The Circular Economy PERTE: why your company should care
The Strategic Project for Economic Recovery and Transformation (PERTE) for the Circular Economy was approved on 8 March 2022 by the Council of Ministers. In addition to public funds, it is expected that 1.2 billion euros will be generated by 2026.
These are the aims of the PERTE.
- Accelerate the transition to a more efficient and sustainable production system in terms of the use of raw materials.
- Position Spain as an international benchmark in terms of the management, recycling and reuse of waste.
- Move from one economic model based on the principle of produce-consume-bin to another based on 3Rs: reduce, recycle and reuse.
- Generate more than 70,000 new jobs .
- Reduce Spain's dependency on foreign sources for raw materials and vulnerability to global crises.
- Promote the use of treatment facilities .
- Accelerate digitalisation .
What industries are these subsidies aimed at?
- Textiles and fashion.
- Plastic .
- Capital goods for renewable energies.
- Any industry that wants to make progress in the circular economy: reduce the consumption of raw materials, rely on eco-design, improve waste management and digitise processes.
Two main lines of action:
- Interdisciplinary actions to boost the circular economy in the production process of companies of all kinds. The opportunity is at public hearing phase, so the legal bases are not yet final. With 192 million euros' worth of funding.
- Sectoral. The sectors that are key due to their relevance to the economy and their potential in waste generation: textiles, plastics and capital goods for the renewable energy industry. Funded with 300 million euros, or 100 million euros per sector. It is based on 17 instruments and no opportunities are currently imminent.
Interdisciplinary grants: these will be announced soon and all sectors can benefit.
This line, funded with 192 million euros, is the first to be launched. It has already been published in the public hearing phase and it is set to be finalised in May. It is set to be popular and it is a non-refundable grant.
- Any private company in any sector can benefit. Cooperatives, mutual companies and non-profit associations can also benefit.
- Companies can apply individually or as part of a business group. However, the latter case must include at least one SME, social economy company or start-up.
As soon as the announcement is published there will be 40 working days to submit an application. In other words, the project must be ready. That is why it is crucial to get specialised advice such as the advice we provide at Bankinter in collaboration with FI Group. Once the application has been submitted, the Administration has six months to review it. Proof must be provided within two months of the project being completed.
How much are the grants worth?
Direct grants will be worth between 150,000 and 10 million euros per application. And the project submitted must involve a minimum investment of 375,000 euros and a maximum investment of 25 million euros. The percentage of subsidy varies according to the size of the company:
- Up to 40% for large companies.
- Up to 50% for medium-sized companies.
- And up to 60% for small and micro-enterprises.
One of the novelties of this opportunity is that up to 60% of the grant awarded may be received in advance before the project has been completed. Although it will be necessary to provide guarantees.
What deadlines do companies have to comply with in terms of performing projects?
It depends on the grant amount:
- Grants between 150,000 and 400,000 euros can be implemented until 30 June 2023.
- Grants between 400,000 and 2.5 million can be implemented until 31 December 2024.
- Grants between 2.5 and 10 million - which is the maximum that can be received - can be implemented until 31 December 2025.
What costs are eligible?
In line with the philosophy of this PERTE, and for the first time with this type of grant second-hand assets can be purchased. Below are other costs that may be included in the project:
- 100% of labour costs for the staff exclusively contracted for the project. One of the requirements - the requirement that staff must be new - has led to many complaints and may be modified.
- 70% of the costs for outsourcing .
- The cost of drafting technical projects, the execution of works, the purchase of equipment and facilities, leases.
- Technology transfer assets.
- Expendable material.
- Communication actions .
The four types of projects covered by this interdisciplinary line.
- Reduction in the consumption of virgin raw materials. Promotes the use of by-products and materials from waste from the production centre itself or from other centres. Considers remanufacturing other products. The project must specify the percentage of replacement of virgin raw material with secondary raw material.
- Ecodesign. Here we discuss the increase in the useful life of products, but also of the increase in repairability and in the commitment to reusable products. This section also includes the improvement of recyclability and the replacement of dangerous substances. PERTE also promotes a change in the consumption model thanks to digitalisation.
- Waste management. This is one of the most ambitious types of projects because it seeks to increase waste treatment infrastructures in the production process. Treatment systems that result in fuel generation are not included, since this technology is not considered a circular economy.
- Digitalisation. Understood for its impact on product traceability and waste management. This includes, for example, facilitating return services and the use of 3D technology to print a part that is not available on the market in order to repair a product.
And what about the evaluation criteria?
The various indicators will be scored with up to 100 points. FI Group calculates that if a score of 60 is not achieved, projects will probably not qualify. It will also depend on the size of the company, its environmental impact or, for example, whether it belongs to one of the priority subsectors: manufacturing industries and treatment facilities.
In addition, as with all projects funded by European funds, social and equality criteria must be followed.
Sectoral lines: Pending publication.
This line, backed by 300 million euros, will be launched throughout 2022 via 17 specific instruments. It seeks to reinforce the new model in three key sectors: fashion and textiles, the plastics industry and capital goods industry for renewable energies (management of waste such as wind turbines, batteries and solar panels).
It will be channelled through 17 instruments that will be released in the coming months, once the legal bases have been established. We are not yet able to announce the requirements or the beneficiaries of the amounts to be granted, although it is foreseeable that equipment and facilities will be subsidised and that there will also be some type of grant for R&D&I.
Textiles and fashion: from fast fashion to smart fashion.
The objective is to improve the circularity and sustainability of the sector. What actions does PERTE encourage in companies?
- Starting to use raw materials with a low environmental impact, by containing fewer chemicals or being more organic (for example, cotton, hemp, wool, recycled and man-made fibres). Use of garments with a longer shelf life and that generate less waste, such as microplastics.
- Investing in infrastructure and technologies for reuse and recycling. It seeks to promote fashion as a service rather than as a product: for example, with rental clothing and the repair and reuse of clothing. And to promote separate collection services for textile waste and footwear.
- Improve the traceability of products and materials. Digitalisation is key here.
With these investments, the PERTE seeks to help the sector incorporate more sustainable raw materials, modernise technologically consume less water and promote the reuse and recycling of garments and materials. The aim is also to make progress in terms of traceability: so the consumer is aware of the history of the garment from the time it is designed, created and produced until it is purchased in store.
Sustainability is demanded by consumers (Spain generates 23 kilos of textile waste per year) but is also demanded by increasingly intense regulations that threaten the competitiveness of the industry if it is not able to adapt. The PERTE discusses overcoming the model of “fast fashion” by replacing it with “smart fashion”.
This sector represents 4.1% of employment and 2.4% of GDP, with a strong export capacity. It covers the entire value chain and is multi-sectoral, since it includes clothing, footwear, home textiles and health care and even the automotive field. According to the PERTE, this will allow take advantage of similarities and submit projects as a consortium of suppliers, designers, distributors, manufacturers and technology centres.
Plastic industry: the goal is for no plastic to end up in landfill.
Social awareness of the need to reduce plastics, specifically in sectors such as food and health - due to the intensive use of single-use plastic during the pandemic - is growing even more intensely than regulations. The industry needs to respond to this challenge and that is why PERTE focuses on measures such as:
- Promoting ecodesign. With recycled and recyclable material and greater use of non-fossil energy sources.
- Promoting the use of reusable containers and getting SMEs and micro-SMEs to also take part.
- Promoting mechanical and chemical recycling.
- Improving social awareness across the board.
The plastic, according to the PERTE report, is the third most consumed product in the world, after concrete and steel.. Almost 400 million tonnes are produced each year. Spain accounts for 4.2 million tonnes of this total figure, mostly in the packaging sector, followed by construction and the automotive industry. Every year 2.6 million tonnes are collected, but only 43% is recycled and 36% ends up directly in landfill. The goal is for zero plastics to end up in landfill.
We are dealing with a sector made up of more than 4,000 companies, 98% of them SMEs, which account for 1.8% to GDP and employ more than 100,000 people.
Renewable waste: Batteries, panels and wind turbines.
A concern of a growing sector such as renewable energies ought to be how it treats the waste it generates. The aim of the PERTE is to make Spain a benchmark in the recycling of wind turbine blades and solar panels, in addition to batteries. One aim of the plan is to incrementally increase the number of treatment facilities for this waste in the next decade.
- Wind energy. It is time to renew the infrastructure that was installed 20 years ago. We are talking about the end of life of 12% of 1,203 wind farms, with 20,940 wind turbines and 62,820 blades installed. In 2025 that percentage will increase to 36%. That means, according to some estimates, generating between 70,000 and 105,000 tonnes of waste per year, from metals to foams, wood, resins, carbon fibre and fibreglass.
- Photovoltaic energy. The latest generation solar panels are much more efficient: They use less material to produce more energy. The emergence of a new industry is expected, not only to recycle them but also to repair them and even sell them second hand. PERTE expects 10,000 tonnes of waste to be generated annually between 2022 and 2027. In 2028, this figure is expected to exceed 22,000 tonnes.
- Batteries. Energy storage is one of the standout measures in the field of European funds. In Spain, we produce almost 13,000 tones of portable batteries and accumulators, 127,000 tonnes of automotive batteries and 41,000 tonnes of industrial batteries a year. But only 134,000 tonnes are collected. This leads to a problem that the PERTE aims to resolve: we do not have a lithium battery treatment infrastructure and therefore have to ship them to Germany, France and Belgium.
Projects funded by the PERTE have three main aims:
- To boost wind turbines and new generation photovoltaic panels.
- To develop facilities for reuse and recycling.
- To open facilities for the recovery of valuable materials such as lithium or lithium ion.
The Spanish Circular Economy Strategy.
This is a strategy related to climate change, but with a focus on the serious population problem that the planet will experience in 2050. According to the UN, the global population will be 9.1 billion by the middle of the century, mainly concentrated in Asia, Africa, Latin America and the Caribbean.
More than two-thirds of that population will live in urban areas by 2050, with an exponential increase in pollution and complex waste management. It would take almost three planets to provide the natural resources needed for these 9.1 billion humans. This is what is driving the new circular model.
In Spain, the ecological footprint generated by each inhabitant per year is 4.04 global hectares. Since the biocapacity per inhabitant is 1.37 hectares, the so-called “ecological deficit” of each Spaniard is 2.67 hectares. This gap will be corrected in the coming years if we reduce waste and opt for reuse.
The Circular Economy Strategy foresees making three-year plans to initiate actions. The I Circular Economy Action Plan (2021-2023) is currently in force. Approved on 25 May 2021, with an investment of 1.529 billion euros. And now it is being complemented with the Circular Economy PERTE.
The 8 PERTEs that are already underway. And new plans are in the pipeline.
This Circular Economy PERTE has similarities with others that have already been rolled out such as Renewable Energies, Renewable Hydrogen and Storage, Agrifood and Electric and Connected Vehicles. All of them include grants related to the reduction of emissions and waste.
In addition to the Circular Economy PERTE, the Government has so far approved another seven PERTEs that will channel a lot of the Next Generation funds: And other PERTEs have been announced and are expected to be approved by the Council of Ministers throughout 2022: - The social economy of care. - Microchips and semiconductors.
- Electric and connected vehicles.
- Cutting-edge healthcare.
- Renewable Energies, Renewable Hydrogen and Storage (ERHA).
- New economy of language.
- Water cycle.
And other PERTEs have been announced and are expected to be approved by the Council of Ministers throughout 2022:
- The social economy of care.
- Microchips and semiconductors.
Information obtained from EL PERTE webinar to drive your company's circular economy organised by Bankinter's CFO Forum. With the participation of:
- Emma Montserrat: Head of European Funds and Deputy General Director.
- Daniel Ramos Blasco: Green Leader at FI Group.
- Claudia Marín: Food & Environment Strategy Granter at FI Group.