Unlocking circular economy policies in integrated assessment models

Abstract

The circular economy (CE) has emerged as a promising strategy to simultaneously address climate change and the over-exploitation of Earth's resources. Yet, most Integrated Assessment Models (IAMs) lack the capacity to fully assess the potential benefits and drawbacks of CE policies in the context of climate change. This paper provides a structured approach to improve the representation of CE in IAMs and guides their application in climate policy assessments. To this end, we first propose a framework to organize the multiple layers and policy dimensions involved in CE. We then review the current state of CE modeling in IAMs and identify critical gaps, including limited attention to policy mechanisms, lack of material-level granularity, and insufficient coverage of downstream and upstream supply chain sectors. Lastly, we identify priority areas for improvement, such as coupling IAMs with material flow and sectoral models, refining data and structural assumptions, and developing more coherent CE policy narratives. Together, these steps establish pathways for the scientific community to better integrate CE into IAMs and strengthen understanding of its role in global climate mitigation strategies.