Resource-use intensity and the labour market: More for less?

Although the circular economy primarily focuses on closing supply chains, residual waste management, and product lifetime extensions, reducing resource use remains critical. This paper examines the system-wide impacts of reducing resource use using a multisectoral computable general equilibrium model. Although not strictly circular, the focus is on a costless 'technology shock' that reduces the consumption of intermediate goods in the construction sector and its system-wide effects. The results suggest that there is potential for reductions in CO2 emissions, but this is accompanied with a fall in GDP and employment, with unskilled workers experiencing larger negative employment effects. However, the scale of these GDP and employment effects is small, despite relatively large reductions in resource use. This indicates that technology-induced reductions in resource use have the potential to support the transition towards an economy that uses fewer resources without causing significant disruptions at the macroeconomic level.

Automated summary

Although reducing resource use can lead to lower CO2 emissions, it also results in a decrease in GDP and employment, particularly impacting unskilled workers. However, despite significant reductions in resource use, the scale of these effects is small, indicating that technology-induced reductions in resource use have the potential to support economic transition.