Evaluating Barriers to Circular Production Systems

Given the finite nature of key resources, concerns about climate change, material scarcity, and market instability, circular economy has been proposed as an essential strategy for decoupling production from negative... [ view full abstract ]

Given the finite nature of key resources, concerns about climate change, material scarcity, and market instability, circular economy has been proposed as an essential strategy for decoupling production from negative environmental impacts. Circular economy enables increased retention of valuable materials and product components within the production-use system through reuse, remanufacturing, refurbishment, and repair, also called circular processes (CPs). CP producers recover end-of-use (EOU) products and components from the market (‘cores’), and use them in the production process. Each of these CPs enables a decoupling of production from negative impacts: the reuse of a small share of a product or component ensures a reduction in the requirement for virgin material inputs, a less energy-intensive production process, and reduced production costs. Given the marginal environmental benefit and the cost advantage, one would expect to see many CP products in the marketplace; however, despite these benefits, the market intensity of remanufactured products in the United States averages only ~2%. CP producers face distinct challenges: with limited control in a large, complex system, CP producers must effectively recover EOU products and components across broad geographies, and face market discrimination originating in societal preferences for traditional ‘new’ products. In some economies, government concern for consumer welfare and the desire to avoid becoming a ‘dumping’ destination for EOU products has resulted in import restrictions and even import bans of cores and finished CP products. The diverse nature of the different barriers to CP production has ultimately inhibited the scale-up of CPs. To understand how the presence of barriers to CPs interfere with decoupling, some key questions must be addressed: 1) What are key CP barriers that currently exist within economic systems; 2) How much environmental benefit would be expected if these CP barriers were mitigated; and 3) Which system agents are best able to alleviate CP barriers?

A systems-dynamics approach models stocks and flows of both new and CP products within an integrated economic system. Key regulatory, technical, recovery, and market-based barriers to CP production and products are reflected at the appropriate point within the system. A modified innovation diffusion model is used to account for the influences of network effect, price and perceived quality upon the diffusion of CP products. Key impact factors of the system are modeled: 1) Virgin material requirement; 2) Virgin material offset (via reuse); 3) Solid waste generation; 4) CO₂-equilvaent emissions; 5) Cost advantage; and 6) Relative employment potential. The economic system model and sensitivity analysis was created using MATLAB, to enable simulation of different scenarios and conditions.

The results of these analyses support the development of strategic policy and best practices to encourage faster scale-up of CP diffusion, ultimately contributing to the decoupling of production from negative environmental impact.