Recycling under environmental, climate and resource constraints

This paper investigates the recycling opportunities of an industrial sector constrained by resource, climate, and waste capacities. To do this, we model the full lifecycle of a good to consider the waste and greenhouse gas (GHG) emissions coming from both its production — from virgin or recycled materials — and consumption. We identify the optimal trajectories of resources use, mainly depending on the relative scarcity of the resources and on their emissions. Although recycling is usually, and correctly, noted as an opportunity to reduce the impact of consumption on primary resources and waste, we also consider the possible negative environmental consequences of recycling and we discuss the resulting arbitrations. We characterize the optimal recycling strategy and we show that, in some cases, the recycling rate through time is an inverted U-shape, and there can be a catch-up phase of consumption at the end of the social planner program. Finally, we discuss the policy implications of our model by identifying and analyzing the set of optimal tax-subsidy schemes, and we highlight the existence of standard environmental externalities as well as a positive externality linked to the absence of a market for waste.