Materials, Technology and Growth: Quantifying the Costs of Circularity

Marcelo Arbex and Zachary Mahone

Department of Economics Working Papers from McMaster University

Abstract: Environmental concerns over growing raw material extraction and waste generation have led many governments, including the United States, to introduce policies intended to reduce the extraction of new materials from the earth and boost material recycling. In the policy sphere, this is referred to as circularity. This paper develops a quantitative growth model with material use and directed technical change to quantify the costs of circularity policies. We study the United States goal of 50% recycling by 2030 and find it would require doubling recycling subsidies and cost 0.17% in consumption-equivalent welfare. However, this policy would also increase virgin extraction. Achieving a substantial reduction in new material extraction itself is very costly. Returning to 1970 levels of extraction entails a long run consumption cost of 6% and lost growth of 1.1% per decade.

Keywords: Materials; Directed technical change; Growth; Circular economy (search for similar items in EconPapers)
JEL-codes: H23 O33 O44 Q38 Q53 Q55 Q58 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2024-06
New Economics Papers: this item is included in nep-env
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Working Paper: Materials, Technology and Growth: Quantifying the Costs of Circularity (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2024-06

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