Economic Instruments for the Circular Economy in Italy

2. Business-as-usual projections

Abstract

This chapter provides insights into current trends in key indicators related to the circular economy in Italy, including resource use, waste generation and treatment, sustainable production and consumption, and circular innovation. The chapter also presents projections for materials use to 2050 under business-as-usual, including for primary and secondary materials.

The chapter concludes by providing the rationale for transitioning to a circular economy in Italy. Italy is one of the European Union countries leading the circular transition. The Italian industrial sector has historically developed high efficiency in the use of resources and methods for material recovery. However, Italy could progress even further to decouple economic growth from material consumption.

2.1. Introduction and current trends

2.1.1. Materials life cycle and the value chain

Italy performs considerably better than the European average in the area of resource productivity and the circularity of material flows. Domestic material consumption (DMC)1, at 8.6 tonnes per capita in 2021, is one of the lowest in Europe and far below the OECD (17.5 tonnes per capita) and OECD Europe average (13.2 tonnes per capita). Non-metallic minerals account for almost half of domestic material consumption (48%), followed by biomass (25%), fossil materials (24%) and metal ores (3%) (Figure ‎2.1).

Figure ‎2.1. Domestic Material Consumption mix in selected OECD countries

Shares per material category (percentages of total), 2022

Source: OECD, "Material resources: Material resources", OECD Environment Statistics (database), https://doi.org/10.1787/data-00695-en.

Italy’s material productivity, expressed in gross domestic product (GDP) in purchasing power standards (PPS) over DMC, was at 4.53 USD/kg in 2021 (OECD, 2017[1]). This is well above the OECD average (2.45 USD/kg) and the EU27 average (2.9 USD/kg) (Figure ‎2.2). The country’s circular material use rate is now the fourth-highest in Europe: in 2022, 19% of overall materials used were recycled and fed back into the economy, compared to the EU27 average of 12% (Eurostat, 2024[2]).

Figure ‎2.2. Material productivity in selected OECD countries

Gross domestic product per domestic material consumption (2015 PPP), USD per kilogram, 2021 data

* Data for EU27 is for 2020.

** Data for the OECD average is for 2019.

Source: OECD, "Material resources: Material resources", OECD Environment Statistics (database), https://doi.org/10.1787/data-00695-en.

Recent trends show a decline and stabilisation in the generation of municipal solid waste (i.e. “rifiuti urbani”), with signs of some decoupling from economic activity. Municipal waste generation amounted to 29 million tonnes (Mt) in 2020, 3% below 2019 levels, mainly as a consequence of the COVID-19 pandemic and the related restriction measures (ISPRA, 2023[3]). This compares to about 32 Mt of municipal solid waste generated in 2010. While municipal waste generation was expected to bounce back to pre-COVID levels, in fact, it increased slightly in 2021 to 30 Mt but then decreased again in 2022 to 29 Mt, despite a concurrent increase in GDP and household expenditure (ISPRA, 2023[3]).

As illustrated in Figure ‎2.3, annual per capita municipal waste generation (487 kg) was below both the averages for OECD Europe (501 kg per capita) and for OECD member countries (534 kg per capita) in 2020. Recent trends show stable amounts of per capita municipal waste generation, with values below 500 kg only in 2020 (due to the COVID-19 pandemic) and 2022 (494 kg per capita) (ISPRA, 2023[3]).

Non-municipal waste generation has seen an upward trend, reaching 165 Mt in 2021 (ISPRA, 2023[4]). Although non-municipal waste generation declined to 147 Mt in 2020 (by 5% compared to 2019) as a consequence of COVID-19 related restriction measures (ISPRA, 2023[5]), it bounced back in the following years. This was particularly the case for non-hazardous construction and demolition waste (CDW) generation, which declined by 6% (from 70 Mt in 2019 to 66 Mt in 2020), but then increased by 18% in 2021 (to 78 Mt). This was also a consequence of interventions foreseen by Italy’s National Recovery and Resilience Plan (NRRP) and the “Ecobonus” and “Superbonus” tax deductions that apply to costs of home renovations to improve energy efficiency and reduce seismic risks (ISPRA, 2023[4]).

As shown in Figure ‎2.4, Italy recycled 30% and composted 26% of municipal waste in 2021, well above the OECD average (24% and 11%, respectively) and also above the EU27 average (30% and 19%, respectively). Although the share of municipal waste sent to landfills has seen a downward trend in recent years, it remains an important disposal option in selected regions, and further efforts are required to reach the EU target of a maximum of 10% of municipal waste landfilled by 2035. Figures for 2022 show that 18% (5.2 Mt) of municipal waste generated was landfilled, i.e. 8% less than 2021 and 20% less than 2018 (ISPRA, 2023[3]). Although this was below the European average (Eurostat, 2024[6]), other countries like Belgium, Denmark, Finland, Germany and the Netherlands already landfilled 7% or less of their municipal waste in 2020 (Figure ‎2.4). Almost one-fifth (18%) of municipal waste generated in 2022 was incinerated for energy recovery, showing a slight decline over the previous 5 years (ISPRA, 2023[3]). For non-municipal waste, more than two-thirds (72%, 128 Mt) of the generated waste was disposed through material recovery options in 2021, while 6% (10 Mt) was landfilled and less than 1% was incinerated (ISPRA, 2023[7]).

Figure ‎2.3. Municipal waste generation in selected OECD countries

Kilograms per capita, 2005-2020

Source: OECD, "Municipal waste: generation and treatment", OECD Environment Statistics (database), https://doi.org/10.1787/data-00674-en.

Figure ‎2.4. Municipal waste by treatment operation

Percentage of total treatment, 2021

Source: OECD, "Municipal waste: generation and treatment", OECD Environment Statistics (database), https://doi.org/10.1787/data-00674-en.

Notes: Recovery includes recycling, composting (biological recovery), incineration with energy recovery and other types of recovery (e.g. reuse). Disposal operations include landfill, incineration without energy recovery, and other types of disposal. The categorisation of waste disposal varies by country, as explained in the country notes present in the database documentation.

In 2022, almost two-thirds of municipal waste generated (65%) in Italy was separately collected. However, substantial disparities persist across regions, especially in areas of separate municipal waste collection and waste disposal. While regions in the North separately collect 72% of their municipal waste, this value falls to 62% in the Centre and 58% in the South (ISPRA, 2023[3]). The best performers are Veneto and Sardegna (76%), Trentino-Alto Adige/Südtirol (75%), Emilia-Romagna (74%), Lombardia (73%) and Marche (72%). Among the worst performers are Sicilia (52%, up from 48% in 2021 and 30% in 2018), Lazio and Calabria (55%), Campania (56%), Liguria (58%), Molise (58%) and Puglia (59%). It should be noted that regions with high rates of separate municipal waste collection usually landfill a small percentage of their municipal waste (e.g. 4% in Lombardia, 5% in Friuli-Venezia Giulia) (ISPRA, 2023[3]). Bridging gaps across regions will constitute a crucial step to achieving more virtuous performances along the value chain.

Insufficient infrastructure is a major barrier to improved waste management and material recovery, and is often a key driver of landfilling of municipal waste or its transport to other regions for disposal. Whereas regions such as Emilia-Romagna and Lombardia present examples of efficient waste management (the latter receiving an extra 0.9 Mt of unsorted municipal waste and 0.4 Mt of organic waste per year from other regions), Sicilia landfills 52% of its waste, whereas Campania and Lazio largely resort to inter-regional trade2 (ISPRA, 2023[3]; REF Ricerche, 2021[8]). Substantial infrastructural investments (e.g. for recycling and organic waste recovery) will be required to achieve the 2030 targets on recycling and landfilling. In the absence of strong and co-ordinated interventions, regions that are already lagging behind risk falling into a vicious cycle of cost-inefficiency in waste management. This would present a higher financial burden on households due to higher waste taxes, inadequate environmental protection (e.g. adverse environmental impacts of landfilling, GHG emissions of long-distance transport of waste) and poor materials recovery. The National Waste Management Plan (MiTE, 2022[9]), adopted in June 2022, takes stock of existing infrastructural gaps and provides a guiding tool for improved governance on waste policy at the sub-national level.

2.1.2. Innovation, circular production and consumption patterns

Compared to the EU average, Italy’s performance is less advanced in the areas of research and development (R&D) and green innovation relevant for the circular economy. The EU Eco-Innovation Index, which shows how well EU member countries perform in the different dimensions of eco-innovation, ranks Italy as eighth among the EU27 countries (Al-Ajlani et al., 2022[10]). Among the index components, Italy performs very well in the resource efficiency outcomes component (European Commission, 2022[11]). However, the country ranks below the EU average in the eco-innovation input dimension, i.e. the set of investments to incentivise eco-innovation activities (European Commission, 2022[11]). For instance, the country’s gross domestic spending on R&D, as a share of total GDP, stood at 1.5% in 2021, well below both the OECD average (2.7%) and the EU27 average (2.2%), despite a gradual growth in recent years (OECD, 2017[12]). Italy also scores below the EU average for the eco-innovation output component (i.e. the outputs of eco-innovation activities in terms of patents, academic literature and media contributions), which is generally correlated to the level of public investments in R&D in environmental and energy topics (European Commission, 2022[11]).

Italy makes an important use of existing EU Eco-Management and Audit Scheme (EMAS) and Ecolabel certifications, which can constitute important tools to promote eco-innovation. The country has one of the EU’s highest number of Ecolabel licences (18% of total licences awarded) and products (16% of licences awarded) (European Commission, 2023[13]). Italy has also been expanding registration rates to EMAS and now has 28% of total EMAS registered organisations and 36% of EMAS registered sites (European Commission, 2023[14]).

Italian consumers are generally conscious about environmental protection and about the impacts generated by their consumption habits, although this does not always translate to more virtuous purchasing and consumption choices. According to a recent Eurobarometer survey, environmental protection is important to 94% of Italian citizens, in line with the EU27 average (94%), with climate change and the mounting levels of waste and air pollution considered as the three most pressing environmental issues (European Commission, 2020[15]). Almost two-thirds of respondents (60%, in line with the EU27 average of 66%) claimed to be separating their waste, and 37% (below the EU27 average of 45%) indicated they avoided single-use plastic goods. However, only one in eight Italian citizens (13%, compared to 22% in EU27) buy products marked with an environmental label, and even less (9%, compared to the 19% EU27 average) bought second-hand products in place of new ones in the preceding six months.

2.2. Baseline projections of key indicators related to materials use to 2050

A modelling exercise has been carried out to project key indicators related to (primary and secondary) materials use under a business-as-usual “Baseline” scenario (hereafter, “baseline”). The results are leveraged in later parts of the report to assess the implications of alternative policies, including subsidies and fiscal reform for materials scenario, in contrast to the baseline.

2.2.1. Details on the methodology employed

Baseline projections are derived by employing the OECD ENV-Linkages model, which is a dynamic Computable General Equilibrium (CGE) model based on the Global Trade Analysis Project (GTAP) national accounting database (Chateau, Dellink and Lanzi, 2014[16]). CGE models can serve as an effective tool for quantifying the macroeconomic consequences of transforming the economy in line with higher resource efficiency and the transition to a circular economy by taking into account both direct and indirect effects of the policies (e.g. changes in trade and production structure). The ENV-Linkages model has been used extensively in the past to assess the consequences of environmental policies. For instance, this work builds on the global analysis of resource policies presented in Bibas, Chateau and Lanzi (2021[17]), with a focused analysis of the impacts on labour markets (Chateau and Mavroeidi, 2020[18]) and international trade (Dellink, 2020[19]). The model is built on a consistent set of data describing the behaviour of production sectors and consumers in the different regions, with a focus on the energy sector and international trade. One key strength is that it is a multisectoral, multi-regional model that links economic activity to environmental pressures (e.g. GHG emissions, air pollutants). Hence, it sheds light on the medium- and long-term impact of environmental policies.

ENV-Linkages is used as the basis to estimate the economic activities that drove materials use in 2019. Compared with previous modelling work, for this report, the ENV-Linkages model has been enhanced to include materials use projections and to disaggregate Italy. In ENV-Linkages, materials projections follow economic projections and, more precisely, the evolution of the production and consumption of goods in the different sectors and regions. Material flows are linked to the economic flows at the detailed sectoral level. The global United Nations Environment Programme (UNEP) dataset on physical material flows (UNEP IRP, 2018[20]) is used as the basis for the projection of primary material extraction.3 The detailed regional and material coverage of this dataset, for all GTAP regions, as well as for 60 materials, allows the physical material flows to be linked to the economic flows in the ENV-Linkages model. The basic principle for linking them is because each physical flow (materials use in tonnes) is attached to the corresponding economic flow (materials demand in dollars). A coefficient of physical use per dollar of demand is calculated and used to project materials use to 2050.

2.2.2. Aggregate projections of materials use

In the coming decades, annual materials use in Italy is projected to remain stable at current levels, as shown in Figure ‎2.5. Projected socio-economic trends are the main drivers of materials use, comprising the size of the economy, its population and the technologies that are in place, and which may affect materials intensity of the economy (OECD, 2019[21]). A declining population and slow economic growth imply limited overall changes in materials use (as detailed in Box ‎2.1). Despite a small initial decline up to the late 2030s, materials use is projected to return to a growing trend due to the projected increase in income and the consequent increase in consumption. As a result, the projections show similar levels of materials use in 2050 compared to today, both in aggregate terms and in the relative contributions of different material types.

Figure ‎2.5. Materials use projections for Italy

Materials use in million tonnes (Mt)

Source: OECD ENV-Linkages model.

Figure ‎2.6 shows projections for material intensity and per capita materials use, which are broadly in line with projected trends in other OECD countries (OECD, 2019[21]):

• Stable levels of materials use combined with a slow but marked growth of the Italian economy lead to a continued decrease in material intensity. Material intensity is projected to decrease from 0.34 tonnes/USD to 0.26 tonnes/USD between 2021 and 2050 (left panel).

• In contrast, materials use per capita is projected to increase, despite a minor dip around 2030, as the population declines (from 59 million in 2021 to 52 million in 2050).

Figure ‎2.6. Material intensity and use per capita projections for Italy

Material intensity in tonnes/USD and materials use per capita in tonnes/cap

Source: OECD ENV-Linkages model.

Box ‎2.1. Socio-economic projections for Italy

After the negative effect of the COVID-19 pandemic on the economy (-8.9% GDP growth in 2020) and the positive post-COVID growth (+4.5% GDP growth in 2021 and +4.4% in 2022), the Italian economy is projected to stabilise on a positive, albeit low, growth pattern, with a yearly GDP growth rate of 0.8%. Meanwhile, current and projected demographic trends suggest that the population is projected to fall to 1970 levels by 2060. Income (GDP per capita) is projected to substantially increase (see Figure ‎2.7).

Figure ‎2.7. Historical and projected average income for Italy

Yearly growth (left panel) and GDP per capita in 2014 USD, PPP (right panel)

Source: OECD ENV-Linkages model, based on long-run projections (https://doi.org/10.1787/eo-data-en), in line with (OECD, 2017[22]).

2.2.3. Detailed projections of materials use

In the coming decades, changes in sectoral output and technologies will drive changes in materials use, as illustrated in Figure ‎2.8. From the current date to 2050, the Italian economy is projected to “green” its energy production sector, relying less on fossil fuels and more on electricity produced from renewable sources. In line with a general trend towards services-based economies in OECD countries, output is projected to decrease in many resource-intensive industrial sectors, such as the metal industry and textile sector (fibre and yarn production), and to increase in the services sectors, which are less materials intensive. However, output is projected to increase in some materials-intensive sectors, such as construction, food transformation and agriculture, driving up overall materials use. Furthermore, material intensity in other materials-intensive sectors, such as fossil fuel-powered electricity, fossil fuel extraction and metal production, is projected to remain constant or increase. Overall, materials-intensive sectors have a below-average growth (mostly driven by services), which explains the general decrease in material intensity (seen in Figure ‎2.6).

Projected changes in sectorial materials use and material intensity also lead to changes in the use of different materials, as shown in Figure ‎2.9. The use of metals is projected to increase, whereas the use of (non-metallic) minerals is expected to remain stable. The bulk of minerals is used in construction: while the output of construction is expected to increase, the material intensity of the sector is projected to decrease, with the net effect of a stable use of minerals in 2050 compared to 2021. The greening of the energy sector implies an increase in the use of gas and a decrease in the use of oil. As output increases in the food transformation sector, the use of vegetables and crops in this sector is projected to grow.

Figure ‎2.8. Projections of sectoral intensity and output growth for Italy

Material intensity in tonnes/USD and output growth in %

Notes: EITE stands for Energy-intensive Trade-Exposed industry. FF stands for fossil fuel.

Source: OECD ENV-Linkages model.

Figure ‎2.9. Materials use growth projections for Italy

Values in Mt

Note: there may be inconsistencies in the data reported here for 2021 and data in ISTAT databases (especially for the category “sand gravel and crushed rock for construction”) due to the different methodologies employed to produce these datasets. The base year data presented here comes from the Global Material Flows Database (UNEP IRP, 2018[20]). According to the Technical Annex (UNEP IRP, 2021[23]), data on the extraction of non-metallic minerals is under-reported in several countries.

Source: OECD ENV-Linkages model.

2.2.4. Primary and secondary materials

The share of secondary metals is projected to remain similar by 2040 in the baseline. The baseline scenario does not include new policies aimed at increasing material circularity, but it does embed the changes observed in current trends based on new economic developments and past policies. As shown in Figure ‎2.10, the changes in outputs of the sectors are minor, leading to similar levels of output (not shown in the chart). Only iron and steel are projected to increase over the period, whereas the outputs of all other sectors are projected to decrease. For iron and steel, this increase is greater for the recycled (secondary) materials than for the virgin (primary) materials. Conversely, for aluminium and copper, the decrease is lower for the secondary materials, translating in a larger share of secondary materials in the total.

Figure ‎2.10. Evolution of the primary and secondary metals sectors

Evolution in value (USD), Baseline scenario, percentage change compared to 2021

Source: OECD ENV-Linkages model.

References

[10] Al-Ajlani, H. et al. (2022), EU Eco-Innovation Index 2022 Policy brief, European Commission, https://green-business.ec.europa.eu/eco-innovation_en (accessed on 1 March 2024).

[17] Bibas, R., J. Château and E. Lanzi (2021), “Policy scenarios for a transition to a more resource efficient and circular economy”, OECD Environment Working Papers, No. 169, OECD Publishing, Paris, https://doi.org/10.1787/c1f3c8d0-en.

[16] Chateau, J., R. Dellink and E. Lanzi (2014), “An Overview of the OECD ENV-Linkages Model: Version 3”, OECD Environment Working Papers, No. 65, OECD Publishing, Paris, https://doi.org/10.1787/5jz2qck2b2vd-en.

[18] Chateau, J. and E. Mavroeidi (2020), “The jobs potential of a transition towards a resource efficient and circular economy”, OECD Environment Working Papers, No. 167, OECD Publishing, Paris, https://doi.org/10.1787/28e768df-en.

[19] Dellink, R. (2020), “The Consequences of a more resource efficient and circular economy for international trade patterns”, OECD Environment Working Papers, OECD Publsihing, Paris, https://doi.org/10.1787/fa01b672-en.

[14] European Commission (2023), EMAS - Facts and Figures, European Commission, https://green-business.ec.europa.eu/eco-management-and-audit-scheme-emas/about-emas/statistics-and-graphs-0_en (accessed on 6 October 2021).

[13] European Commission (2023), EU Ecolabel facts and figures, https://ec.europa.eu/environment/ecolabel-facts-and-figures_en (accessed on 1 March 2024).

[11] European Commission (2022), The Eco-Innovation Scoreboard and the Eco-Innovation Index, https://ec.europa.eu/environment/ecoap/indicators/index_en.

[15] European Commission (2020), Special Eurobarometer 501 - Attitudes of European Citizens towards the Environment, https://europa.eu/eurobarometer/surveys/detail/2257 (accessed on 1 October 2021).

[2] Eurostat (2024), Circular economy indicators: Circular material use rate, European Commission, https://doi.org/10.2908/CEI_SRM030 (accessed on 8 November 2021).

[6] Eurostat (2024), Landfill rate of waste excluding major mineral wastes, https://ec.europa.eu/eurostat/databrowser/product/view/env_wasoper (accessed on 29 February 2024).

[4] ISPRA (2023), Catasto Rifiuti Sezione Nazionale - Produzione Rifiuti Speciali, https://www.catasto-rifiuti.isprambiente.it/index.php?pg=prodrsnazione (accessed on 29 February 2024).

[5] ISPRA (2023), Rapporto Rifiuti Speciali - Edizione 2022, https://www.isprambiente.gov.it/files2023/pubblicazioni/rapporti/rapportorifiutispeciali_ed-2022_n-367_versioneintegrale_agg-29_03_2023.pdf.

[7] ISPRA (2023), Rapporto Rifiuti Speciali Edizione 2023, https://www.isprambiente.gov.it/files2023/pubblicazioni/rapporti/rapportorifiutispeciali_ed-2023_n-389_versioneintegrale.pdf.

[3] ISPRA (2023), Rapporto Rifiuti Urbani - Edizione 2023, ISPRA, https://www.isprambiente.gov.it/it/pubblicazioni/rapporti/rapporto-rifiuti-urbani-edizione-2023 (accessed on 29 February 2024).

[9] MiTE (2022), Programma nazionale per la gestione dei rifiuti (PNGR).

[21] OECD (2019), Global Material Resources Outlook to 2060: Economic Drivers and Environmental Consequences, OECD Publishing, Paris, https://doi.org/10.1787/9789264307452-en.

[12] OECD (2017), “Gross domestic spending on R&D”, Research and development (R&D) (database), https://doi.org/10.1787/d8b068b4-en (accessed on 28 May 2024).

[1] OECD (2017), “Material resources”, OECD Environment Statistics (database), https://doi.org/10.1787/data-00695-en (accessed on 28 May 2024).

[22] OECD (2017), “OECD Economic Outlook No 109 (Edition 2021/1)”, OECD Economic Outlook: Statistics and Projections (database), https://doi.org/10.1787/4229901e-en (accessed on 28 May 2024).

[8] REF Ricerche (2021), “Gestione rifiuti. Sostenere i piani regionali con un approccio “razionale” e condiviso”, Laboratorio SPL Collana Ambiente, Vol. Rifiuti n. 182/Giugno 2020.

[23] UNEP IRP (2021), Technical annex for the global material flows database.

[20] UNEP IRP (2018), Global Material Flows Database, https://www.resourcepanel.org/global-material-flows-database (accessed on 1 June 2024).

Notes

← 1.  DMC refers to the amount (in weight) of materials used in an economy, i.e. materials extracted or harvested in the country, plus imported materials and products, minus exported materials and products.

← 2.  Italian legislation requires that regions are self-sufficient in the management of municipal waste generated within their territory, whereas non-municipal waste can be traded freely to facilitate waste management and recovery.

← 3.  The ISTAT database (leveraged in Chapters 5 and 8 of this report) and the UNEP database (2021[23]) employ different methodologies. In particular, flows of non-metallic minerals are estimated based on cement used for concrete, bitumen used for road construction, and the production of bricks and tiles, following the methodology detailed in (UNEP IRP, 2021[23]).