However, as the difference between S and SE is due to an externality, this difference
in value is not taken into account by the market that would still produce at P*Q*.
In this case, the problem is then how to reach the optimal level. Clearly, a tax on
the harvested material would go in this direction actually moving from S to SE the
actual supply curve. However, this would put a higher burden to consumers and have
the limitations of any increase in taxes in terms of political consensus. On the other
hand, this situation may also justify support to the alternative recycling technology.
A major issue in this case would be that, in the absence of market prices for the
externality, it is much more difficult to identify the optimal level of circularity.
The analysis above is based on comparative statics, but can be used as a basis for
some dynamic considerations. First, some level of path dependency may apply in
terms of availability of materials to be recycled. In particular, the maximum amount
of recycled feedstock cannot be higher than the amount used in the previous period
(or in the same period); also the maximum efficiency of recycling technology should
be taken into account in considering this type of restrictions. Second, as mentioned
above, different costs levels may be interpreted as changes over time. It is usually
expected that, as the stock of mined or the availability of harvested resources
declines over time, while the stock of used products increases over time, the
importance of recycling increases (Zilberman et al. 2013). However, pressure to
moderate consumption increase can hinder the growth of production. Third and most
important, research and innovation tend to decrease costs of recycling over time, but
may affect also the costs of mining and harvesting.
It is important to note that bioeconomy resources may be grown or harvested, so
that cultivation may replace recycling if more profitable. Also, the advances in
technologies promoting reduction of biomass to elementary components, in particular platform chemicals, and their re-composition in new products open up to a wide
range of substitutes (or of substituting sources of biomass). For this reason, recycling
should be seen in the wider landscape of potential alternative technologies, rather
than in isolation.
1.4
Discussion
While the above provides a sound conceptual background, its implementation in
practical terms remains difficult for several reasons. The first and most important
remains the complexity in accounting for actual costs of different technologies and
how they shape the supply functions. Not only harvesting can come from different
sources, but also reuse technology can follow different solutions and pathways.
Another key issue is logistic. This is usually more important for high volume low
value goods. It is hence an issue for waste and other recycled material, similar but
with different problems compared to primary production, taking also into account,
e.g., legal constraints affecting wastes. Costs may depend on the way waste is
collected and managed and hence depend on facility choices, network design and
economies of scale. Costs may include fixed and variable costs per vehicle (transport), personnel cost, container or bag costs as well as emission costs estimated to be
1 Exploring the Economics of the Circular Bioeconomy
7
in value is not taken into account by the market that would still produce at P*Q*.
In this case, the problem is then how to reach the optimal level. Clearly, a tax on
the harvested material would go in this direction actually moving from S to SE the
actual supply curve. However, this would put a higher burden to consumers and have
the limitations of any increase in taxes in terms of political consensus. On the other
hand, this situation may also justify support to the alternative recycling technology.
A major issue in this case would be that, in the absence of market prices for the
externality, it is much more difficult to identify the optimal level of circularity.
The analysis above is based on comparative statics, but can be used as a basis for
some dynamic considerations. First, some level of path dependency may apply in
terms of availability of materials to be recycled. In particular, the maximum amount
of recycled feedstock cannot be higher than the amount used in the previous period
(or in the same period); also the maximum efficiency of recycling technology should
be taken into account in considering this type of restrictions. Second, as mentioned
above, different costs levels may be interpreted as changes over time. It is usually
expected that, as the stock of mined or the availability of harvested resources
declines over time, while the stock of used products increases over time, the
importance of recycling increases (Zilberman et al. 2013). However, pressure to
moderate consumption increase can hinder the growth of production. Third and most
important, research and innovation tend to decrease costs of recycling over time, but
may affect also the costs of mining and harvesting.
It is important to note that bioeconomy resources may be grown or harvested, so
that cultivation may replace recycling if more profitable. Also, the advances in
technologies promoting reduction of biomass to elementary components, in particular platform chemicals, and their re-composition in new products open up to a wide
range of substitutes (or of substituting sources of biomass). For this reason, recycling
should be seen in the wider landscape of potential alternative technologies, rather
than in isolation.
1.4
Discussion
While the above provides a sound conceptual background, its implementation in
practical terms remains difficult for several reasons. The first and most important
remains the complexity in accounting for actual costs of different technologies and
how they shape the supply functions. Not only harvesting can come from different
sources, but also reuse technology can follow different solutions and pathways.
Another key issue is logistic. This is usually more important for high volume low
value goods. It is hence an issue for waste and other recycled material, similar but
with different problems compared to primary production, taking also into account,
e.g., legal constraints affecting wastes. Costs may depend on the way waste is
collected and managed and hence depend on facility choices, network design and
economies of scale. Costs may include fixed and variable costs per vehicle (transport), personnel cost, container or bag costs as well as emission costs estimated to be
1 Exploring the Economics of the Circular Bioeconomy
7