MATCGE

General Scope and Connection with Climate Mitigation

Introduction

We introduce a CGE model that endogenously includes physical flows subject to material balance constraints. We propose a new framework that more accurately describes the interaction between transaction values and material flows, and thereby becomes particularly relevant for the ex ante analysis of CE policies and autonomous developments.

Global economic/material model

The model structure is very generic and has the following structure: firms producing goods $i\in I$, factors of production $f\in F$, and households and institutions $h\in H$. We have the following variables: $Y_{I}$ for output by firms (which equals sales and total production costs), where we may omit the subscript $I$ for convenience as we do not use the symbol $Y$ for other agents. $X_{J,I}$ for intermediates from firms $J$ to firms $I$, using the symbol $J$ equivalently (alias) to $I$. $L_{F,I}$ is factor use by firms, and $\Omega _{F,H}$ is supply by consumers. $C_{I,H}$ is consumption by households, respectively. $T_{R/W}$ is taxes on resource use or waste generation.

Model Scope

Our model is generic and include only one geographical region for now. It includdes intermediary deliveries, consumption (government and households), labour and investment. It can be used iteratively and a dynamically integrated version is under development.

The main specificity of our model is that material flows are endogenously adjusted. Underlying material flows are indexed $m\in M$ and are linked to economic flows through material intensities $\theta _{m}$: $X_{mij}=\theta _{m}^{X}X_{ij}$, $C_{mih}=\theta _{m}^{C}C_{ih}$.

Material input is a natural resource in production: $R_{mi}=\rho _{mi}Y_{i}$. Waste comes from consumption, capital depreciation and a share $\epsilon$ of material in production.

Note that it is possible to include as many materials $m\in M$ as needed.

Model Development

• Status: the CGE model with endogenous material flows has a robust generic theoretical basis and the code to illustrate it. Further developments include: adding stock vintages, more precise Circular Economy elements, quality differentiation.
• Environment: python.
• Documentation: available for current version of the model.
• Source code: available for the static and iterative model. Time-integrated version is still under development.

Circular Economy Features

This section provide the CE features of the model

R Words coverage and implemented in the model

• R0 Refuse:adding an exogenous constraint on a sectorial output (economic or material flow);
• R2b Business model shift: including a service sector;
• R2e Lifetime extension: introducing capital and stock vintages, lifetime can be extended by modifying capital depreciation rate or expected lifespans;
• R2f Lightweighting: model endogenously adjust material intensity (kg/euro), that can also be interpreted as quality (in euro/kg)
• R2g Material substitution: the model allows for several layers of material flows (i.e. for one Social Accounting Matrix - SAM - we can add several Physical Input-Output Tables - PIOT), and materials substitute endogenously.
• R2h+i Less fabrication scrap: ratio of industrial waste per material input can be adjusted. The mechanism of R2g can also be included.
• R3-7 Reuse: Can be included with the addition of a detailed waste sector that allows for households to trade their own goods.
• R8 Recycle: with the inclusion of a recycling sector with either direct recycling from the flow of waste or recycling from "waste mining" (with a waste stock).
• R9 Recover: including a disaggregated waste sector that includes energy recovery.

CE strategies and connection with climate change mitigation.

Among all PIOT that can be added to the model, a GHG one can be included.

Insights for Analytical Framework

This section should highlight the features relevant for the CIRCOMOD analytical framework. They should be linked with the previous section which provide more details.

• Key mechanisms and interactions within CE strategies that lead to changes in GHG emissions.
• Tool exploration (demonstrating ideas before implementing them in large-scale quantitative models)
• Communication key CE dynamics (to the broader audience)

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By having a CGE structure with endogenous material flows and policies targeting material extraction/waste allows, the model allows to observe all adjustments of material flows, including carbon in GHG emissions.

Refinement, Integration, Future Development

The following sections are optional and should be completed only if they are relevant.

Refinement process

Please describe how the stylized model will be improved/refined in the CIRCOMOD project.

Integration

Highlight the features to be integrated in larger model in the CIRCOMOD project.

Future features of the model

Not yet implemented, planned model developments, if any.