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Materials, Technology and Growth: Quantifying the Costs of Circularity

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  • Marcelo Arbex
  • Zachary Mahone

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.

Suggested Citation

  • Marcelo Arbex & Zachary Mahone, 2024. "Materials, Technology and Growth: Quantifying the Costs of Circularity," Department of Economics Working Papers 2024-06, McMaster University.
    • Handle: RePEc:mcm:deptwp:2024-06
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    References listed on IDEAS

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    1. Stephie Fried, 2018. "Climate Policy and Innovation: A Quantitative Macroeconomic Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(1), pages 90-118, January.
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    4. Krausmann, Fridolin & Gingrich, Simone & Eisenmenger, Nina & Erb, Karl-Heinz & Haberl, Helmut & Fischer-Kowalski, Marina, 2009. "Growth in global materials use, GDP and population during the 20th century," Ecological Economics, Elsevier, vol. 68(10), pages 2696-2705, August.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Materials; Directed technical change; Growth; Circular economy;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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