key: cord-0945679-yepbvvqe
authors: Argentiero, Amedeo; D’Amato, Alessio; Zoli, Mariangela
title: Waste recycling policies and Covid-19 pandemic in an E-DSGE model
date: 2022-01-10
journal: Waste Manag
DOI: 10.1016/j.wasman.2021.12.036
sha: c203bfe3e61d5d7c19b2d149733999d9e2582ef8
doc_id: 945679
cord_uid: yepbvvqe

Among the environmental problems we have still to face in the 21st century, waste production and management are particularly pressing. Despite policy efforts, waste volumes are still increasing worldwide and landfilling remains the main disposal option in several parts of the world. Together with the huge environmental impacts of the large amounts of waste landfilled, it would be possible to save enormous amounts of resources improving reuse and recycle options. The impact of the COVID-19 outbreak has been significant also in the waste cycle, leading to an increase in the amount of non-recyclable carising sanitary needs and new consumption practices. On the basis of these considerations this paper aims at analysing: i) the short run impact on output, consumption and health of appropriate waste policies aimed at reducing non-recyclable waste production, and ii) to highlight the mechanics triggered by an exogenous pandemic event in terms of waste management, environmental and health impacts. To these ends, we adopt an E-DSGE approach. Our results confirm the relevance of policies and consumers’ preferences in driving waste management towards a circular economy transition. More importantly, our (to our knowledge) novel analysis suggests the existence of a trade-off between environmental quality and health in the presence of a pandemic event, suggesting the need to increase preparedness to such events, in order to avoid relying on ”emergency approaches”, based on resorting to increases in non-recyclable consumption types (e.g. single use plastics).

-We adopt an E-DSGE modelling strategy -We model the short run impact of waste policies and of a pandemic event -We highlight economic, environmental and health impacts -We confirm relevance of policies and preferences in a circular economy transition -We identify an environmental quality/health trade-off triggered by a pandemic event 1 Introduction 33 Waste is one of the "unresolved" environmental issues in the 21st processes, and also embedding recyclable and non-recyclable con-99 sumption in consumers' preferences. 100 We assume that recyclable consumption does not contribute to 101 environmental harm but, rather, can be "transformed" to be uti-102 lized again in the production process, in a circular economy per-103 spective. Non-recyclable consumption, instead, due to the need 104 to dispose of it through landfilling and/or incineration, worsens 105 environmental quality. Our DSGE logic is particularly suitable to 106 understand the dynamic response of economic, waste and environ-107 mental variables in the presence of shocks related to productivity, 108 policy and preferences. 109 We exploit these features of our model first, to investigate the 110 impact of two different waste policy instruments, and second, to The supply-side of the economy is comprised of three sectors: 237 output is divided into two different types; more specifically, to keep 238 matters as simple as possible we consider a recyclable goods sector 239 and a non recyclable goods sector. In the following, we will use the 240 label r to refer to variables related to the recyclable consumption The corresponding production functions are:

where α r , α nr , β r , β nr and γ are the elasticities of output with 252 respect to each production factor, also indicating the distributive 253 shares of each productive factor remuneration, and A r t and A nr t are 254 total factor productivities (TFP) in each sector. 

where is the elasticity of substitution between recyclable con-263 sumptions and recycling quality.

The exploitation of virgin natural resources in the two sectors, 265 E r t and E nr t respectively, are related to the stock of (non renew- :

with ρ t corresponding to the subjective discount factor.

For the period utility function, we assume the following con-278 5 This "aggregate" representation of the stock of natural capital is rather standard, for example, in the literature on economic growth and the environment -see, among others, Smulders (2000) . On the other hand, to point out the current over-exploitation of natural resources, we assume a negative exogenous stock exploitation adding to the endogenous flow of resources used in the recycling and non-recycling sectors. stant relative risk aversion (CRRA) form:

where v t is a taste shifter (Stockman and Tesar, 1995) , whose 280 law of motion is described by an AR(1) process with zero mean 281 and uncorrelated residuals. 

where δ h indicates an exogenous health deterioration rate, while κ t instrument. In particular, the Government budget is balanced on 329 a period-by-period basis:

where taxation τ t on non recyclable consumptions is levied in 331 order to finance the value of recycling quality P q t Q t , and to spur 332 recyclable consumptions through a subsidy µ t . Here, P q t is the unit 333 "price" of the quality of waste recycling infrastructures, which is 334 formally borne by the Government but is effectively paid by the in- Together with the analysis discussed in this section, we also performed an assessment of the impact of total factor productivity shocks on recyclable and non-recyclable sectors. On the other hand, as results are standard, we will not detail the related discussion here. The corresponding impulse response functions are reported in Appendix C. The same Appendix reports all impulse response functions that are not reported in the main text for the sake of space. We therefore refer to Appendix C for all impulse response functions commented but not reported here. The results for the waste subsidy are midway between those of a waste tax and those stemming from a taste shock. This implies that the impact on aggregate production and consumption, as well as the impact in terms of recyclable consumption, is larger under a taste shock than under any kind of modelled policy. As it seems to emerge from the two parts of Table 3 The first column contains the parameters considered for the sensitivity analysis, whereas the other columns indicate the simulated steady state values for some relevants great ratios: the first value is the one simulated under the baseline calibration, the second one is generated when the parameter value is increased of 10% and the third one when the parameter value is decreased of 10%.

The crisis related to the COVID-19 pandemic event has been hav- α r 6.35; 6.33; 6.34 0.08; 0.09; 0.08 β r 6.35; 6.34; 6.35 0.08; 0.09; 0.08 ζ 6.35; 6.34; 6.35 0.08; 0.10; 0.08 6.35; 6.35; 6.35 0.08; 0.08; 0.08 6.35; 6.40; 6.33 0.08; 0.12; 0.07 P ersistence f or τ t 6.35; 6.35; 6.35 0.08; 0.08; 0.08 P ersistence f or µ t 6.35; 6.34; 6.35 0.08; 0.09; 0.08 

☒ The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

☐The authors declare the following financial interests/personal relationships which may be considered as potential competing interests:

Assessing the effective-602 ness of voluntary solid waste reduction policies: Methodology 603 and a Flemish case study

Government subsidies in 606 the power battery recycling industry. Industrial Management 607 & Data Systems

Productivity, en-609 ergy prices and the great moderation: A new link

Cost savings 612 in unit-based pricing of household waste: the case of The 613

The Road from Landfilling to Recycling: Com-615 mon Destination, Different Routes. European Environment 616 Agency

DivertingWaste from Landfills. European Envi-618 ronment Agency

Guide to Cost-Benefit Analysis 620 of Investment Projects. Economic appraisal tool for Cohesion 621 Policy

Covid-19 face masks: 623 A potential source of microplastic fibers in the environment

Emissions targets 626 and the real business cycle: Intensity targets versus caps or 627 taxes

Health impact 631 assessment of waste management facilities in three European 632 countries

Garbage, recycling, 634 and illicit burning or dumping

Household Re-637 sponses to Pricing Garbage by the Bag

An econometric analysis 640 of regional differences in household waste collection: the case 641 of plastic packaging waste in Sweden

Can the coro-644 navirus disease be transmitted from food? A review of ev-645 idence, risks, policies and knowledge gaps

How should environmental policy respond 648 to business cycles? Optimal policy under persistent produc-649 tivity shocks

Generation of household 656 solid waste in OECD countries: an empirical analysis using 657 macroeconomic data

Garbage and re-659 cycling with endogenous local policy

Minimising the present and future plastic waste, energy and 663 environmental footprints related to COVID-19. Renewable 664 and Sustainable Energy Reviews

Municipal waste Kuznets 666 curves: evidence on socio-economic drivers and policy ef-667 fectiveness from the EU. Environmental and Resource Eco-668 nomics

An estimated DSGE model of energy, costs 670 and inflation in the United Kingdom, Bank of England (No. 671 432)

Impact of meteoro-673 logical factors on COVID-19 pandemic: Evidence from top 674 20 countries with confirmed cases

Changing behavior with normative 677 feedback interventions: A field experiment on curbside re-678 cycling

Italian "Triangle of death" 680 linked to waste crisis

In-683 creased plastic pollution due to COVID-19 pandemic: Chal-684 lenges and recommendations

An estimated dynamic 687 stochastic general equilibrium model of the euro area

Shocks and frictions in US 690 business cycles: A Bayesian DSGE approach. American eco-691 nomic review

Economic growth and environmental 693 quality

Tastes and Technol-696 ogy in a Two-Country Model of the Business Cycle

Environmental pollution from illegal 701 waste disposal and health effects: A review on the

Coronavirus pan-705 demic and tourism: Dynamic stochastic general equilibrium 706 modeling of infectious disease outbreak

Investigat-709 ing the effect of government subsidies on end-of-life vehicle 710 recycling

Indirect effects of COVID-19 on the envi-713 ronment

Pandemic shock -Impact on aggregate variables