The Economics of the Circular Economy Transition – Chile's case

1. POLICY INSTRUMENTS FOR A
RESOURCE-EFFICIENT CIRCULAR
ECONOMY
Peter Bӧrkey
OECD Environment Directorate
First session
5 December 2022

2. Defining the circular economy
Increasing material
efficiency
Slower material
loops
Material loop
closing
• Increased resource
productivity
• Increased asset
utilization
• Modified consumer
preferences
• Increased product
lifespan (e.g. through
eco-design, re-use or
repair)
• Increased product,
repair and
remanufacture
• Increased material
recycling and recovery
Defining a Circular Economy
Source: McCarthy, Dellink, Bibas (2018), The Macroeconomics of the Circular Economy Transition

3. Economic instruments offer
the prospect of achieving
circular economy
objectives at a lower cost,
while incentivising innovation
and possibly generating
revenues
Economic instruments have become a core policy tool
for materials management and circular economy
Induce behavioral changes through
price signals
Help internalise environmental
costs into firms’ and households’
decisions
Offer a degree of flexibility in
compliance allowing to minimise
costs
3

4. Types of economic instruments
4
“Explicit” economic
instruments
• Taxes and charges
• Tradeable permits and
tradeable compliance
certificates
• Deposit-refund systems
• Incentive subsidies
Other instruments with
similar properties
• Extended Producer
Responsibility schemes
• Green Public Procurement

5. Product
Design
Sourcing of
materials
Production
Consumption
End-of-life
treatment
Raw
materials
Recycled products, near
virgin feedstock material,
virgin equivalent
feedstock
Reused products,
remanufactured
products,
redistributed products
Disposal
(landfill),
energy
recovery
Virgin equivalent
feedstock
material, biomass
Refurbished
product
Leakage,
illegal
disposal
Information
and data
flows
Redistribute,
repair, share
Material and
waste flows
Product life
cycle flows
Packaging and
scrap from
manufacturers
5
Economic instruments can provide incentives
throughout the product life cycle

6. Product
Design
Sourcing of
materials
Production
Consumption
End-of-life
treatment
Raw
materials
Recycled products, near
virgin feedstock material,
virgin equivalent
feedstock
Reused products,
remanufactured
products,
redistributed products
Virgin equivalent
feedstock
material, biomass
Packaging and
scrap from
manufacturers
6
Economic instruments can support changes in
product design, sourcing of materials and production
Link product design
to end-of-life costs
Extended Producer Responsibility
Advance disposal fees
Green Public Procurement
Enhance business
R&D and eco-
innovation
Incentive subsidies
(tax reliefs and
public funds)
Discourage
producers from
using virgin and non-
recyclable materials
Virgin materials taxes
Taxes on plastics

7. Product
Design
Sourcing of
materials
Production
Consumption
End-of-life
treatment
Refurbished
product
Leakage,
illegal
disposal
Redistribute,
repair, share
7
Economic instruments have the potential to change
consumer and household behaviour
Influence
consumer/household
decisions at the point
of sale
Product excise taxes
Incentive subsidies (consumer tax
reductions and public funds)
Change consumer
and household
behaviour at the
product’s end-of-life
Pay-as-you-throw
waste charges
Deposit-refund
systems
Change consumption
practices during
product’s use
Incentive subsidies
(consumer tax reductions
and public funds)

8. Product
Design
Sourcing of
materials
Production
Consumption
End-of-life
treatment
Recycled products, near
virgin feedstock material,
virgin equivalent
feedstock
Reused products,
remanufactured
products,
redistributed products
Disposal
(landfill),
energy
recovery
8
Economic instruments can support more circular end-
of-life treatment and reverse supply chains
Incentivise recycling
Landfill taxes
Incineration taxes
Tradeable compliance certificates
Incentive subsidies (public funds)
Extended Producer Responsibility
Incentivise reuse and
remanufacturing
Incentive subsidies (tax reliefs and
public funds)
Extended Producer Responsibility/
Deposit-refund system

9. • Relevant recent work:
Past and ongoing work at the OECD - EPR
• Past/Ongoing
– EPR Guidance
– EPR and online sales
– EPR and DRS
– Fee modulation
– EPR to manage pharma waste
• Future work
– EPR extensions
– Distributional aspects of EPR
– EPR for textiles

10. • Relevant recent work:
Past and ongoing work at the OECD – Taxes/Charges
• Past/Ongoing
– Policies to address SUP
– Raw material taxation
• Construction aggregates tax (Andalusia)
• Global Material Resources Outlook
• Global Plastics Outlook
– In-country support with focus on
economic instruments, across sectors
(e.g., construction, food and biowaste,
plastics)
– Environmentally Harmful Subsidies
(EHS) for primary metal production
• Future work
– Taxation to address plastic pollution

11. • Relevant recent work:
Past and ongoing work at the OECD - Other
• Past/Ongoing
– Circular Economy Labels and
Information Systems
– Green Public Procurement
– Recycled content
requirements for plastics
• Future work
– Overview paper on economic
instruments for a CE

12. • Economic instruments are insufficiently used to support
the CE transition, especially upstream in the product life-
cycle
• They need to be embedded in a broader policy mix to be
effective
• There is a lack of experience with their use and a need for
policy experimentation to develop insights on the design
of these policies
12
Conclusions

13. Thank you
Find out more about our work at:
www.oecd.org/environment/plastics
Peter.Borkey@oecd.org