Recycling for sustainability - a long run perspective?

In our paper, we analyse the prospects for sustainable growth offered by recycling promoting environmental policies where the main objective of the government is to assure for sustainability in the sense of a non deteriorating state of the environment. The environment is important for economic production in a twofold way: firstly, it supplies resources as inputs for the production process and, secondly, it serves as a sink for all kinds of waste products generated by economic activities. It is shown that in the absence of environmental policy the overexploitation of the renewable resource stock and the dumping of waste will drive nature beyond the limits of its assimilative and regenerative capacity. Therefore, we focus on these phenomena by modelling on the one hand recycling processes that decrease the flow of waste to the environment and considering on the other hand requirements for a sustainable extraction of raw materials. Hence, by including the intention to spare resources and the aim of reducing waste, we deal with an input problem - sometimes referred to as the primary problem - and an output problem - referred to as the secondary problem. Both problems can be considered to have local, regional and global impacts. For example, reduced resource requirements might decrease the dependency of resource-importing countries (local or regional effect) and will also help to maintain the supply of resources in all world regions (global effect). Alternatively consider the example of a reduction in the combustion of waste which is due to an increase in recycling. The reduction will cause the mitigation of local and regional air pollution as well as of global warming causing emissions of CO2. Hence, one far-reaching policy additionally induces ancillary benefits on different geographical levels. We use the framework of an endogenous growth model where waste is generated as an undesired byproduct in the production of the desired output. Nature is assumed to have a certain regenerative capability which depends on the state of the environment. Furthermore, environmental quality is negatively affected by the amount of waste dumped and the amount of resources extracted. The amount of dumped waste can be reduced by recycling firms which process the waste and sell it to the intermediate sector where it serves as substitute for natural resources as an input in production. We show that balanced sustainable growth is only possible if governmental policy ensures a recycling rate of unity. By reviewing the debate on complete recycling, we finally discuss this result from an ecological economics point of view. It is shown that the feasibility of complete recycling depends critically on the nature of wastes, a sufficient storing space for wastes and the availability of sufficient energy.