A systematic review of agent-based modelling in the circular economy: Insights towards a general model

Circular Economy (CE) is a popular topic for governments and businesses around the world; yet, only a few comprehensive and economy-wide frameworks exist, and the consequences of the CE on economic systems stay unclear. With this systematic review, we put under scrutiny the existing contributions to Circular Economy (CE) that apply the Agent-based modelling methodology. There is an open gap in the CE literature regarding the use of ABM. The research question that guides this systematic review concerns the potential benefit of ABM for CE and how to use this methodology in the context of CE. We put in evidence three thematic areas, two agents and one process, namely producers, i.e. firms and industrial systems, consumers, i.e. households and waste disposal, and the diffusion of innovation. We infer that the former three thematic strands of literature can be further synthetized together to form a general model of the Circular Economy. This development is crucial to properly evaluate how the agent's heterogeneity affects the diffusion and the consequences of the adoption of CE practices on the economy. Research has widely applied ABM simulations to consider the impact of heterogeneity amongst individuals and their behavioural interactions on the evolution of complex systems, yet very little did it systematically about CE. Our results complement those of Computable General Equilibrium models. The review provides an interpretative framework, suggests valuable future research directions within the new comprehensive thematic area, and contributes to the theoretical and managerial discussion on agent-based modelling in the circular economy

Foreign exchange rates with the Taylor rule and VECMs

In this project, we challenge the conventional wisdom on exchange rate predictability with the Taylor rule (Molodtsova & Papell, 2009; Rossi, 2013) by employing the vector error correction model (VECM) when the cointegration (CI) rank of our multivariate model is greater than one and less than full. Even though our approach is quite bounded to the finding of a suitable CI rank, our predictions are quite good when compared to a driftless random walk as a benchmark in the long run, whilst the performance in the short run is not. Notwithstanding we claim that we could also obtain better results had we been able to perform a static forecast for three months ahead rather than one (the latter is the only case admitted by the gretl software)

Energy price shocks and stabilization policies in the MATRIX model

The recent surge in energy prices in Europe has prompted governments to introduce policy measures to support households and businesses. This paper uses the MATRIX model, a multi-sector and multi-agent macroeconomic model calibrated on the Euro Area, to analyse the economic and distributional effects of different macro-stabilization policies in response to energy price shocks. We find that, without policies, a surge in fossil fuel prices leads to higher inflation, lower GDP, and slow recovery. Generalized tax cuts and household subsidies have no significant effects, while firm subsidies promote a faster recovery at the expense of financial instability in the medium term, leading to a second slump. However, this second-round effect can be mitigated with proper fiscal-monetary policy coordination. If timely adopted, a government-funded energy tariff reduction is the most effective policy in mitigating GDP losses at relatively low public costs, particularly when coupled with an extra-profit tax on energy firms. Energy entrepreneurs benefit from rising fuel prices in all scenarios, but workers and downstream firms’ owners benefit more from energy tariff cuts and windfall profits tax

Beyond green preferences: Alternative pathways to net-zero emissions in the MATRIX model

Green preferences are often regarded as crucial factors in facilitating the energy transition. However, it is unclear if they can alone propel an economy towards achieving a net-zero emissions outcome. In this study, we expand the multi-agent integrated assessment model MATRIX by incorporating considerations on implicit emissions in the decision-making process of consumers and firms. To evaluate the efficacy of those green preferences, we construct a range of experiments encompassing varying degrees of pro-environmental attitudes. Those scenarios are then compared to more conventional incentive-based climate policies, such as a carbon tax and a Cap-and-Trade mechanism, with and without a subsidy for abatement technology, each implemented at different stringency. Our findings indicate that only exceptionally high and unrealistic values of green preferences for both firms and consumers can achieve a net-zero outcome in the absence of an active policy. Moreover, the most favorable scenario in terms of environmental, economic and distributional outcomes emerges from a carbon tax accompanied by a moderate subsidy. Without subsidy, policies entail mainly negative economic and distributional consequences as firms transfer the increased costs to consumers

Beyond Green Preferences: Alternative Pathways to Net-Zero Emissions in the MATRIX model

Green preferences are often regarded as crucial factors in facilitating the energy transition. However, it is unclear if they can alone propel an economy towards achieving a net-zero emissions outcome. In this study, we expand the multi-agent integrated assessment model MATRIX by incorporating considerations on implicit emissions in the decision-making process of consumers and firms. To evaluate the efficacy of those green preferences, we construct a range of experiments encompassing varying degrees of pro-environmental attitudes. Those scenarios are then compared to more conventional incentive-based climate policies, such as a carbon tax and a Cap-and-Trade mechanism, with and without a subsidy for abatement technology, each implemented at different stringency. Our findings indicate that only exceptionally high and unrealistic values of green preferences for both firms and consumers can achieve a net-zero outcome in the absence of an active policy. Moreover, the most favorable scenario in terms of environmental, economic and distributional outcomes emerges from a carbon tax accompanied by a moderate subsidy. Without subsidy, policies entail mainly negative economic and distributional consequences as firms transfer the increased costs to consumers

Warming the MATRIX: a Climate Assessment under Uncertainty and Heterogeneity

This paper explores the potential impacts of climate change and mitigation policies on the Euro Area, considering the uncertainty and heterogeneity in both climate and economic systems. Using the MATRIX model, a multi-sector and multi-agent macroeconomic model, we simulate various climate scenarios by employing different carbon cycle models, damage functions, and marginal abatement curves found in the literature. We find that heterogeneous climate damages amplify both the magnitude and the volatility of GDP losses associated with global warming. By the end of the century, we estimate that assuming homogeneous shocks may underestimate the effects of climate change on aggregate output by up to one-third. Moreover, we find that the speed and feasibility of a low-carbon transition crucially depend on (i) the stringency of emission reduction targets, which determine the level of a carbon tax, and (ii) the rate of technological progress, which influences the shape of the abatement cost curve

Beyond Green Preferences: Alternative Pathways to Net-Zero Emissions in the MATRIX model

Green preferences are often regarded as crucial factors in facilitating the energy transition. However, it is unclear if they can alone propel an economy towards achieving a net-zero emissions outcome. In this study, we expand the multi-agent integrated assessment model MATRIX by incorporating considerations on implicit emissions in the decision-making process of consumers and firms. To evaluate the efficacy of those green preferences, we construct a range of experiments encompassing varying degrees of pro-environmental attitudes. Those scenarios are then compared to more conventional incentive-based climate policies, such as a carbon tax and a Cap-and-Trade mechanism, with and without a subsidy for abatement technology, each implemented at different stringency. Our findings indicate that only exceptionally high and unrealistic values of green preferences for both firms and consumers can achieve a net-zero outcome in the absence of an active policy. Moreover, the most favorable scenario in terms of environmental, economic and distributional outcomes emerges from a carbon tax accompanied by a moderate subsidy. Without subsidy, policies entail mainly negative economic and distributional consequences as firms transfer the increased costs to consumers

Kuznets and the cities: Urban level EKC evidence from Europe

This paper empirically explores the extent to which European cities are on track to sustainable development by examining the environmental performance of a large sample of cities observed during the last two decades. The paper builds on the Environmental Kuznets Curve framework and leverages satellite data to build a set of environmental indicators as varied and as granular as possible. Evidence suggests that European cities are, on average, on track to sustainable development, meaning that the contribution of their economic growth to environmental degradation is already negative or close to becoming so. The paper also examines Transnational City Networks as accelerators of environmental transition. The results suggest that cities participating in such networks anticipate the transition with respect to their peers

Warming the MATRIX: a Climate Assessment under Uncertainty and Heterogeneity

This paper explores the potential impacts of climate change and mitigation policies on the Euro Area, considering the uncertainty and heterogeneity in both climate and economic systems. Using the MATRIX model, a multi-sector and multi-agent macroeconomic model, we simulate various climate scenarios by employing different carbon cycle models, damage functions, and marginal abatement curves found in the literature. We find that heterogeneous climate damages amplify both the magnitude and the volatility of GDP losses associated with global warming. By the end of the century, we estimate that assuming homogeneous shocks may underestimate the effects of climate change on aggregate output by up to one-third. Moreover, we find that the speed and feasibility of a low-carbon transition crucially depend on (i) the stringency of emission reduction targets, which determine the level of a carbon tax, and (ii) the rate of technological progress, which influences the shape of the abatement cost curve