Methodologies for Measuring the Macroeconomic and Societal Impacts of the Circular Economy

Workpackage: 

WP2 Theoretical framework

This report assesses methodologies that are used to measure the macro-economic and societal impacts of the circular economy. It provides insights relevant for relating circular opportunities as analysed in case studies to GDP growth, employment, competitiveness and welfare. Macroeconomic effects of circular-economy changes may differ in the short- versus long-term perspectives. Case studies can be viewed as elements in a list of circular business opportunities that are not realised in a baseline scenario due to barriers. A circular economy scenario consists of a number of policies to reduce these barriers. In the literature, a large number of studies suggests that GDP and employment will rise as a consequence of circular opportunities being realised or circular policies being implemented. The methodologies used in these studies are critically evaluated, and it is concluded that several assumptions are necessary in order to reach such results. Especially, it is important to consider to what extent the relevant comparison between the baseline and circular scenarios is being made. Is the point of reference that no measures are taken that reduce barriers to profitable business opportunities, or that instead of reducing barriers for only circular opportunities policy is focused on reducing barriers for all business opportunities? In the latter case, it is much more difficult to prove that circular opportunities generate an increase in GDP or employment. Therefore, a thorough investigation of the methodology behind macro-impact evaluations of the circular economy, though difficult, is important to undertake. Based on the analysis, possible indicators are suggested, both at the level of circular business opportunities and at the macro level.