A necessary change : suitable policy tools for a transition into a circular economy

Our current production system remains unsustainable and will eventually deplete virgin materials. There have been several efforts to make production more sustainable, e.g. different policy programs from governments that have tried to increase recycling, such as Extended Producer Responsibility (ERP) initiatives. This thesis states that these initiatives have not been enough to enable the development of a circular production system, as envisioned by the Circular Economy framework. The general effect of other policies and practices, such as Product Stewardship (PS), taxes on virgin materials, eco-design, deposit-refund systems and waste management are also assessed, in order to answer the research question: What are suitable policy tools that can support an effective strategy for a transition into a circular production economy? Results form the analysis show that the use of a tax on virgin materials is the most promising alternative, but that this tax must be combined with supporting policies that increases consumer participation and recycling of feedstock materials, in order to be effective in the development of circular production. The use of subsidies is often necessary in order to strengthen the market share of new technologies such as renewable energy, but these subsidies should be used with caution to avoid the onset of “the green paradox”. Policy tools in general should be used with caution, as they can cause market distortions and inefficiencies. They must have a clearly and narrowly defined goal in order to reach their desired effect; if the ambition of the policy tool is to widely defined, it will be very difficult to measure its effect. Additionally, there will be need for waste management systems that are effective in handling an increasing amount of waste globally, but at the same time does not create barriers for the establishment of circular production. A creative approach and the use of economy and mathematical tools has resulted in the introduction of the “Earthsaver Tax Function” (ETF), the Adjusted Tax Rate and the Product Cycle, in which customers return materials for recycling to feed the circular production loop. The ETF is highly adjustable, and can be used to replace virgin materials with renewable materials, by using the tax as a feedback mechanism that funds the development of the renewable material