How the Digital Circular Economy Can Help Us Get to Carbon Neutrality

By Dr. Long Chen

The climate crisis requires that economies achieve net zero carbon emission by 2050. However, average annual greenhouse gas (GHG) emissions during the 2010s have continued to increase, according to the United Nations’ Intergovernmental Panel on Climate Change.

Most climate policies have focused on accelerating the supply-side transition of energy away from fossil fuels, reducing carbon emissions from production, and decarbonizing investments and financial markets.

Regrettably, these policies have placed relatively little emphasis on decarbonizing consumption by using the combined potential of digitalization and the circular economy to create a digital circular economy (DCE). The DCE framework has strong potential to support decarbonization efforts, according to a new research report by Luohan Academy, Alibaba Group’s global think tank.

The Digital Circular Economy Framework

A product’s lifespan used to be well established: create, use, dispose. Today, millions of consumers are embracing the circular economy, reusing products—clothes, electronics, furniture—instead of discarding them, and trading on dozens of online marketplaces like Alibaba’s Idle Fish for valuable, previously owned goods.

These resale platforms enable consumers and businesses to convert unwanted products into income, and to extend the life of millions of items, reducing production and waste. And digital technology and platform economics expand the markets for these goods to the world beyond neighborhood garage sales and local charity shops.

Coupling digitalization and the circular economy is a key strategy for countries to develop their economies while decoupling gross domestic product (GDP) and the consumption of fossil-based energies, the Luohan Academy report notes. This approach undergirds a more sustainable model that can lead us closer to achieving the net-zero goal.

Digital Platforms: Sustainability at Scale

The world needs more studies and research on the critical question of how to reduce GHGs while maintaining GDP growth. The only way to progress technologically and economically while reducing our impact on the environment is to increase efficiency, using less energy and fewer carbon emissions to conduct our daily activities.

Digital technologies can increase efficiency through virtualization, data monitoring, collection, optimization, and connecting buyers and sellers who otherwise could not connect. Digital platforms’ efficiency and scalability can make circular economies sustainable, extending options for buyers and sellers globally, and could expand today’s circular economies to unprecedented levels. Already, we see the potential power of this approach through such resource-sharing platforms as transportation apps and home-sharing services.

Idle Fish, the secondhand digital marketplace Alibaba founded in 2014, hosts more than 20 million active users a day, trading more than a million products. Only digital platforms can grow so quickly and reach so many users in so little time while featuring low emissions, high efficiency, high recycling, and high carbon sinks. Beyond trade, digital platforms can also integrate data that shows a transaction’s potential carbon footprint for production and shipping, to help consumers make informed decisions.

Cloud Computing and the Climate

Underpinning all growing digital sharing platforms—and decoupling growth from carbon emissions—is cloud computing. Products and services built on these cloud infrastructures are helping more and more customers find sustainable solutions to their problems.

Clouds all deploy leading technologies in power management, cooling, and hardware and computing efficiency; adopt high levels of renewable energies; and keep improving hardware circularity. During the 2010s, while global data centers grew more than sixfold, cloud computing helped limit the annual increase of energy use to a mere 6%.

But maximizing the climate benefits of digitalization and the circular economy is possible only with a properly designed governance system that engages all stakeholders, the Luohan Academy report notes. Transforming those systems to take full advantage of DCE for decarbonization, mitigating air pollution, and supporting conservation requires thinking of technologies as part of socioeconomic systems.

The importance of systems thinking is evident in the Union of Concerned Scientists’ recent studies showing that ride-sharing platforms might not reduce carbon emissions. These findings demonstrate the importance of changing lifestyles and habits for DCEs’ business models to make a significant contribution to the net-zero goal.

Socioeconomic systems should provide more people better information and incentives to participate in DCE. Personal carbon accounting (PCA) is one incentives-based economic program, designed to promote environmental awareness and give individuals the agency and motivation to participate directly in carbon reduction.

The Power of Good Governance

While consumers’ growing willingness to adopt new technological tools demonstrates that individuals are either pursuing or open to accepting changing social conventions and behavior norms, DCE’s tremendous promise to help achieve net zero can only happen with proper regulations and economic systems in place.

To overcome old norms and succeed in transition to DCE, society needs to implement three agendas on sustainability governance.

1. Privacy protection. Data is key to digitalization. To ensure that more people and institutions feel safe providing their data for optimization, it’s essential that organizations have a trustworthy protocol that protects privacy as it collects and uses data.
2. A stakeholder economy. DCE requires all of society to participate in the net-zero movement, not just specific organizations or sectors. Our shareholder economy needs to transform into a stakeholder economy. Doing that will require a greater proactive effort, and participants need the right guidance and tools to make that effort happen. Alibaba’s Carbon Neutrality initiatives and programs are designed to influence and transform socioeconomic governance to encourage a broader range of organizations and customers to adopt business models and lifestyles that cut carbon emissions at scale.
3. Deep global trust and cooperation among nations. Climate change is a global menace. The net-zero movement should coordinate initiatives from all over the world. Meeting the net-zero goal depends on all countries to establish a deeper level of trust and cooperation and to overcome any conflicts.

Learn more about fighting the climate crisis in the Alibaba Group Digital Circular Economy Report.

Dr. Long Chen is Vice President of Alibaba Group and Chair of Alibaba’s Sustainability Steering Committee.