The Waste Sector in the Green Reform Model: A Tentative Static Partial Equilibrium Model

29-10-2020
GrønREFORM Dokumentation Peter Kruse-Andersen Peter Birch Sørensen

This paper describes a tentative static version of the waste sector module to the GreenREFORM model. We expect the main structure described below to carry through to the final version of the module, while the level of detail increases.

Abstract

The economy generates waste from production and consumption.The waste is sorted by households and firms before collection and treatment. The present model takes waste generation as given, while waste collection and treatment are explicitly modelled.These activities require labor, capital, and energy input. Waste can be burned, transformed into new raw materials, or end up as landfill. The first activity is not explicitly modelled. Instead, firms handling waste treatment sell waste as a fuel input to the electricity and heating sector. The chosen waste treatment for each waste fraction depends on economic trade-offsand regulation. Regulation requires that hazardous waste is deposited as landfill or undergoes special treatment. The waste hierarchy dictates that recycling is preferable to energy utilization, thereby placing a constraint on firms in the treatment sector. Finally, the government impose a non-profit constraint on firms within the waste sector. This constraint implies that firms in the sector obtain zero profits after paying the factors of production (including capital).