Distributional Effects of Circular Economy Policies: a CGE-based framework for redistribution

This project aims to analyse how Circular Economy (CE) transitions may affect income distribution and welfare across socio-economic groups. With global material use expected to double in 40 years, reliance on material resources for economic growth raises sustainability concerns. CE offers an alternative by promoting resource efficiency, waste reduction, and material reuse, potentially leading to more sustainable economic growth. Despite the growing importance of CE, there remains a critical gap in understanding its distributional effects, particularly its effects on economic inequality and welfare. While some economic models have been developed to assess the effectiveness of CE policies, they overlook the redistributive dimensions of these transitions. This project seeks to fill this gap by developing a Computable General Equilibrium (CGE) model that integrates both welfare and inequality analysis in the context of CE policies.Building on the work of two string of literature: 1) on CGE modeling which investigate redistributive polices and 2) on CGE modeling of the CE, this project will apply state-of-the-art CGE modeling to assess how CE transitions may affect socio-economic groups. It will explore dynamic scenarios of policy interventions, measuring the effects on income distribution, resource use, and overall welfare. The project's objectives include developing a comprehensive CGE model to analyze CE's effects on redistribution, calibrating the model using relevant economic data, and providing policymakers with actionable insights on how to design equitable and efficient CE policies.Ultimately, this project will provide insights into designing policies that balance socio-economic objectives with environmental sustainability. It will contribute to a deeper understanding of how to ensure that the shift towards a CE is not only resource efficient but also socially equitable, minimizing the risks of increased inequality.