In the Loop - A CGE Analysis of Circular Economy in Finland

Circular Economy has attracted considerable interest in the past few years. In Finland, a country with a long culture of nurturing its renewable resources, the coming of the circular economy is claimed to revolutionize the whole economy. It is difficult to see whether all the fanfare is justified. On the one hand, it is clear that many of the large material flows have already been closed in the Finnish economy - say, in the forest industries; on the other, new technologies utilising hitherto unutilisable flows constantly emerge, suggesting there’s much more to the circular economy than meets the eye. This paper is part of a larger study commissioned by the Prime Minister’s Office, studying the potential of Circular Economy in Finland, and advising on its advancement. The paper analyses the potential of Circular Economy in Finland in the light of several, recent case studies covering the flow of food from agriculture to food industries to retailing to consumption; the role of recycling; the possibilities of radically different new technologies such as 3D printing and new lignine/cellulosic processes; and the emergence of a new kind of consumerism. We integrate each of these cases into the FINAGE model of Finland to assess the economic potential of these new technologies. We find that it is not unrealistic to expect gains from the Circular Economy. Even with conservative estimates of the effects in our cases, the gains from increased material efficiency outweigh the costs, and most likely, also the costs of climate policies.