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Thematic Session 3: Policy Frameworks for Advancing a Sustainable Circular Economy Across Environmental Challenges (HYBRID)
Time:
Tuesday, 17/June/2025:
4:15pm - 6:00pm
Session Chair: Eugénie Joltreau, RFF-CMCC European Institute on Economics and the Environment (EIEE), Fondazione Centro Euromediterraneo sui Cambiamenti Climatici (CMCC)
Location:Auditorium M: Jan Mossin
Session Abstract
The circular economy (CE) intersects multiple environmental challenges. It is expected to ease the pressure on resource extraction—thereby protecting biodiversity—support the feasibility of a materials-intensive energy transition, and lower emissions by reducing resource consumption, thus combatting climate change. Finally, reducing waste and designing environmentally friendly products should lower levels of pollution.
For these reasons, the European Commission considers the 2020 Circular Economy Action Plan—addressing waste recycling and product design—one of the main building blocks of the European Green Deal. To achieve these environmental objectives simultaneously, public policies must consider their interconnections and be carefully designed as a cohesive package, given that policies influence one another.
Featuring insights from four innovative studies, the session highlights key market mechanisms, policy mix, and trade-offs in advancing circularity across environmental dimensions and scales.
Presentations
Incentivizing Repair Over Replacement in Japan: The Role of Economic Incentives and Lifestyle Changes in Reducing Waste and Resource Use
Darius Corbier1, Hazel Pettifor2, Maureen Agnew2,3
1RFF-CMCC European Institute on Economics and the Environment, France; 2Environmental Change Institute, Oxford Centre for the Environment, Oxford University, UK; 3Geography and Environment, Loughborough University, United Kingdom
Repairing consumer goods instead of discarding them can significantly extend their life, decrease the demand for new purchases, reduce waste, and save resources. While Japan’s implementation of the Sound Material-Cycle Society led to a notable decrease in municipal waste, this progress has slowed since the 2010s. The country still relies heavily on primary resources and continues to produce large amounts of waste, a considerable portion of which is incinerated. This paper assesses the socio-economic and environmental effects of fiscal incentives for repairing energy-using goods in Japan using a dynamic general equilibrium model with material stock and flow consistency. Also, the paper studies diverse household responses to policy measures based on three low-carbon lifestyle types. The results reveal that incentives such as bonuses and VAT reductions on repair services, if properly financed through Extended Producer Responsibility (EPR) revenue, incentivise households to engage in repair activities. Despite their positive impact in minimizing waste and materials use, the policies' effectiveness is mitigated by substitution effects and rebound effects on CO2 emissions.
The effects of EU Green Deal policies on world resources management & climate change: a CGE assessment with integrated material flows
We study the synergies and conflicts between climate and circular economy policies and provide an enhanced CGE tool for such analysis. We examine the implications of the European Union's Green Deal policies on global resource management and climate change mitigation through an innovative Computable General Equilibrium model, Green-R. The enhanced CGE incorporates endogenous material intensity and integrates balanced Physical Input-Output Tables with (monetary) Social Accounting Matrices, providing a comprehensive view of both the economy and material flows. We analyze the effects of various fiscal instruments on iron and carbon material flows from extraction, to consumption and disposal, and CO2 emissions. Our findings confirm the effectiveness of the Carbon Border Adjustment Mechanisms (CBAM) for both circular economy goals and climate mitigation, as they reduce leakages. We also identify a substantial tradeoff between circular economy and climate policies, as single-targeted policies inevitably lead to leakages in non-targeted areas.
Matter matters: Efficient recycling policies under tight markets for scrap
Miao Dai1, Mouez Fodha2, Francesco Ricci3
1Vrije Universiteit Amsterdam and Tinbergen Institute; 2Paris School of Economics and University Paris 1 Panthéon Sorbonne; 3University of Montpellier and CEE-M
We posit a representative structure of the recycling value chain, emphasizing
the supply-side linkages between virgin and recycled materials. This case, overlooked
in the literature, seems particularly relevant for critical raw materials during
the early phase of the energy transition. We show that when the availability
of recyclable materials is constrained, the optimal policy can involve a single instrument: a tax on virgin or output, a recycled content standard or even a tax on
recycling! However, it is also possible to combine these instruments to choose the
allocation of the cost of regulation across actors.
From (Micro-) Circularity To (Macro-) Mitigation
Eugénie Joltreau1, Elena Verdolini1,2, Cristina Cattaneo1
1RFF-CMCC European Institute on Economics and the Environment (EIEE), Fondazione Centro Euromediterraneo sui Cambiamenti Climatici (CMCC), Italy; 2Università degli Studi di Brescia
Circular economy practices, employed by firms and aimed at reducing, reusing and recycling resources, have the potential to improve resource efficiency. However, despite their clear objectives, these micro-level interventions may not necessarily result in economy-wide reductions in resource consumption and greenhouse gas emissions. This paper presents a novel analytical framework for examining the pathways through which firm-level circularity leads to macro-level reductions in resource use, extraction, and disposal—conceptualized as a macro circular economy— and ultimately, climate mitigation. Drawing upon diverse strands of economic literature and employing sequential reasoning, we identify the necessary conditions under which circular practices at the firm level generate tangible benefits at the aggregate level. Our findings reveal that these identified conditions correspond closely with principles of sufficiency. Subsequently, we examine policy instruments that can facilitate the achievement of a macro-circular economy.
