Empirical Analysis of A Closed-Loop Economy and Society-Case Studies of Glass Bottle and Iron Scrap-

June, 2002
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
(Cabinet Office)
Toshiyuki Tanabe
(Mitsui Knowledge Industry;
a former staff of Economic and Social Research Institute, Cabinet Office)
Kazuyoshi Nakata
(Economic and Social Research Institute, Cabinet Office)

The full text is written in Japanese.

(Abstract)

1. Outline

The aim of this research is to carry out an empirical analysis of recycling, based on the ideas presented in "The Basic Law for Establishing the Recycling-based Society." We constructed econometric models in which virgin materials and recycled materials were input substitutively in a production process, based on a general equilibrium model with an Input-Output Analysis model.

2. Summary

(1)Two kinds of economic models for analysis of recycling

We employ two kinds of economic models for our analysis. One of them is an Input-Output model with sectors that recycle glass and iron scrap. The other is a sub-model for each material. We assume a substitution between virgin materials and recycled materials in the sub-models, and we analyze the effect of recycling on the national economy and environmental loads by using the Input-Output model. Relative price and relative input ratio of virgin materials and recycled materials are determined in sub-models, and they are used as input for the Input-Output model. The information that we collected directly from related associations and firms was used in estimating the econometric models.

(2)Analyses of recycling of glass bottle and iron scrap

(a) Analysis of glass bottle recycling

Substitution between virgin materials such as silica sand, soda ash, and limestone flux and a recycled material (glass cullet) is assumed in a sub-model of glass bottles. The use of glass cullet depends on the relative price of production factors.

The results from this sub-model and the Input-Output model suggest that subsidies for glass cullet bring about a rise in the recycling rate, a decrease in prices, an increase in real household expenditure, and a reduction in CO2 emission.

We also calculated the effects of policies (subsidy, tax, and target for the recycling rate)for recycling on the recycling rate.

(b) Analysis of iron scrap recycling

Two types of sectors are considered in the iron-scrap recycling model: the integrated sector and the minimill sector. The former produces steel from natural resources (iron, ore, coke), while the latter produces steel from recycled resources (iron scrap).

If the price of iron scrap is cheaper than that of iron, the minimill sectors will produce more. We carried out a simulation for the case. The simulation results suggest that the share of the minimill sector will rise, and that the consumer price index and the price of capital goods will decrease. The volume of CO2 emission will, at the same time, decrease if the price of iron scrap decreases.

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