Exploring the Economics of the Circular Bioeconomy

Abstract

The concept of circularity has become key for the bioeconomy. The objective of this chapter is to discuss the concept of the optimal level of circularity, how it can evolve over time and how it can be operationally used in decision-making about the bioeconomy. In the background of the current literature on circular bioeconomy, we first illustrate the concept of the optimal degree of circularity using a simple market equilibrium framework. Then we elaborate on how this can be connected to the reality of transition to a circular bioeconomy. From an economic point view, the identification of an optimal pathway towards a circular bioeconomy driven by cost of recycling and externalities is central to ensure economic efficiency. In practice, a series of information obstacles hinder the implementation (and even the quantification) of this pathway. Hence, articulated policy mixes are usually needed to promote transition towards a circular bioeconomy.