DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS

DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS • 73
2.3 Analyse economy-wide implications
Once the sector-specific circular economy opportunities have been assessed,
they can all be put together and the national implications analysed. This
step will typically be driven by a core group of policymakers, policy and
economics experts and with the participation of multiple government
agencies. The sector-specific impact assessments could be put together in
one overarching whole-economy impact assessment to support the mandate
for policy intervention (Section 2.3.1). Sector-specific policy options could be
complemented by economy-wide policy options (Section 2.3.2). The set of
sector-specific and economy-wide policy options needs to be prioritised and
assembled into coherent policy packages (Section 2.3.3).
Demonstrating the economic potential of the circular economy compared to alternative
pathways is in many cases required in order to advance the circular economy. Assessing
the direct economic impacts within the focus sectors, as presented in the previous
section, is a fundamental component of that process. However, some stakeholders, such
as finance ministries, might also want to appraise the broader economic impacts of such
transformations, requiring the use of tools and methodologies that can quantify the
potential macroeconomic, economy-wide impacts of delivering the circular economy
opportunities.
Once the economic and broader societal rationale for policy intervention has been
developed, and a set of potential policy options has been identified in each of the focus
sectors, policymakers might reflect on complementing these with economy-wide policy
options. They can conduct a structured cost-benefit assessment process to prioritise the
different policy options and put these together in structured policy packages, including
the development of provisions to address any important distributional consequences
that could otherwise hinder societal acceptance of the overall policy change.
This step will typically be driven by a core group of policymakers, policy and
economics experts and with the participation of multiple government agencies. The
project team needs to have at its disposal strong macroeconomic modelling skills (if a
macroeconomic modelling effort as laid out in Section 2.3.1 is performed) and policy
analysis expertise. In the Denmark pilot, in total, around ten man-months were dedicated
to this step.
2.3.1 Quantify economy-wide impact
Objective:
End product:
Support the case for economy-wide and broad sectoral policy
interventions.
Estimate of expected impact of circular economy opportunities on
national macroeconomic indicators such as GDP, employment, net
exports, and carbon emissions.
There is – to the best of our knowledge – no methodological approach available that
fully captures the impact of transitioning towards the circular economy. The main
underlying issue is that current economic models are built relying heavily (although not
necessarily exclusively) on historic correlations (in a linear economy) between different
sectors. This approach has inherent limitations when modelling the circular economy
with – by nature – very different relationships between sectors.
There are however several ‘standard’ approaches available to quantify macroeconomic
impact. Among these, while there is no ‘one size fits all’ approach, computable general
equilibrium (CGE) models might be a good choice as they have multiple desirable
attributes. The diversity and specificity of circular economy opportunities means that
hybrid CGE approaches – which combine the strengths of high granularity sectorspecific
impact modelling with the aggregated economy-wide impact assessment
capability of a CGE framework – are among the best suited, existing impact modelling
approaches for this task.