Macroeconomic and environmental consequences of circular economy measures in a small open economy

Abstract

This paper investigates the economy-wide impact of the uptake of circular economy (CE) measures for the small open economy (SOE) of Belgium, in particular the impact of fiscal policies in support of lifetime extension through repair activities of household appliances. The impact assessment is completed by means of a computable general equilibrium model as this allows quantification of both the direct and indirect economic and environmental impact of simulated shocks. The results show that different fiscal policy types can steer an economy into a more circular direction. However, depending on the policy type, the impact on the SOE’s macroeconomic structure and level of circularity differs. Furthermore, common claims attributed to a CE (e.g. local job creation or decreased import dependence) can be, but are not always, valid. Hence, policy-makers must prioritize their most important macroeconomic goals and opt for an according fiscal policy. Finally, this paper finds that the CO2 equivalent emissions calculated from a production (or territorial) perspective increase, while they decrease from a consumption perspective. This is explained by the substitution of international activities by local circular activities. This comparative analysis advocates for the consumption approach to assess the CE’s impact on CO2 equivalent emissions.

Work integration ambitions of startups in the circular economy

“…In a report commissioned by the European Commission, the net increase in jobs by moving towards a more circular economy is estimated at 700,000 through additional labor demand from recycling plants, repair services, and rebounds in consumer demand (European Commission, DG Environment, 2018). In order to estimate these impacts, scholars developed input–output models (Dubois & Christis, 2014; Geerken et al., 2019; Wijkman & Skånberg, 2017), computable general equilibrium (CGE) models (Brusselaers et al., 2022), supply chain equilibrium models (Lahcen et al., 2022), and mixed‐integer linear programming models (Pedram et al., 2017). Other studies focus on methodologies to define and monitor circular jobs (Circle Economy & EHORE, 2017; Coats & Benton, 2015; Delanoeije & Bachus, 2020; Morgan & Mitchell, 2015).…”

“…While collaboration is an important scaling strategy for both social enterprises and circular economy ventures, academic literature at the crossroads of circular economy, work integration, and startups remains scarce to non-existent. There exists an increasing number of studies estimating the job creation potential of the circular economy (Brusselaers et al, 2022;Delanoeije & Bachus, 2020;Dubois & Christis, 2014;European Commission, DG Environment, 2018;Geerken et al, 2019;Lahcen et al, 2022). Also, job opportunities for vulnerable target groups have been identified (OECD & European Commission, 2022;RREUSE, 2021;Willeghems & Bachus, 2018b), as well as business opportunities the circular economy may generate for WISEs (Banerjee & Anand, 2021;França et al, 2022;Schadenberg & Folmer, 2022).…”

Willingness to pay for climate change mitigation measures in households: Bundling up renewable energy, energy efficiency, and renovation

“…This implies that policies toward providing financial incentives, tax rebates that stimulate renovation of energy efficiency as well as change behavior could help in mitigating climate risks. The third strand is the circular economy which suggests that designing building and renovating processes with longevity, energy efficiency appliance and transition to more renewable energy usage will require sustainable building materials that can withstand the test of time (Bianchi & Cordella, 2023; Brusselaers et al, 2022; Valencia et al, 2023). The circular strategies also suggest that sustainable building can encourage sharing energy resources and equipment among households and communities.…”

Policies for supporting the regional circular economy and sustainability

“…While some papers attempt to conceptualize sustainable development from a microeconomic perspective, others have a macroeconomic empirical focus. Brusselaers et al (2022), employing a computable general equilibrium (CGE) model, investigate the impact of fiscal policies in support of lifetime extension through repair activities of household appliances for the small open economy of Belgium. The authors argue that expansionary rather than restrictive fiscal policies can be more effective in promoting circular activities.…”