Economic Analysis Series No.173
An Empirical Analysis of the Recycling System of Waste Products in the Japanese Economy

March, 2004
Masahiko Shimizu
(Senior Visiting Fellow, Economic and Social Research Institute, Cabinet Office;
Professor, Keio University)
Mikio Suga
(Visiting Fellow, Economic and Social Research Institute, Cabinet Office;
Associate Professor, Tokyo International University)
Takashi Saito
(Graduate School of Economics, Keio University)
Masahide Hayashida
(Former Research Officer,Economic and Social Research Institute, Cabinet Office;
Deputy Director, under the Director-General for Economic and Fiscal Management, Cabinet Office)
Toshiyuki Tanabe
(Mitui Knowledge Industry;
Former Staff of Economic and Social Research Institute, Cabinet Office)
Kazuyoshi Nakata
(Former Research Officer,Economic and Social Research Institute, Cabinet Office;
Deputy Director, under the Director-General for Overseas Economies, Cabinet Office)

The full text is written in Japanese.

(Abstract)

1. Purpose

The purpose of this study is to design the system of recycling based society which "the Basic Law for Establishing the Recycling- based Society" aims, and construct an econometric model of Japanese economy in which resource recycling processes or activities are explicitly introduced. Furthermore, we will propose some simulations of promoting recycling of iron scrap, glass bottle, aluminum ingot, waste paper and PET resin.

2. Background

There are quality gaps between products made from recycled materials (RM) and those made from virgin materials (VM). If there are not the condition where price of RM is sufficiently lower than price of VM, it would be difficult to promote utilization of RM. Therefore, promoting utilization of RM semi-compulsorily through changing relative price of RM and VM by means of policies like subsidizing or removing tax burden can be effective. However, we must investigate the proper method while comparing costs accompanying possible policies. Furthermore, the change of recycling rate in specific sector affects price system or production in the whole economy through technological interdependency among industries, and also affects emission of carbon dioxide. We must investigate by considering and estimating influences of recycling promoting policy to whole economy.

3. Method

We constructed sub-models of five different materials; iron scrap, glass bottle, aluminum ingot, waste paper and PET resin. The substitutions between RM and VM which are accompanied by changes in relative price are described in sub-models. We analyzed empirically influences of recycling promoting policy to whole economy by applying Leontief's input output analysis based on results from sub-models. For example, we estimated changes in relative prices generated by subsidizing, and changes in emission of carbon dioxide from production.

4. Implication

The influence of recycling promoting policy to emission of carbon dioxide seems to be small. However our purpose is not to show that the impact of specific policy in removing environmental burden is impressive. As we mentioned above, what our research objective is "Does any market mechanism work between RM and VM?". If no market mechanism was effective between RM and VM, our society have to pay high social costs to promote recycling, or we have to wait until new technology appears. If we discovered some possibilities of market mechanisms between RM and VM, then recycling based society will naturally become taking advantage of recycling promoting policies.

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