tourism

16 Promote ecotourism

Financial services

17 Mobilise finance

For each of these interventions the annual and long-term GHG mitigation and sequestration potential has been estimated both witin Lao PDR and its trade partners. Other impacts which were quantified are reductions solid waste disposal, job creation potential, GDP potential and the business cases covering simple playback, net precent value, CAPEX, OPEX and marginal abatement costs.

Lao PDR’s most recent NDC aims to reach net carbon neutrality by 2050. This report explains how supplementing the NDC with 17 circular economy GHG mitigation and sequestration interventions can contribute to achieving or, even, raising that ambition. It also presents the business cases supporting these interventions for the private sector in Lao PDR.

Net carbon neutral by 2040 within reach Lao PDR can become net carbon neutral by 2040 by adopting a circular economy approach. With the measures proposed in the NDC, it can reduce its GHG footprint from 106 to 58 million tCO2e/year in 2040. The circular GHG mitigation interventions can reduce it further to net zero. Most of the circular mitigation and sequestration potential lies in wood-based construction, improving livestock efficiency, prioritizing active, shared, public and electric transport and reducing food losses. By adopting circular economy strategies within Lao PDR, the country would also reduce the import of carbon-intensive products. This creates additional GHG emission reductions in other countries of approximately 2.2 million tCO2e/year.

The circular economy can add $16 billion per year to the GDP by 2050 These interventions can reduce solid waste disposal by 86 percent and reduce an additional 2.6 million tonnes of food waste and losses. The gross domestic product (GDP) from the circular economy in Lao PDR could reach $16 billion by 2050, while the number of jobs in the circular economy could reach 1.6 million by 2050. The Lao PDR workforce totalled 3.9 million in 2020, of which around 16 percent in circular jobs.

89 percent of the mitigation potential has a positive NPV

According to business case estimates, the circular economy is a viable business opportunity for Lao PDR. Eighty-nine percent of the circular GHG mitigation and sequestration potential has a positive net present value and 85 percent provides a payback in less than six years. When introducing a carbon price of $25 per tonne, 98 percent of the circular mitigation and sequestration potential has a positive return, or negative marginal abatement costs. Without a carbon price, that percentage is 89 percent.

Circular GHG mitigation requires a $4.1 billion investment

The transition to a circular, net zero carbon economy requires an investment of $4.1 billion in the period 2022-2036. That is in addition to the $4.7 billion required between 2020 and 2030 to implement the NDC. In comparison, the new Boten-Vientiane railroad requires investment of $5.95 billion. To realize investments in a low-carbon and circular future, regulatory and institutional barriers must be overcome for circular ventures so that they have access to investment capital, for example.

This integrated metabolic analysis for Lao PDR includes several elements: 1) a material flow analysis, 2) assessment of trends in quality and quantity of natural assets and produced stock, 3) translation of material flows expressed in tonnes into tCO2e embedded emissions, 4) an estimate of the circularity gap and underlying dashboard indicators, which set a benchmark against which to monitor future progress, 5) policy analysis, 6) analysis of the business cases for low-carbon circular economy interventions, 7) long-term low-carbon development strategy and 8) the private, financial and public sector suggestions from a series of workshops and a Community of Practice.