The causal impact of material productivity on macroeconomic competitiveness in the European Union

Interdisciplinary scholars and policy makers have claimed that increasing material productivity not only reduces environmental pressures but also improves the competitiveness of economies. This is particularly relevant in the context of the European Union (EU) since it motivates its resource efficiency and circular economy agenda by referring to this assertion. However, two limitations in the literature cast doubt on the validity of the claim. First, the literature fails to clarify the concept and measurement of macroeconomic competitiveness. Second, it lacks to take the endogeneity of material productivity into account. Addressing both shortcomings, this paper reviews the concept of macroeconomic competitiveness and identifies six conventional macroeconomic indicators to approximate it. Moreover, using panel data of the 28 member states of the EU between 2000 and 2014, the causal impact of material productivity on the six indicators is estimated, instrumenting material productivity with the number of deaths from natural hazards. The results provide evidence for a positive and causal impact of the material productivity rate on the wage rate and, with lower confidence, on the current account rate, while the remaining macroeconomic indicators are not significantly affected. Overall, these results suggest to be cautious with the claim that increasing material productivity improves macroeconomic competitiveness in the EU. Particularly the positive effect on the wage rate calls for considering possibilities to channel gains from increasing material productivity into eco-innovations to reduce the magnitude of potential rebound effects and thus environmental pressures

Investments in material efficiency: the introduction and application of a comprehensive cost–benefit framework

Increasing material efficiency is considered to yield multiple economic and environmental benefits. This paper firstly introduces a comprehensive cost–benefit framework to systematically assess the viability of investments in material efficiency. The framework comprises several components by (1) comparing a business-as-usual scenario with a scenario of scaling up investments in material efficiency, (2) covering economic and environmental dimensions, and (3) considering direct and indirect effects. In a second step, we match the framework to existing evidence from the literature, followed by an application of the framework to a microeconomic investment project financed by a multilateral development bank. Our results suggest that material efficiency investments can yield positive net benefits, which typically increase when non-monetary dimensions are additionally taken into account. Overall, our analysis calls for a more comprehensive approach towards material efficiency investment appraisals, the internalisation of externalities, and further empirical research to better understand the implications of moving towards material efficient economies

On imperfect competition and market distortions: the causes of corporate under-investment in energy and material efficiency

In practice firms are faced by a range of market frictions and barriers, which can prevent them from undertaking investments in efficiency and low-carbon technologies. Thus, even when environmental taxes are imposed, firms may be unable (or unwilling) to adjust their behaviour and technology in response to price signals. With a focus on energy and material efficiency investments, this paper systematically investigates how the theoretical assumptions of perfectly competitive and efficient markets are violated in practice, and how this results in complex and interlinked investment barriers. It classifies five categories of investment barriers: information, capacity, and financial constraints, as well as uncompetitive market structures and fiscal mismanagement; and presents evidence on each of these. It concludes by proposing a range of measures for mitigating investment barriers, and addressing their structural causes. Overall, the evidence presented in this paper aims to help increase the effectiveness of environmental taxes and regulation, by identifying market imperfections that environmental taxes alone cannot address

The causal impact of economic growth on material use in Europe

Several scholars and policy-makers have claimed that Europe, and Western Europe in particular, has managed to ‘decouple’ economic growth from material use. We identify and address one major limitation in the existing literature – failure to take the endogeneity of economic growth into account. Based on a panel data-set of 32 European countries from 2000 to 2014, we estimate the causal impact of gross domestic product (GDP) on domestic material consumption (DMC) applying an instrumental variable approach. We use the number of storm occurrences as an instrument for GDP, which we show is both relevant and valid. Our results provide new evidence that increasing the GDP growth rate causes the DMC growth rate to increase for Western Europe, whereas the effect is insignificant for the Eastern European economies and Europe as a whole. As our results partly question current wisdom on the achievements of ‘decoupling’, especially among European policy-makers, we offer two explanations that are consistent with these results

The causal impact of material productivity on microeconomic competitiveness and environmental performance in the European Union

Interdisciplinary scholars and policymakers in the European Union (EU) claim that increasing material productivity improves the competitiveness of firms. However, the current evidence base has two main shortcomings. First, most studies fail to provide evidence beyond case studies, thus not considering dynamic effects and heterogeneity across firms, sectors, and countries. Second, they do not adequately take the endogeneity of changes in material productivity into account. In this paper, we investigate data from the Community Innovation Survey comprising over 52,000 firms across 23 sectors and 12 EU member states. Moreover, we take an instrumental variable approach to account for endogeneity. Our findings provide evidence for a positive and causal effect of material productivity improvements on microeconomic competitiveness for those firms that received targeted public financial support to realise eco-innovations. The effect tends to be limited to firms in certain material-intensive sectors and countries. We further show that such increases in material productivity reduce the firms’ carbon dioxide footprint, thus achieving both economic and environmental objectives. Therefore, our findings provide the important policy insight that tailoring the availability of public financial supports to sector and country specific circumstances and those eco-innovations that increase material productivity is most promising in reconciling competitiveness and climate change mitigation objectives

Sustainable resources – Managing markets, increasing efficiency and establishing partnerships

The contemporary debate offers two perspectives on natural resources, especially regarding minerals and metals: One perspective looks at environmental pressures and scarcities; it often contrasts environmental constraints with extraction figures that have been on the rise since decades. The other perspective looks at development opportunities for resource-rich countries and analyses the governance conditions that may help to turn natural endowments into prosperity for the people. Indeed, both perspectives are justified and resemble the broader debate on the environmental and socio-economic dimensions of sustainable development. Not surprisingly, there are a number of trade-offs and synergies between both angles that need to be considered. The aim of our contribution is to analyse key trends of international resource consumption and evaluate sustainability perspectives for resources focusing on material resources. We seek to demonstrate that the broader picture is neither gloomy (limits to growth or resource curse) nor should one become overly optimistic about transitions to market-based and equitable democracies based on commodities. Underlining the importance of natural resources, we argue that the notions of a green economy and green growth require incorporating the topic of sustainable resource management. A particular objective of our paper is to highlight resource efficiency as an opportunity, which is in line with both perspectives. Evidence, however, shows that resource efficiency occurs insufficiently and under what we call a web of constraints, i.e. interconnected barriers to resource efficiency improvements. Such barriers obstruct efficiency gains at different levels and should be removed by more ambitious, better coordinated and more internationally oriented strategies by multiple actors, including policy makers. Finally, we will draw several conclusions about the future role of resources in development cooperation

Assessing carbon emission savings from corporate resource efficiency investments: an estimation indicator in theory and practice

The Nationally Determined Contributions pledged by numerous countries under the Paris Climate Agreement refer to efficiency gains as a key instrument for achieving carbon emission reductions. Indicators for estimating emission savings from resource efficiency projects can play a key role in identifying and prioritising projects. Building on existing emission factor-based approaches, this paper introduces a methodology which allows consistent ex-ante estimation of lifetime carbon savings from corporate resource efficiency investments. This methodology accounts for the intertemporal dimension of resource savings and project lifetimes and allows consistent aggregation across resource and project types. Moreover, it shows how social benefit (or cost) can be monetised. The methodology is tested using a resource efficiency investment project under the UN Clean Development Mechanism. We demonstrate that this indicator can be a robust, coherent and practical tool for firms, governments and investors to estimate carbon emission reductions from resource efficiency investments

Environmental and socio-economic effects of construction and demolition waste recycling in the European Union

The recovery rate of construction and demolition waste (CDW) in the European Union (EU) is at 89 % and thus high relative to other waste streams. However, the relatively high figure can be misleading because it typically does not correspond to high-value material recovery but rather "poor" levels of circularity. From a life-cycle perspective, we assess the environmental impacts and costs of 12 CDW material fractions relying on alterna-tive pathways and treatment technologies. The results indicate important trade-offs in the transition towards the circular economy. Indeed, recycling of concrete, bricks, gypsum, and ceramics and tiles represent the best environmental performance but also the most expensive pathway. However, when shifting from landfill to recycling the total societal costs in the EU are reduced mainly due to the lower external costs. Overall, recycling CDW in the EU with advanced technologies would save about 264 kg CO2-eq t(-1) with a cost of 25 EUR t(-1). The maximum potential for recycling under current technology in the EU would lead to an annual total reduction of about 33 Mt. of CO2-eq using 2020 as reference year. The fractions with the highest potential for improving current waste management practices in terms of environmental improvements are concrete and bricks. The economic and non-economic barriers for realising this potential at EU level are discussed in relation to the European Green Deal and the EU's circular economy objectives

Is benign MS really benign? What a meaningful classification beyond the EDSS must take into consideration

BACKGROUND: Multiple sclerosis (MS) is a neuroinflammatory and neurodegenerative disease with an unpredictable course that has a broad clinical spectrum and progresses over time. If a person with MS (PwMS) shows overall mild to moderate disability even after a long duration of disease, the term benign MS (BMS) is used. However, there is currently no generally accepted definition of BMS. Most definitions are based on EDSS in connection with disease duration, i.e. EDSS ≤3.0 after 15 years' disease duration. The question arises whether focusing on EDSS alone is adequate for classifying the disease course taking into account that 'hidden' or 'soft' symptoms are not sufficiently covered by this instrument. The aims of the study are to assess the prevalence of BMS in one of the largest patient cohorts, to describe the prevalence of patients without disabilities and to assess the further disability progression of these patients over another 15 years. METHODS: Based on data exported from the German MS Registry, PwMS with a disease duration of 15 years or more were included in the analyses. PwMS were divided into BMS (EDSS ≤3.0) or non-benign (NBMS, EDSS >3.0). RESULTS: Out of 31,824 PwMS included in the German MS Register, we identified 10,874 patients with a disease duration ≥15 years of whom 4,511 (42%) showed an EDSS ≤3.0 fulfilling the criterion of benign MS. In the subgroup with EDSS measured exactly at 15 years' disease duration, the proportion was 54%. This proportion decreased continuously with increasing disease duration and fell to 30% after 30 years. Female sex (hazard ratio [HR]: 0.84) was associated with BMS, while a progressive (HR: 2.09) and late disease onset (HR: 1.29) were associated with NBMS (p<0.001). With a more rigorous definition of BMS (EDSS ≤1.0, absence of disability, and active employment), only 580 (13%) of the initial BMS remained 'benign'. CONCLUSION: Our data propose an alternative definition (EDSS ≤1.0, absence from any disability, and the ability to work after 15 years of disease duration) which might truly reflect BMS