case study on economic environment

Circular economy introduction

Case studies and examples of circular economy in action

Our curated collections of case studies present circular economy success stories from around the world, showing how businesses, governments and cities are transforming our economy into one that works for people and the environment.

Get inspired by new circular economy business models, policies and strategies that demonstrate how we can fundamentally change the way we design, make and use the things we need.

Case studies by topic

Biodiversity case studies

Examples illustrating how the circular economy can benefit biodiversity.

Built environment case studies

Examples of circular economy in the built environment

Business case studies

Examples of circular economy in business practices.

Circular design case studies

Examples of the circular economy in design.

Cities case studies

Examples of circular economy in cities.

Climate case studies

Examples of how the circular economy can help the climate.

Fashion case studies

Examples of circular economy in the fashion industry.

Finance case studies

Examples of the circular economy in the financial sector.

Government and policy case studies

Examples of circular economy in policies.

Food case studies

Examples of circular economy in the food industry.

Plastics case studies

Examples of circular economy in the plastics industry.

Case study collections

Building Prosperity: Strategies in action

These case studies come from the Ellen MacArthur Foundation's report, Building Prosperity.

• Built environment

Multinational companies

Examples of some of the world’s largest companies that have started to embrace the circular economy.

Great ideas

Examples of products and services with the circular economy in their DNA.

Case studies in Africa

Examples of circular economy in Africa.

Case studies in Asia

Examples of circular economy in Asia.

Case studies in China

Examples of circular economy in China.

Case studies in Europe

Examples of circular economy in Europe.

Case studies in Latin America

Examples of circular economy in Latin America.

Case studies in North America

Examples of circular economy in North America.

Case studies in Oceania

Examples of circular economy in Oceania.

View all of our case studies

Explore our full library of case studies to discover more examples of the circular economy in action.

• Circular economy explained

News and updates from The Ellen MacArthur Foundation

The Ellen MacArthur Foundation works to accelerate the transition to a circular economy. We develop and promote the idea of a circular economy, and work with business, academia, policymakers, and institutions to mobilise systems solutions at scale, globally.

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• Understanding Poverty
• Environment

The Economic Case for Nature

• Economies rely on the flow of goods and services generated by nature (such as food, raw materials, pollination, water filtration and climate regulation), but nature is under unprecedented threat.
• A new World Bank report, The Economic Case for Nature, uses innovative economic modelling techniques to estimate how changes in select ecosystem services impact the economy, helping decision-makers understand the cost of inaction.
• The report also lays out options for nature-smart policies that reduce the risk of ecosystem collapse and are “win-win” in terms of biodiversity and economic outcomes.

The Economic Case for Nature  is part of a series of papers by the World Bank that lays out the economic rationale for investing in nature and recognizes how economies rely on nature for services that are largely underpriced. This report presents a first-of-its-kind integrated ecosystem-economy modelling exercise to assess economic policy responses to the global biodiversity crisis. Modeling the interaction between nature’s services and the global economy to 2030, the report points to a range and combination of policy scenarios available to reduce the impact of nature’s loss on economies. This modeling framework represents an important stepping-stone towards ‘nature-smart’ decision-making, as it seeks to support policymakers who face complex tradeoffs involving the management of natural capital, and hence achieving growth that is resilient and inclusive.

This report presents a novel modeling framework that integrates select ecosystem services into a computable general equilibrium (CGE) model. This allows the study of the impact of changes in select ecosystem services on the global economy and vice versa between 2021 and 2030. The report assesses the link between the decline of select ecosystem services—pollination of crops by wild pollinators, climate regulation from carbon storage and sequestration, provision of food from marine fisheries and provision of timber—and the performance of key sectors that rely on these services, such as agriculture, forestry, and fisheries sectors, and related industries.

METHODOLOGY

The integrated model is used to compare the baseline (economy-only) scenario with a set of scenarios that simulate the interactions between ecosystems and the global economy to   2030. First, the ‘business-as-usual’ scenario where economic growth leads to a decline in the ecosystem services analyzed, and two, a ‘partial ecosystem collapse’ scenario where pressure on select ecosystems pushes them to tipping points, with dire economic consequences. A third set of scenarios assesses the effects of introducing various nature-smart policy reforms on environmental and economic outcomes in 2030.

Finding Solutions to Development Challenges in Nature

• PRESS RELEASE: Protecting Nature Could Avert Global Economic Losses of $2.7 Trillion Per Year
• REPORT: The Economic Case for Nature
• INFOGRAPHIC: The Economic Case for Nature
• KEY FINDINGS: The Economic Case for Nature
• World Bank and Environment
• World Bank and Biodiversity
• Global Program on Sustainability

Global Climate Action Partnership

regional leadership, global change

KNOWLEDGE HUB

Green economy: success stories from developing countries.

This report, Green economy: success stories from developing countries , summarizes eight examples of successful green economy initiatives, highlighting their economic, social and environmental benefits.

The eight case studies are:

• Renewable energy in China
• Feed-in tariffs in Kenya
• Organic agriculture in Uganda
• Sustainable urban planning in Brazil
• Rural ecological infrastructure in India
• Forest management in Nepal
• Ecosystem services in Ecuador
• Solar energy in Tunisia

While some represent established broad-based policies and investment programs, others are newly initiated pilot projects or local ventures. In this sense the collection underlines that a green economy strategy is not limited to national or other government policy levels but can take root wherever there is the leadership and vision to make this transformation. Indeed, there is a growing body of evidence illustrating the growing interest among developing countries to seize opportunities to move to a green economy.

The economic analysis in the report builds in part on the encouraging signs and results of many initiatives around the world. A number of these come from developing countries, including emerging economies, and illustrate a positive benefit stream from specific green investments and policies, that if scaled up and integrated into a comprehensive strategy, could offer an alternative development pathway, one that is pro-growth, pro-jobs and pro-poor.

Read Green economy: success stories from developing countries .

Institutions Involved

• UN Environment Program (UNEP)

How Economics Informs Environmental Policy: A Case Study of Shale Gas and Oil

In December 2018, the United States became a net exporter of oil- and gas-based fuels for the first time in decades (Figure 1). 2 These fuels provide energy for transportation, home heating, manufacturing, and more. Much of the production boom can be attributed to "unconventional" drilling operations that increase the output of shale oil and gas wells. Such operations are called hydraulic fracturing.

Figure 1: Production Index: Crude Petroleum and Natural Gas

SOURCE: FRED ® , Federal Reserve Bank of St. Louis: https://fred.stlouisfed.org/series/IPG211111SQ .

Hydraulic fracturing is commonly referred to as "fracking." These drilling operations pump large amounts of water mixed with sand and chemicals into a well to break the oil and gas free from shale rock formations. 3 Hydraulic fracturing has been used for years in some "conventional" (traditional) drilling operations, but it has proven even more useful in shale wells. Figure 2, from the U.S. Energy Information Administration, shows the increased contribution of shale gas to overall natural gas production since the late 2000s. Although fracking has provided a new source of fuel, there is concern about the impact of certain pollutants from fracking on local water sources as well as global climate change. 4

Figure 2: Natural Gas Gross Withdrawals and Production

NOTE: MMcf, million cubic feet.

SOURCE: U.S. Energy Information Administration; https://www.eia.gov/dnav/ng/ng_prod_sum_dc_NUS_mmcf_a.htm .

Environmental Pollution

Pollution is defined by the Environmental Protection Agency (EPA) as "Any substances in water, soil, or air that degrade the natural quality of the environment; offend the senses of sight, taste, or smell; or cause a health hazard." 5 Environmental economists generally classify pollutants as follows:

• Banned pollutants are chemical compounds with high levels of toxicity. The government has banned their use—they cannot be used at all—due to their extremely adverse health effects. Anyone who has watched the movie "Erin Brockovich" has heard of one such substance, hexavalent chromium, which was banned by the EPA using its authority under the Toxic Substances Control Act. 6
• Regulated pollutants are chemicals that have some adverse health effects. These effects are not considered extreme when present at moderate levels in the environment. Government regulations determine when, where, and how much these pollutants may be used.
• Regulated natural elements occur naturally in the environment. They can have adverse health effects when present in abnormally high levels. In 2009 the EPA classified carbon dioxide (CO 2 ) as a pollutant because of concern about CO 2 's impact on climate change. 7,8 Humans produce CO 2 naturally when breathing, but it is also emitted by the processing and burning of fossil fuels such as shale oil and gas.

Economic Theory

To better understand the need for regulation, it is helpful to first understand the demand firms have to pollute. The law of demand states that as the price of a good or service increases, the quantity of that good or service demanded decreases—and vice versa. Think about this law in the context of the goods you purchase: When the price of a good goes up (down), you naturally want to buy less (more). But why would a firm have a demand for something seemingly harmful like the ability to pollute? The answer lies in the cost of reducing pollution. If there is no cost for reducing pollution, firms can produce their goods more inexpensively and earn greater profits. Economists call this derived demand because demand is derived from the desire to avoid the cost of reducing pollution.

Figure 3: The Demand Curve for Pollution

Consider the quantity and price of pollution as shown in Figure 3. If industries do not have to put any dollars into reducing pollution, they will likely produce the maximum quantity (Q-max) of pollution created by their manufacturing methods. Therefore, if there are no limits on pollution, they will not have to pay an extra price for this level beyond their production costs. Now assume firms are required to reduce their pollution level by a small amount to abide by a regulation, going from Q-max to Q 1 . This reduction can typically be accomplished with some inexpensive tweaks in the production process, costing no more than P 1 for each unit of reduction. However, if firms are required to achieve significant reductions (reducing pollution to Q 2 ), they typically would have to buy expensive equipment—which brings a higher price tag. Therefore, the price of lower levels of pollution is much higher, yielding a downward sloping demand curve.

Figure 4: Two Policy Options

Knowing the demand curve for any given pollutant allows policymakers to establish regulations limiting the amount of harm to the environment. One way to target a specific quantity (Q) is to sell and allow firms to trade pollution permits, where firms are required to own a permit for each unit of pollution emitted. This is called a cap and trade system , where a cap, or upper limit, is established on the quantity of permits at Q (Figure 4A). Once the quantity is fixed in the market , the price of permits will be determined by the demand curve. Alternatively, policymakers could fix the price (P) by charging a tax on each unit of pollution, allowing the demand curve to determine the resulting quantity (Q) (Figure 4B). Such a regulation is called a Pigovian tax and is used to make activities that harm the environment more costly.

Real World Markets

While a cap and trade system and a Pigovian tax appear to both yield the same quantity and price, this is only true if all other market conditions do not change and the demand curve does not move. But, of course, market conditions do change and the demand curve for pollution rights wil fluctuate (Figure 5). This fluctuation will have major implications depending on whether policymakers fix the quantity and allow the price to be determined by the markets (a cap and trade system) or fix the price and allow the quantity to be determined by the markets (a Pigovian tax). Under a cap and trade system, if demand increases, the price will increase from P to P', making reductions in pollution more costly but leaving the level of pollution constant (Figure 5A). Under a Pigovian tax, if demand increases (shifts to the right), the price will remain constant but the quantity of pollution will increase from Q to Q' (Figure 5B). In this case, pollution will increase above the desired level (quantity).

Figure 5: The Impact of a Shifting Demand Curve on Prices and Quantities

Applying Permits and Pigovian Taxes to the Real World

When designing regulations, policymakers are faced with a tradeoff : Do they strictly control pollution levels at the risk of elevated prices (undesirable to firm profits), or do they strictly control pricing at the risk of elevated pollution (undesirable to health and the environment)? The choice largely depends on the type of pollution. For example, regarding the shale oil and gas industry, environmental scientists are concerned about drinking water near drilling wells because many of the chemicals used in the drilling process are believed to be highly toxic. 9 If emitted into local water sources, the impact on human health could be devastating. When the cost of environmental damage is high, regulators lean toward fixed quantity controls at the risk of elevated prices. Such quantity controls may take the form of a cap and trade system, firm-level restrictions on emissions, or even an outright ban.

With CO 2 , a naturally occurring chemical, regulators are more concerned about atmospheric levels of CO 2 in the long run and not necessarily in any given year. As a result, regulators could fix the price in the form of a Pigovian tax and allow the amount of CO 2 generated to vary year to year. This would allow firms to avoid the uncertainty of suddenly elevated prices in the market for CO 2 pollution permits. Thus, it is clear that the optimal environmental policy for any pollutant depends on its chemical formulation, its toxicity, and the resulting costs of its environmental impact.

Economists often make the assumption of a "representative agent"—a single agent whose actions are representative of all persons in the economy. Unfortunately, there is no such thing as a representative pollutant, as each one has unique chemical and physical properties that must be considered when designing environmental policy. For example, the shale oil and gas industry uses and emits pollutants ranging from natural elements such as CO 2 to toxic chemicals such as those used in the drilling process. Sound environmental policy needs to take into account the dangers of the pollutant, the needs of the industry, and the real-world behavior of the market: If a pollutant is not highly toxic, then a Pigovian tax can successfully reduce the long-term emission levels while creating price stability for firms. For a more toxic element that produces greater health concerns, a cap and trade system or other quantity control may be more appropriate, even if it creates price uncertainty for firms.

Market: Buyers and sellers coming together to exchange goods, services, and/or resources.

Environmental policy: Laws, rules, and regulations that are proposed or adopted by a government, businesses, or individuals to protect the natural world.

Regulations: Rules that seek to produce positive impacts or avoid negative impacts by setting standards or controlling the use of a product or process.

Demand: The quantity of a good or service that buyers are willing and able to buy at all possible prices during a certain time period.

Derived demand: The demand for a good or service that helps to acquire or produce another good or service.

Tax: A fee charged on business and individual income, activities, property, or products by government.

Pigovian tax: A tax used to correct for a negative side effect (such as pollution) that results when the production or consumption of a good or service affects the welfare of people who are not the parties directly involved in a market exchange.

Cap and trade system: A regulatory program in which governments or organizations cap the total amount of pollution and allow the trading of rights that are given or sold for each unit of pollution.

Tradeoff: Giving up some of one thing in order to gain some of something else.

• White House Press Briefings. "Remarks by President Trump in Press Conference." February 16, 2017.
• Olson, Bradley.  "U.S. Becomes Net Exporter of Oil, Fuels for First Time in Decades." Wall Street Journal , December 6, 2018; https://www.wsj.com/articles/u-s-becomes-net-exporter-of-oil-fuels-for-first-time-in-decades-1544128404 .
• EPA. "The Process of Unconventional Natural Gas Production." https://www.epa.gov/uog/process-unconventional-natural-gas-production , accessed January 2019.
• Union of Concerned Scientists. "Environmental Impacts of Natural Gas." https://www.ucsusa.org/clean-energy/coal-and-other-fossil-fuels/environmental-impacts-of-natural-gas#.XEaB0M17lhF , accessed December 2018.
• EPA. "Terms & Acronyms." https://ofmpub.epa.gov/sor_internet/registry/termreg/searchandretrieve/glossariesandkeywordlists/search.do?details=&vocabName=Environmental%20Issues%20Glossary#formTop , accessed January 2019.
• Harrington, Rebecca. "The EPA Has Only Banned These 9 Chemicals—Out of Thousands." Business Insider , February 10, 2016; https://www.businessinsider.com/epa-only-restricts-9-chemicals-2016-2 .
• McMahon, Jeff. "EPA Chief Resigns: Declared Carbon Dioxide a Pollutant." Forbes , December 27, 2012; https://www.forbes.com/sites/jeffmcmahon/2012/12/27/epa-administrator-resigns-declared-carbon-dioxide-a-pollutant/#2f159d9c3a7a .
• Lindsey, Rebecca. "Climate Change: Atmospheric Carbon Dioxide." Climate.gov, National Oceanic and Atmospheric Administration, August 1, 2018; https://www.climate.gov/news-features/understanding-climate/climate-change-atmospheric-carbon-dioxide .
• Greenwood, Michael. "Chemicals in Fracking Fluid and Wastewater Are Toxic, Study Shows." YaleNews, January 6, 2016; https://news.yale.edu/2016/01/06/toxins-found-fracking-fluids-and-wastewater-study-shows .

For Teachers

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David F. Perkis was a senior economic education specialist at the St. Louis Fed.

Related Topics

David F. Perkis, " How Economics Informs Environmental Policy: A Case Study of Shale Gas and Oil ," Federal Reserve Bank of St. Louis Page One Economics , March 1, 2019.

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