Tools for a Circular Economy: Assessing Waste Taxation in a CGE Multi-Pollutant Framework

Economic theory states that incineration and landfill taxation can effectively diminish the environmental impacts of pollution and resource use by reducing their associated pollutants while stimulating the reuse and recycling of materials, and therefore, fostering a circular economy. The aim of this research is to assess the economic and environmental effects of these taxes in Spain under different scenarios with a detailed dynamic computable general equilibrium (CGE) model, as there are no studies analyzing this in detail. We focus on the economic impact on GDP and sectorial production and the environmental impact on different categories: global warming potential, marine eutrophication potential, photochemical ozone formation potential, particulate matter, human toxicity (cancer and noncancer), ecotoxicity, and depletion of fossil resources. We find in all scenarios that these taxes have a limited economic impact while reducing all of the environmental impact categories analyzed. The study reinforces the theory that policy makers need to impose taxes on landfill and incineration to reinforce the circularity of the economy and reduce environmental burdens, but also demonstrates that they can improve their design without additional costs.