1) The circular economy aims to reduce environmental impacts, use of primary materials, and reliance on imported materials. Increasing recycling and use of secondary materials is a key pillar of circular economy policies. 2) Past data shows that higher domestic metal recycling decreases imports of secondary metals but does not affect imports of primary metals. Modeling suggests current policies will not significantly change trade patterns in materials by 2060. 3) Additional circular economy policies like taxes on primary materials and subsidies for secondary materials and recycling could lead to higher trade in primary and secondary materials by 2040 as production shifts from primary to secondary. Regional differences in these policies would affect trade patterns.

1. CIRCULAR ECONOMY IMPACTS ON
TRADE PATTERNS
Elisa Lanzi
Acting Senior Economist
Environment and Economy Integration Division
Environment Directorate
OECD International Trade and Circular Economy Workshop
Paris, 26 February 2020

2. Aims of the circular economy transition
o Reduce the environmental impacts throughout the
products’ life cycle: extraction, materials use, and
waste generation and management
o Reduce the use of primary materials
o Reduce reliance on imported materials, especially
for countries with low resource endowments
o Seize opportunities for economic growth and to
create new jobs
2

3. Primary vs secondary raw materials
Primary raw materials Secondary raw materials

4. • Increased recycling and use of secondary
materials is one of main pillars of circular
economy policy packages
• Secondary raw materials can be used to
replace domestic primary raw materials
• For countries with low resource endowments,
secondary raw materials can substitute
–Imports of primary raw materials
–Imports of secondary raw materials
Changes in international trade when
recycling increases

5. Learning from from past data
5
Focusing on metals, there is no evidence that
increasing secondary materials production
decreases imports of primary raw materials
When domestic metal recovery increases
o Decrease in secondary raw metals import
o No effect on primary raw metals import
Note: Empirical analysis based on annual country-level data; (21 countries; 1994-2008)
Source:Dussaux and Glachant (2018)
“How much does recycling reduce imports? Evidence from metallic raw materials”
Journal of Environmental Economics and Policy

6. The RE-CIRCLE project investigates how future economic
activity and materials use are linked
• “Global Materials Resources
Outlook to 2060”
• Macroeconomic consequences of the
transition towards the Circular Economy
Innovative modelling approach with distinction between
primary and secondary metals production
Future trends in materials use:
the RE-CIRCLE project
6

7. 7
1.1%
0.9%
2.4%
1.2%
0.9%
1.9%
<0.1%
1.2%
1.0%
2.2%
1.3%
0.9%
1.4%
<0.1%
0
200
400
600
800
1000
1200
1400
1600
1800
Aluminium Copper Iron & steel Other non-ferrous
metals
Non-metallic
minerals
Mining products Recycling
products
2017 2060
Bln USD
Note: The numbers above the bars reflect the share of the sector in total exports.
Source: ENV-Linkages model.
Projections of regional exports of
materials under current policies, 2060
• Without additional policy action, no significant change in
trade patterns in materials

8. 8
Policy scenario
Analysis to 2040 as most implemented policies target at most this date.
Taxes on primary
metal use
Taxes on non-
metallic mineral
use
Subsidies to
production of
secondary metals
Subsidies to
recycling
Material fiscal
reform scenario

9. Global sectoral output and exports with
additional circular economy policies, 2040
9
-15%
-10%
-5%
0%
5%
10%
15%
20%
Aluminium
(primary)
Iron
and
steel
(primary)
Non-metallic
minerals
Copper
(primary)
Non-ferrous
metals
(primary)
Construction
[…]
Motor
vehicles
Other
machinery
and
equipment
Fabricated
metal
products
Other
mining
Recycling
Output Exports
>50%
Source: OECD ENV-Linkages model
• Production changes from primary to secondary
• Higher trade in primary and secondary materials

10. Effects of policy package on
regional exports of materials commodities
10
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Canada
Chile
Mexico
USA
EU
large
4
Other
OECD
EU
Other
OECD
Aus.
&
NewZ.
Japan
Korea
Brazil
Other
Lat.Am.
Other
EU
Russia
Caspian
region
Other
Europe
Middle
East
North
Africa
South
Africa
Other
Africa
China
India
Indonesia
Other
ASEAN
Other
Asia
OECD
America
OECD
Europe
OECD
Pacific
Latin
America
Rest of Europe
and Asia
Middle East
& Africa
South and
South-East Asia
Domestic policy effect International policy effect Trade interaction effect
• Regional differences in policy results affect trade patterns
• Indirect effects (e.g. trade interaction)

11. • Additional policies needed to further stimulate the
substitution from primary to secondary materials and to
achieve the transition to a circular economy
• Trade patterns will be affected by the implementation of
circular economy policies
– Substitution effects
– Regional differences
• Results are particularly relevant for resource intensive
countries that may need to diversify their economic
structures (as well as their labour force) in the future
Concluding remarks
11

12. THANK YOU!
For more information:
elisa.lanzi@oecd.org