From Trash to Treasure: Trade Insights on Raw Material Substitution

Isabella Gourevich

No 427, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: Recycling and waste trade are increasingly important for mitigating supply risks and en-vironmental concerns associated with raw material imports, yet little is known about the economic and technical potential for substitution between recycled and virgin materials. This paper estimates material-specific cross-price elasticities of substitution using novel global trade data for major recyclable materials from 2013 to 2023, instrumenting vir-gin-material prices with export restrictions. Results show substantial heterogeneity across materials: those with established recycling technologies respond strongly to price incentives, while others display limited substitutability, highlighting the role of technolog-ical feasibility beyond economic viability. Using the estimated elasticities, I evaluate the policy mix required to meet the EU’s 25 percent recycled-content target and document a central misalignment between circular-economy goals and climate-optimal policy.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ifowps:_427

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