RecyclinginaGlobalizedEconomy

EugénieJoltreauandLuisSarmiento

WorkingPaper25-19

July2025

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RecyclinginaGlobalizedEconomy?

EugénieJoltreau1,2,* LuisSarmiento1,2,3

Developingacirculareconomythroughwasterecyclinghasemergedasaparadigmforconservingnonrenewableresources.Butwhatdoesimplementingacirculareconomymeaninthecontextofglobalizedeconomies?Wastegeneratedbyconsumption,in-cludingimports,oftenmisalignswithnationalproductionandexportmaterialneeds.Thismaterialmismatch,termed"materialimbalances,"alongwithvariationsinwastedisutility,costs,andaccesstovirginresourcesacrosscountries,shapeslocalandin-ternationaltradestrategiesrelatedtowaste.Thispaperoffersanewperspectiveonrecyclingpolicies,emphasizinginternationaltradeandnationalmaterialimbal-ances.Wetheoreticallycharacterizetheexistenceofawastemarketforrecyclinganddemonstratethatlocalrecyclingincentivepoliciescandriveorreducewasteexportsdependingontheirdesign.Additionally,weshowboththeoreticallyandempiricallythatrelativematerialimbalancesbetweencountriesareakeydeterminantofwastetradeforrecycling.

JELcodes:Q53;H23;L33;L51

Keywords:CircularEconomy,InternationalTradeofWaste,EnvironmentalPolicy

Acknowledgements:E.J.acknowledgesfundingbytheEuropeanUnionundertheHorizonEuroperesearchandinnovationprogram,projectCircEUlar(GANo.101056810).

1RFF-CMCCEuropeanInstituteonEconomicsandtheEnvironment,Milan,Italy.

2CentroEuro-MediterraneoSuiCambiamentiClimatici,Lecce,Italy.

3BancodeMéxico,Merida,Mexico.

*Correspondingauthor.E-mail:

eugenie.joltreau@cmcc.it

?

WethankDominikWiedenhoferandJanStreeckforsharingthematerialinputs,stocks,andoutputs(MISO)modeldatawithus.WethankWeiGuoandRouhanSongfortheirhelpwiththereportsoftheChineseMinistryofCommerce.WethanktheparticipantsofEEA-ESEM2021fortheirhelpfulcommentsandparticipantsfromthe2022seminarofUniversitéParisDauphine,PSL,andCEE-M(INRAE).

Wearesolelyresponsibleforanyerrorsinthemanuscriptandreportnoconflictsofinterest.

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Introduction

Thecirculareconomyisoftendiscussedfromlocaltonationallevels(Korhonen,HonkasaloandSepp?l?,2018);however,materialflowsexistwithintheframeworkofinternationaltrade.Globaltradecancreatemismatchesbetweenwastegenerationandthelocationswherematerialsareneededforproduction.Forinstance,somecountriesgenerateexcesswastematerialsthatcouldprovideinputsforindustriesinothernations.

Atthesametime,secondarymaterialsfromconsumption(wasteandrecycledmaterials)aretradedglobally.Asizeableglobalwastemarketexists—nearlyUSD100billionand218milliontons(2016value;OECD,2018).Ascountriesandregionsoftenimplementpolicieswithoutconsideringtheinternationalnatureofmaterialflows,weaimtounderstandthedeterminantsoftheglobalwastemarketforrecyclinganditsrelationtonationalrecyclingpoliciesandupstreamglobalization.

Wedeveloptheconceptofmaterialimbalance,definedasthemismatchbetweenmaterialsneededforproductionandwastegeneratedfromconsumption.Wethenformulateatheoreticalmodeltocharacterizetheinternationalmarketforpostconsumptionwaste,emphasizingitsinteractionwithnationalrecyclingpoliciesandmaterialimbalances.Finally,weempiricallytestthelinkbetweencountry-pairmaterialimbalancesandwastetrade.

Theliteratureonwastetradehasprimarilyfocusedonthewastehavenhypothesisandex-portsfordisposal(Copeland,1991;Baggs,2009;Kellenberg,2010,2012;EggerandKeuschnigg,2024),illegaltradeflows(Copeland,1991;Bernard,2015;Sun,2019)andwastetradeforreuse(YokooandKinnaman,2013;Bernard,2015);weprovidethefirstcharacterizationofinterna-tionalwastetradeforrecycling.Understandingthisiscrucialbecausereusemeetsconsumptionneeds,whereasrecyclablewasteservesasaproductioninput.Thisdistinctionimpliesdifferentdynamicswithinthevaluechain.Wefurthercontributetotheliteraturebyanalyzingtheeffectsofnationalrecyclingpoliciesinthecontextofglobalizedmaterialflows,suchasDussauxandGlachant(2019),García-BarragánandZelity(2019)andEggerandKeuschnigg(2024).1Toourknowledge,thisisthefirstarticleintheinternationaltradeandcirculareconomyliteraturetoutilizetheconceptofmaterialimbalancetocharacterizeinternationalmarketsforwasteandrecycledmaterials.

Webeginbymotivatingthetheoreticalmodelwithaseriesofstylizedfactsaboutinternationaltradeinrecyclablematerials,includingplastics,glass,steelandiron,aluminum,andpaper.

1AppendixA.1presentsacompletediscussionofthewastetradeliterature.

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First,wedocumentthemagnitude,composition,anddirectionofglobaltradeflowsinwasteusingcustomdata.Weconcludethatthevolumeoftradeinrecyclablewasteissignificant,amountingto52megatonnes(Mt)in2016.Notably,asignificantshareofthis—exceeding50Mt—hasoriginatedfromhigh-incomecountriesandbeenexportedworldwidesincethe2000s.Next,weexaminematerialimbalances(materialneedsformanufacturingminuswastegeneratedbyconsumption).Wefindthathigh-incomecountrieshaveaproduction-dominatedmaterialimbalance(exceptforpaper),butonethattendstodecrease(thevolumeofwasteincreasesfasterthanproductiveneeds).Incontrast,therestoftheworldexperiencesasignificantaccelerationinmaterialneedscomparedtowasteproduction.Finally,wedemonstratethatrecyclingpoliciesandthewastemarketinteract.WeestimatetheelasticitybetweenwasteexportsandnationalrecyclingratesinEurope,rangingfroma20percentagepointincreaseintherecyclingratefora1percentincreaseinwasteexportsforislandnations,likeMaltaandCyprus,to5–10percentagepointsforlargereconomies.

Ourtheoreticalmodelanalyzescountries’trade,disposal,andrecyclingdecisionsbasedontheirmaterialimbalances,nationaleconomicconditions,andglobalmarketpriceswithinastaticframework.ItincorporatesresourceendowmentsinthespiritoftheHeckscher-Ohlinframework,withthekeydistinctionthatwasteendowmentsaredeterminedbyconsumptionpatterns,whicharethemselvesinfluencedbyexogenousinternationalflowsoffinalgoods.Unlikeaconventionalmarketforgoodsorpollution,thismodelfeaturesanambivalentpricethatcanfluctuatebetweenpositiveandnegativevalues.2Itmakesseveralassumptions,includingashortageofprimarymaterials,asdocumentedbyYoshidaetal.(2005)forChina.Itexcludestradeinvirginresourcestofocussolelyonthedownstreamsector.Weassumethatallwasteisrecyclableatagivencost.

Thefirstequilibriumconsidersacompetitiveextractionindustrywithrespecttorecycling.Wedefineawasteexporterprofilecharacterizedbylowcollectioncosts,highdisposalandrecyclingcosts,andawaste-dominatedmaterialimbalance,contrastingwiththewasteimporterprofile.Wefindthatawastemarketemergesbetweentwocountrieswhenmutuallybeneficialtradeop-portunitiesarisefromasymmetriesinmaterialimbalances,lowtransportcosts,andvariationsinwastecollection,recycling,anddisposalcosts.ThisinsighthelpsusunderstandthesignificantwastetradebetweenEuropeandAsia.Inthisequilibrium,ourtheoreticalmodeldemonstratesthattradedoesnotaffectglobalrecycling;wasteexportsmerelyshifttotheimportingcoun-try,wherethewasteisrecycled,substitutingfornationalwastecollectionandrecycling.ThisalignswithChina’sstatementsthatbanningwasteimportsaimedtostimulatedomesticrecycling

2Themodelconsidersillegaltradeasthemodel’sboundary;whenthepricebecomestoonegative,themarketcanbecomeadumpingmarket.

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(ISWA,2018)andwithdatafromtheChineseMinistryofCommerceindicatinganincreaseindomesticrecyclingafterbanningimports(AppendixA.10).Thisisarelevantfindingfortheliteratureandpublicdebates,whichfocusedonthewastehavenhypothesisandtradeinwastefordisposal(Copeland,1991;Kellenberg,2012)orconsideredtradeinwasteasawaytoincreaseglobalrecyclingwhileminimizingeconomiccosts(OECD,2018).Inaddition,themodelshowsthatpoliciesbasedoneconomicincentivesinthewaste-exportingcountrytendtofavorexportsoverlocalrecyclinguptoacertainthreshold—untilthenetenvironmentalbenefitsofrecyclingexceedtheresidualneedformaterials.Inthisequilibrium,incorporationratesaremoreefficientthanrecyclingtargetsinincreasinglocalrecyclingforawasteexporterprofile.

Thesecondequilibriumemergeswhenrecyclingbecomesmoresociallycompetitiveduetohigherdisposalcostsandlowerrecyclingcosts.Thisshiftreflectsthestrengtheningofrecyclingpoliciesinthewaste-exportingcountry.Thosepoliciesenhancelocalrecycling,whichsubstitutesforvirginresources.Theimpactonwasteexportsismorenuanced:althoughtherecyclingsubsidyreducesexports,thedisposaltaxnolongerhasanyinfluence.Thecollectionsubsidystimulatesexportsbydrivingdownwasteprices.However,iftheglobalwastepricedropstoosharply,itcanincentivizeillegaltradefordisposal.

Accordingtothefirstequilibriumandassumingtheequalizationofothervariables,3atrademarketforwasterecyclingemergeswhencountrieshavedifferentrelativematerialimbalances.Intheempiricalsection,wetestthismodelpredictionbyexamininghowmaterialimbalancesbetweentwocountriesaffectwastetradewithinagravitymodelframework.UsingaPoissonpseudo-maximumlikelihoodestimator(PPMLE),wefindanelasticityof0.8betweenrelativematerialimbalanceandwastetradeforrecyclablematerials.Thisresultremainssignificantacrossdifferentspecifications,estimators,andmaterials,confirmingourtheoreticalcontribution.

Ourresultshaveseveralpolicyimplications.Thetheoreticalmodelindicatesthatwasteimporterprofilesareeconomieswithhighmaterialneeds,lowerdisposalandrecyclingcosts,andunderde-velopedcollectionandsortingsystems.Thisprofilematchesdevelopingeconomies,asconfirmedbythestylizedfacts,raisingbothenvironmentalandethicalconcerns.Developedcountriesmaythusstrengthenlocalrecyclingsystemstodecreasewasteexportsandcombatresourcescarcity.However,themodelrevealsthatpoorlydesignedrecyclingpoliciesmayunintentionallyencour-agewasteexportswithoutimprovingdomesticrecycling.Boththetheoreticalandempiricalmodelsrecognizematerialimbalancesasakeyfactorinfluencingwastetrade.Toaddressthisis-sue,exportingcountriescanadoptstrategiessuchasincreasinglocalmaterialdemand—through

3collection,disposalandrecyclingcosts,andvirginresourceavailability

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reindustrialization,forexample—andreducingwastebypromotingconsumptionsufficiencyandextendingproductlifecycles.However,anypolicyaimedatboostingmaterialdemandmustalignwithglobalsustainabilitygoals,acknowledgingtheneedtoreduceoverallresourceusetorespectplanetaryboundaries(Rockstr?metal.,2009).

Therestofthepaperisorganizedasfollows:Section2presentsstylizedfactsonthetradeinrecyclablewaste,Section3displaysthetheoreticalmodel,andSection4empiricallytestsourtheory.Section5concludes.

StylizedFacts

AMajorTradeinRecyclableWaste

Theinternationaltradeinwasteissubstantial.In2016,itaccountedfor0.6percentofglobaltradevalue(OECD,2018).Itmainlyconsistedofmetal,paper,andplasticwaste(OECD,2018).Whenfocusingtherecyclablewastematerialsconsideredinthispaper,4thisfigureisabout0.53percentofthetotalvalueofinternationaltrade,comparabletotheannualtradeincoal,medicalinstruments,orsemiconductorsforthatyear(OrganizationforEconomicComplexity,2016).

Figure1presentstheevolutionofwastevolumesin(a)andthebalanceofwastetradeacrossincomegroupsin(b).WeconstructthisfigureusingdatafromtheBACIdatabasefromtheCentred’EtudesProspectivesetd’InformationsInternationales.Wecategorizecountriesintohigh-incomeandrestoftheworldaccordingtotheWorldBankclassification.Wefocusonthefivemainrecyclablewasteproducts:plastics,paper,aluminum,glass,andsteel/iron.5

Thevolumeofwastetradegrewsteadilyfromthebeginningofthecenturyuntilthe2008financialcrisis,increasingfrom84to181Mt.Despitethemarkeddecreasein2009,from2010,tradevolumeshaveremainedstableat170–200Mtperyear.Themostimportantrecyclablematerialbyvolumetradedissteel/iron,followedbypaper,plastic,aluminum,andglass.Panel

b)depictsthebalanceofwastetradebetweenhigh-incomecountriesandtherestoftheworld.Thistimeseriesconfirmsresearchindicatingagrowingsupplyofrecyclablewastetradefromhigh-tolower-incomeeconomiesstartinginthe2000s(CEPII,2012).In2022,high-incomecountrieshadrecyclablewastetradesurplusesofupto72Mt.

Themarketforrecyclablewasteishighlyconcentrated.Thetop10countriesaccountfor67

4Weconsiderfivewastematerials:plastics,paper,aluminum,glass,andsteel/iron,aligningwithEuropeanUnionpackagingrecyclingrequirements(Directive2018/852).

5WepresentthedataworkandotherstatisticsinAppendixA.3.

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Figure1:RecyclableWasteVolumeandValues

Notes:Self-constructeddatawithfiguresfromtheBasepourl’AnalyseduCommerceInternational.HScodesareinAppendixA.3.

percentofglobalwasteexports.Theonlynon-high-incomecountryinthisgroupisRussia.ThemainexportersaretheUnitedStates,Germany,Japan,andGreatBritain,withglobalsharesof19,10,7,and7percent,respectively.Chinaisthelargestimporter,accountingfor13.8percentofallimportsbetween2001and2022,followedbyGermany,Turkey,India,andKorea.

CountriesExhibitingMaterialImbalances

Globalizationandspecializationcancreatematerialimbalancesbecausedifferentspecializationsrequirevaryingresourceamounts.Forinstance,aserviceeconomytypicallyusesfewermaterialsforproductioncomparedtoamanufacturing-focusedeconomy.Moreover,aserviceeconomythatconsumeslargequantitiesofmanufacturedgoodsmaygeneratemorewastefromconsumptionthanitproduces.Incontrast,aneconomycenteredonresource-intensiveproductioncanproducelesswastethanitconsumes.Otherfactorscontributetothesediscrepancies,suchasproductlife-span,whichaffectswasteoutput,andlevelsofeconomicgrowthandurbanization,whichinfluenceproductionneeds.

Todocumentandprovideevidenceofmaterialimbalances,weusedatafromthematerialinputs,stocks,andoutputs(MISO2)modelfromWiedenhofer,Streeck,Wieland,Grammer,Baumgart,Plank,Helbig,Pauliuk,HaberlandKrausmann(2024);Wiedenhofer,Streeck,Wieland,Gram-mer,BaumgartandPlank(2024).Itisanadvanced,dynamic,inflow-drivenmodelthatprovidesacomprehensiveframeworkforanalyzingmaterialstocksandflowsacrossvarioussectors.6

6Ittracksmaterialsfromextractionthroughprocessing,trade,andproductuse,ultimatelyleadingtorecycling

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Figure2showsthedifferencebetweenthematerialsembodiedintheproductionofdomesticmanufacturedgoods(includingexports)andthoseintheapparentconsumptionofmanufacturedgoods(includingimports).7Exceptforglass,high-incomecountriesexhibitadifferentialfavoringconsumptioninmostrecentyears.Incontrast,therestoftheworldshowsanincreasingsurplusrelatedtoproductiveneeds.Thisdiscrepancysuggestsagrowingdemandformaterialsintheproductionofmanufacturedgoodsindevelopingnations,especiallyforexports.

Figure2:MaterialImbalancefromFinalProductionandConsumption

Notes:Thisfigurepresentsthetimeseriesofmaterialimbalanceembeddedinthedifferencesbetweenproductiveneedsandconsumption.Weconstructthedatasetfromtheeconomy-wide,dynamic,inflow-drivenmodelofmaterialinputs,stocks,andoutputs(MISO2)developedbyWiedenhofer,Streeck,Wieland,Grammer,Baumgart,Plank,Helbig,Pauliuk,HaberlandKrausmann(2024).Toconstructthetimeseries,weuseMISO2-reporteddataonmaterialsembodiedinfinalproduction(F78)minusmaterialembodiedinlocalconsumption(F89).Thatis,materialimbalancefromproductionandconsumptionisF78–F89andshowsthemismatchbetweenacountry’scontemporarymaterialneedsforitsproductionprocessesandthematerialsembeddedinconsumption.Oncewecalculatethisvalueforeachcountry,weaggregatebycountrygroupbysummingoverallthecountriesinthatgroupandyear.

However,ourmaterialimbalanceconceptfocusesonavailablewasteratherthanmaterialem-bodiedinconsumption(i.e.,itintegratesproductlife-spans).Forinstance,arapidlyurbanizingeconomymayexhibithighmaterialconsumption,butthesematerialscanremaininuseforanextendedperiod.Incontrast,amatureeconomythatconsumesfewerdurablegoodsgenerateswastemorequickly.Figure3illustratesthedifferencebetweenmaterialsembodiedinthepro-ductionofmanufacturedgoodsandthewastegeneratedfromconsumption(afteruseintheeconomy).Exceptforpaper,thematerialimbalanceofhigh-incomecountriesispositiveand

orwaste.MISO2provideshigh-resolutiondatafor177countriesfrom1900to2016,withaspin-upperiodstartingin1820.AnotablefeatureofMISO2isitsconsistencywitheconomy-widematerialflowaccounting(ew-MFA),whichensuresasystematicmassbalancethroughouttheentirematerialcycle.

7F_7_8andF_8_9intheMISO2variabledefinition.

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morestable.Nevertheless,itmostlyshowsaslightdownwardtrend(afasterincreaseinwasteproductionthanproductiveneeds;itismorestableforglass).Thesituationfortherestoftheworldisentirelyopposite,withmaterialrequirementsrisingsharplyrelativetowasteproduced.

Figure3:MaterialImbalanceConsideringProducts’Life-Span

Notes:Thisfigurepresentsthetimeseriesofmaterialimbalanceembeddedinthedifferencesbetweenproductiveneedsandwastegenerationfromconsumption.Weconstructthedatasetfromtheeconomy-wide,dynamic,inflow-drivenmodelofmaterialinputs,stocks,andoutputs(MISO2)developedbyWiedenhofer,Streeck,Wieland,Grammer,Baumgart,Plank,Helbig,Pauliuk,HaberlandKrausmann(2024).Toconstructthetimeseries,weuseMISO2-reporteddataonfinalmaterialproductionneeds(F78)minusend-of-lifewasteflows(F1011).Thatis,materialimbalancefromproductionandwastegenerationisF78–F1011andshowsthemismatchbetweenacountry’scontemporarymaterialneedsforitsproductionprocessesandtheavailablewastematerialsafterconsumption.Oncewecalculatethisvalueforeachcountry,weaggregatebycountrygroupbysummingoverallthecountriesinthatgroupandyear.

TheWasteMarketInteractingwithDomesticRecyclingPolicies

Inadditiontomaterialimbalanceandmarketforces,policiescanalsosignificantlyinfluencethewastemarket.TheEuropeanUnionexemplifiesthisphenomenon.Itsetspackagingrecyclingquotasformemberstates,whichtheycanfulfillthroughwasteexportforrecycling.8

WedemonstratethescaleofrecyclingexportsinrelationtotherecyclingperformanceofEuro-peancountries.Ouraimisnottodemonstrateacausallink,asitexistsbylaw.Ourobjectiveistoelucidatethephenomenon’sscaleandunderscoreitspolicyrelevance.WeusethepackagingrecyclingdataproducedbyEUROSTAT9andBACIforwasteexports.

8SeeDirective2018/852,whichamendedDirective1994/62/EC.Thesetargetsarealsodefinedatthepackagingmateriallevel:forinstance,50percentforplasticandaluminum,75percentforpaperandcardboard,and70percentforferrousmetals(Directive2018/852).

9Thisdatasetonlycoverspackagingwaste.Itexcludesotherwasteproductsofthesamematerials,suchas

homeappliances,clothing,andtools.

9

Since2018,membercountriesmustreporttheshareofrecyclingthatoccursoutsidetheEuropeanUnion.InTable1,wepresenttheaveragerecyclingsharesinthehomecountry,withintheEuropeanUnion,andoutsidetheEuropeanUnionfrom2018to2021.Onaverage,10–13percentoccursoutsidetheEuropeanUnion.

Table1:Avg.WasteGenerationandRecyclingSharesintheEuropeanUnion(2018–2021)

Generation(MT)

Share

Share

Share

Share

2018

3.03

61.98

59.34

32.04

13.19

2019

2.72

60.83

56.89

30.92

13.36

2020

3.06

61.40

58.26

27.46

13.83

2021

3.25

62.21

59.95

29.74

10.30

Avg.Waste

Recycling

LocalRecycling

EuropeanUnionRecycling

ForeignRecycling

Notes:ThistablepresentstheaverageannualvaluesacrossallEuropeanUnioncountriesforfivevariables:averagewastegenerationinmegatonnes,averagerecyclingrate,localrecyclingshare(thepercentageoftotalrecyclinghappeningdomestically),EuropeanUnionrecyclingshare(thepercentageoftotalrecyclingthatoccursinothermemberstates),andforeignrecyclingshare(thepercentageoftotalrecyclinghappeningincountriesoutsidetheEuropeanUnion).

However,dependingonthematerial,thissharewaslikelymuchhigherbeforetheChineseban.AccordingtoEuropeanParliament(2018),theEuropeanUnionusedtoexportapproximatelyhalfofitsplasticsdestinedforrecycling.Thiscouldhaveaccountedforupto50percentofEuropeancountries’plasticrecyclingrates,raisingconcernsabouttheirdependenceonforeignmarketsforwastemanagement.

Figure4presentstwosimpleexercisestoillustratetherelationshipbetweenrecyclingratesandwasteexportsamongEuropeanUnionmemberstates.Theleftpanelshowsascatterplotofrecyclingratesandtotalwasteexportsfrom2000to2021forthe15largesteconomiesintheEuropeanUnion,whichmandatesaminimumrecyclingrateof65percentforallpackagingwasteby2025.Thefigureincludesalinearfitforeachcountryinalevel-logspecification.Fourteenofthe15largesteconomiesshowapositiverelationshipbetweentheirrecyclingratesandwasteexports.10Atthetopright,weestimatetheelasticitybetweenthesetwofactorsusingasimplelevel-logmodelforeachcountry.11Thecoefficientsrangefrom26pp(Malta)to-6pp(Romania).Ofthe27countriesinthesample,23(85percent)showapositiveestimate,andonly4haveanegativecoefficient.Amongthe23countrieswithapositiveestimate,onlytwoarenotstatisticallydifferentfromzeroatthe10percentlevel,andnoneofthefourwithnegativecoefficientsisstatisticallysignificant.FourofthefivelargesteconomiesintheEuropeanUnion(France,Italy,Spain,andtheNetherlands)showapositiveandsignificantpointestimate.Inthebottomrightcorner,wepresenttheactualshareofrecyclingoutsidetheEuropeanUnionbetween2018and2022forcomparison.12Theratesareparticularlyhighforislandeconomies,

10TheonlyexceptionisGermany.Apossiblehypothesistotestisthatvariationsinlocalrecyclingorintra-

Europeanexportsbetterexplaintheincreaseinitsrecyclingrate.

11TheestimatedequationisRct=log(Wct)+?ct.Rctistherecyclingrateforcountrycattimet,andWctisthetotalvolumeofwasteexportsoutsidetheEuropeanUnion.

12Thisinformationisunavailableforyearsbefore2018.However,themarketunderwentsignificantchangesafter

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whichalignwiththeirelasticities.

Figure4:EuropeanUnionRecyclingRatesandWasteExports

Notes:ThisfigurepresentstherelationshipbetweenEuropeanUnionrecyclingratesandwasteexports.PanelapresentsascatterplotoftherecyclingrateandthetotalwasteexportsoutsidetheEuropeanUnionbetween2000and2022forthe15largestEuropeanUnioneconomies.Foreachcountry,weindependentlymakealinearfitacrossallyearlyobservations.Panelbpresentsthepointestimatesofasimpleordinaryleastsquareslevel-logmodeloftherecyclingrateasafunctionofwasteexports.WeestimatethemodelindependentlyforeachEuropeanUnioncountryandplotpointestimatesand95percentconfidenceintervals.

TheTheoreticalModel

AutarkyinResources

Westartbyconsideringaneconomyinresourceautarkythatprohibitstradeinvirginresourcesandsecondarymaterialsor,alternatively,auniformglobaleconomy.

ThecountryhasasingleagentthatproducesgoodsfromauniquematerialwithweightQˉ,whosequantityisdeterminedexogenouslybyconsumerdemand.Inthepreviousperiod,theagentconsumedaquantityofgoodsC,whichisnowavailableasrecyclablewasteCw.Nonrecycledwasteisdisposedofwithdisutilityωandcostlyfortheuniqueagentofthecountry.Wedonotconsiderwastefromthepreviousperiodatdumpsitesforrecyclinginthecurrentperiod.ToproduceQˉ,theagentmustchoosebetweenusingthevirginnationalresourceRfromtheresourcereservoir(Rˉ)orrecyclingashareτofthenewlyavailablenationalwasteCw.

Intherecyclingvaluechain(collection,sorting,recycling),weassumethatcostconvexityexistsonlyinthecollectionandsortingprocesses,whichwemodelasthesamestep.Weconsider

Chinaimposedstrictrestrictionsonwasteimportsin2017.

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auniformdistributionofmaterialwastein[0,1],where0denotesthelocationoftherecyclingindustryandfirm,asinFleckingerandJoltreau(2020).Theagentstartsbycollectingthemostaccessiblewaste.Wastecollectionincursaunitcostγ.Thus,thecollectioncostscanbeexpressedasfollows:

r

τ

γ xdx=

0

γτ2

2

(1)

Costconvexityarisesbecausethelastcollectedwasteisoftenthemostexpensive,suchasfromremoteareasorhouseholdsthatresistsorting.13Anotherinterpretationisthatwastequalityvariesfrom0(pure)to1(impure);γrepresentsthesortingpremiumassociatedwithimpurity.Theunitcostofrecyclingthecollectedwasteisα,whichincludesrecyclingstandardsandnorms.

Weassumethatvirginresources(R)concentrateatpoint0andthatextractionoccursataconstantunitcostr.Extractioncostsincreaseovertime(Hotelling,1931),andcollectioncostsoccurperiodically.Inthismodel,weadoptastaticperspective.Hence,foragivenyear,wemodelextractioncostsasaconstantunitcost,allowingconvexityonlyinco