CIRCEE (CIRCular Energy-Economy Model) is a stylized deterministic dynamic and stochastic general equilibrium model designed to assess circular economy policies and behavioral changes at the macroeconomic level on socioeconomic systems, resource use, waste generation and CO₂ emissions.

CIRCEE consists of a dynamic general equilibrium model that incorporates industrial ecology concepts such as material stock and flows consistency (Corbier et al., 2024). The economy consists of virgin and secondary material producing firms, consumption and capital goods producing firms, circular services producing firms (repair and B2C sharing of energy-using products), heterogeneous households, and a government. On the production-side of the model, consumption and capital goods are produced from labor, capital, efficient energy and material inputs. Virgin materials are produced from labor, capital, efficient energy and raw material inputs. Secondary materials are produced from labor, capital, efficient energy and recyclable waste inputs. Repair services are provided from the use of labor and capital inputs. Sharing services are provided from the use of labor, efficient energy and energy-using goods (e.g. cars and electrical and electronic equipment).

Waste from production activities, government and households’ consumption activities is either landfilled/incinerated or recycled by the secondary material producing firm.

The model addresses behavioral heterogeneity by analyzing how different household lifestyles in repair, sufficiency and sharing respond to circular economy policies by soft-linking CIRCEE to the LIFE model of Pettifor et al. (2023). Lifestyles and material contexts differ among three defined households - ’Low-carbon’, ’Cautious’, and ’Constrained’. Consumers make intratemporal choices regarding the composition of their consumption basket and intertemporal choices between different types of assets - semi-durable, durable and capital goods - available to them to maximize their lifetime utility subject to a budget constraint. The consumption basket consists of energy services, semi-durable goods (e.g. furniture and clothing) and non- durable goods (e.g. food and packaging). Energy services are either provided by a sharing market or produced at home by households from owning an “energy-using” durable good and using efficient energy. Households also have the option to repair part of their existing “energy-using” durable goods stock instead of purchasing brand new goods to replace old ones.

The government collects taxes and other revenues, implements circular economy measures, and manages public spending. Taxes include the following : consumption tax, capital tax, labor tax, electricity tax, carbon tax, fuel tax, landfill tax, municipal waste tax and import duties. Additionally, the government, which is responsible for collecting and transporting waste to management facilities, charges a fee for handling both industrial and municipal waste.

The energy supply is exogenous to CIRCEE. The evolution of energy (electricity and fuels) prices, energy efficiency improvements, CO2 emission factors and investments in the energy supply sector are provided exogenously by the Integrated Assessment Model WITCH.

The current geographical scope of CIRCEE is EU27 as a single region and Japan, with 2018 as the base year and SSP2 the base Shared Socioeconomic Pathway.

Applications

In its current version, CIRCEE is designed to focus on consumer behaviors in response to specific circular economy policies aimed at fostering Repair, Reuse, Rethink and Refuse strategies. Future developments will focus on incorporating endogenous green product design for durability and repairability, providing a more detailed assessment of how policies drive innovation in sustainability.

One of CIRCEE’s applications assesses the effects of increasing Extended Producer Responsibility (EPR) fees for energy-using durable goods. These fees can incentivize households to shift from purchasing new products to engaging in circular activities like repairing and sharing. CIRCEE’s simulations reveal that higher EPR fees can reduce material use and waste generation while promoting resource-efficient behaviors. However, the model also highlights potential trade-offs. For example, greater reliance on shared services may increase energy consumption, partially offsetting the environmental benefits.

References

Corbier, D., Pettifor, H., Agnew, M., & Drouet, L. (2024) CIRCEE, the CIRCular Energy Economy model: Bridging the gap between economic and industrial ecology concepts. Journal of Industrial Ecology, 28, 6

Pettifor, H., Agnew, M., & Wilson, C. (2023). A framework for measuring and modelling low-carbon lifestyles. Global Environmental Change, 82, 102739.