A Stylized Computable General Equilibrium Model for Circular Economy Strategy Analysis

Riccardo Boero
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Riccardo Boero: NILU - the Climate and Environmental Research Institute

No 69gcx_v1, SocArXiv from Center for Open Science

Abstract: This work presents a stylized computable general equilibrium (CGE) model for analysing circular economy policy strategies in an intentionally abstract setting. The model is not calibrated to a specific economy; instead, it uses round-number calibration data and systematic numerical experiments to identify the behavioural and physical conditions under which circular strategies reduce primary material use, represented by virgin metal. The analysis compares virgin-metal taxation, recycling support, and life-extension support through refurbishment, repair, and reuse in single-country and two-country model variants. The results show that circular strategies cannot be ranked by label alone. Virgin-metal taxation operates through an upstream material-price channel and is comparatively insensitive to how end-of-life products are allocated among circular routes. Recycling and life-extension support depend more strongly on collection and allocation of end-of-life products, route yields, recycled-metal quality, route substitutability, and final-product service-demand response. For some combinations of demand elasticity, substitution elasticities, route yields, and recycled-metal quality, a policy can reduce virgin-metal use even while demand for the final product service increases; for others, the same demand response can weaken or reverse the expected primary-material reduction. Support-efficiency comparisons show that refurbishment support performs better than recycling support in the closed-economy case, while this gap narrows when virgin-metal production is separated from consumption and circular processing in the two-country extension. The nested life-extension analysis further shows that refurbishment, repair, and reuse are not interchangeable policy mechanisms. Overall, the model provides a reproducible equilibrium framework for identifying where circular economy strategies work, where they fail, and which assumptions drive the difference.

Date: 2026-06-20
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:69gcx_v1

DOI: 10.31219/osf.io/69gcx_v1

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