EU Green Deal and Circular Economy Transition: Impacts and Interactions
Maksym Chepeliev,
Angel Aguiar Román,
Thomas Farole,
Andrea Liverani and
Dominique van der Mensbrugghe
No 333431, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project
Abstract:
Rapidly increasing material extraction is putting major pressure on ecosystems. Future increases in incomes and population could result in over 2.5 times growth in global material demand by 2050, putting even more pressure on environment. Thus, an absolute decoupling of material use from GDP and income is of major importance to preserve the safe operating boundaries. It is vital to understand how current policy efforts, including climate mitigation, could impact material use patterns and what complementary circular economy (CE) policies should be implemented to support dematerialization. Here we develop a special version of the Global Trade Analysis Project (GTAP) database (GTAP-CE) with detailed representation of primary, secondary, and recycling activities for metals (steel, aluminum, copper, etc.) and plastics. We also incorporate quantity flows of metal ores and non-metallic minerals. We investigate a set of scenarios focusing on Europe that include mitigation and CE-specific policies using a dynamic general equilibrium model (ENVISAGE). A set of CE-specific policies includes fiscal measures to stimulate recycling and penalize primary production, extraction levies (for non-metallic minerals), and demand-side measures, such as shifts in consumption patterns toward dematerialization, changes in the product design and product lifetime extensions. We also model various border tax adjustments covering embodied raw materials and consider alternative revenue recycling mechanisms. Our results indicate that EU mitigation measures will have a moderate impact on material use. Similarly, materials-focused measures will have only a modest impact on CO2 emissions. Aggregate material use in the EU could decline up to 8-11% (relative to baseline in 2030) under alternative CE policies allowing to achieve absolute decoupling. We also find that using CE production taxes’ revenue to reduce labor taxes would lead to increase of growth and welfare.
Keywords: International Relations/Trade; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 35
Date: 2022
New Economics Papers: this item is included in nep-des, nep-ene, nep-env, nep-int and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333431
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