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.
Highlights
The circular economy (CE) is gaining momentum as an alternative to traditional linear economic systems that rely on a take–make–dispose approach, e.g. as part of the European Green Deal (European Commission 2019)
This paper presents a computable general equilibrium (CGE) model to investigate the economy-wide impact of the uptake of CE measures for the small open economy (SOE) of Belgium
The CGE model assumes that the tax increase or decrease reaches its maximum or minimum level, respectively, at the end of the stepwise tax adaptation
Summary
The circular economy (CE) is gaining momentum as an alternative to traditional linear economic systems that rely on a take–make–dispose approach, e.g. as part of the European Green Deal (European Commission 2019) In this rationale, a CE introduces alternative flow models to an economic system that are cyclical and avoid waste to reduce negative environmental impacts (Ellen MacArthur Foundation et al 2015) and avoid extensive use of materials. The basic model’s sectoral disaggregation does not allow for the analysis of the envisaged circular strategy (i.e. lifetime extension through repair of household appliances). As stated by Winning et al (2017), the analysis of specific circular strategies requires more detail For this reason, two additional sectors are extracted and introduced in to the CGE model.
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