Development of Trade in Recyclable Raw Materials: Transition to a Circular Economy

Abstract

Mechanisms for sectoral change in the economy are being used to move towards a circular economy. Trade in recycled raw materials could contribute to circular economy development and is treated as the main circular indicator used to monitor progress toward a circular economy. However, the research area surrounding the transition to a circular economy lacks adequate tools, as until now, the circular economy has been investigated from an evolutionary and ecological perspective. In the article, the authors conduct a study identifying important variables for trade in recycled raw materials as the main indicator of CE development. The authors propose a two-step methodology for researching the links between main trade in recyclables and circular economy indicators. The authors found correlations between trade in recyclables and private investments in circular economy sectors. The authors used panel data analysis, compiled a regression matrix, and formed a dynamic regression model. The statistical tests showed that the formed regression model has no significant autocorrelation and heteroscedasticity. The framework can be applied in practice to serve policymakers and the academic community interested in analyzing the move toward a circular economy and its main circular indicators.

1. Introduction

The trade in recyclable raw materials (TRRM) is the circular indicator helping to monitor the circular economy’s (CE’s) progress (Hanusa 2021; Mancini et al. 2019). In the CE sector, the purpose of residual materials is to be recycled and reintroduced into the economy as new raw materials. This can have several advantages as follows: reducing waste and increasing the security of the supply of raw materials (Pati et al. 2006). Furthermore, it is necessary to include the movements of raw materials derived from waste, i.e., secondary raw materials (Eurostat 2023; Risch 1978).

The TRRM contributes to positive economic and environmental benefits by reducing material inputs. Environmental benefits are mentioned by Sandin and Peters (2018) in the review of more than 40 scientific papers.

The proposed revision of the progress of circular trade is narrowed to monitoring the flow of material, and, using such an explanation, the authors focus on the flow of materials that contribute to a CE (Barrie and Schröder 2022). However, as long as circular trade activities (and CE) are pursued within the economic system driving continuous economic growth, the net contribution of trade in recyclables to national resource consumption reduction could be measured in a more precise way, helping to increase the impact of TRRM (Gregson and Crang 2015). Such an investigation is still on the priority list of the researchers.

Lieder and Rashid (2016) reviewed the literature on circularity and the practical application of the CE in many manufacturing industries. European Union (2020) suggests an action plan on circular economics, which offers new innovative opportunities for waste reduction (European Union 2020).

A recent report by BDO LLP (2022) shows that investment in the CE reached new heights in 2022, and 2022 remains the busiest year for CE investments, growing by 16%. Investors are focusing on companies that can be reduced to modify old raw materials with steady ones. According to the report by BDO LLP (2022), society’s desire to consume more sustainable products has led to significant investments in brands that use circular and sustainable materials. This is reflected by its 35% contribution to materials recycling in the manufacturing and manufacturing sectors. This trend is also reflected in the retail, consumer, and entertainment sectors, where 40% of investments are focused on more circular raw materials.

The fact is that whereas the EU imports about half of these raw materials it consumes, Eurostat (2023), the development of TRRM is worthy of this topic but still gains little attention from researchers.

Materials are recycled to achieve the twin benefits of reuse as new materials or products in the economy and through circularity. However, some countries cannot deal with this waste and trade their recyclable waste. Equally, some countries cannot reuse, remanufacture, or recycle used goods and waste materials; such cases require investments. Also, TRRM supports initiatives that shift companies from a linear to a circular business model.

This paper focuses on developing the trade of recycling and secondary raw materials initiatives and indicates what stimulates an increase in such trade flows. The trade in waste not only solves the problems of resource scarcity, reduces the negative impact on our environment, and brings significant economic benefits but is also actively involved in expanding the CE (Morici et al. 2022). To create waste trading networks and identify their structural evolution and determinants, Xu et al. (2021) analyzed waste trade flows.

The authors analyzed the scientific literature and identified a gap from the fact that, in European research, there are not many studies related to the integrated processing of all types of recycled raw materials in the trade landscape and the presentation of how it responds to the CE’s approach. Scientific research on this topic is, therefore, timely and relevant. The novelty of this article relates to the fact that it explains the development of TRRM, which indicates the transition to a CE.

The methodological framework proposed in this article is intended for EU countries seeking to help review the dynamics of TRRM. In this research, the authors set out to determine the interdependences of the mentioned phenomena and use statistical software related to the dynamic regression model, such as the Chow test and the breakdown of the variance of forecast errors. The listed tools establish causal links between CE-related private investments and an indicator defining the trade development in recycled raw materials. Adequately delayed values of the forecasted measures show how accurate the forecasts of recyclable trade volumes are (Mesjasz-Lech and Michelberger 2019).

Main idea: A transition towards more efficient resource usage and a CE has many links with trade. Such interactions are essential in helping ensure that global value chains via trade can improve resource usage efficiency. In this article, the authors conducted a study identifying important variables for trade in recycled raw materials as the main indicator of CE development.

Research gaps: The studies show that in the context of the EU, adequate tools and standards that ensure the quality of secondary raw materials to enhance their recovery and trade flows are missing (OECD 2018). Among the methods applied for the delivered research, the most popular methods for researching trade dynamics were causal effect modeling, single-objective and multiple-objective linear programming, analysis of hierarchical regression, fuzzy logic, rough neighborhood sets, and network modeling; however, the application of other methods is still under revision.

Practical implications: In this article, the researchers studied variables important to recycling, excluding other less significant ones. The authors revised and recommended a regression equation characterizing the variables impacting trade in recyclables. This system can be applied in practice and could serve and be useful for those interested in analyzing the trade in recyclables and CE development cases.

Originality/Value: the paper analyzes and investigates TRRM by applying the dynamic regression method, which is quite a new application in similar studies.

This article has five sections. After the introduction, the authors revise the connections between the CE and TRRM. In the first section, the authors present a variety of recycled raw materials. A literature review on TRRM focuses on the trade aspects of different raw materials. In the second section, quantitative methods that are used in other studies for researching TRRM are presented. Herein, the authors propose a two-stage methodology applied for empirical research. In the fourth section, the authors present the results of the research. Finally, the paper is finalized with concluding remarks.

2. Literature Review

Trade in recyclable raw materials facilitates the shift to a circular economy (CE). Processing raw materials reduces the need to recover and treat primary raw materials and protects natural ecosystems (Geisendorf and Pietrulla 2018), supporting the circular approach concept, whereby products and materials are reused and recycled rather than thrown away (Geisendorf and Pietrulla 2018). Introducing recyclable materials to the market fosters recycling technology innovation (Nicolli et al. 2012) and processes. International trade in recyclable materials promotes resource efficiency and reduces waste (De Sa and Korinek 2021). Reusing materials reduces energy consumption and greenhouse gas emissions associated with resource extraction. The process industry creates economic opportunities and jobs and contributes to sustainable economic growth (Hysa et al. 2020). A well-managed recycling market reduces the demand for single-use products and stimulates the production of durable products (Van Beukering and Bouman 2001).

In this way, valuable materials can be redistributed where needed, thus reducing waste in the supply chain (Xu et al. 2017). It supports developing recycling infrastructure and collection systems to make recycling more accessible. International recycling cooperation helps to ensure responsible and environmentally friendly waste management (Wath et al. 2010). Increasing recycling can reduce the environmental impact of landfills and incinerators. Recycling reduces pressure on ecosystems and helps protect biodiversity and natural habitats (Buchmann-Duck and Beazley 2020). The sale of recyclable materials encourages companies to develop products that can be recycled. Trade in recyclable materials can boost investment in cleaner production technologies (Nilsson 2007) and waste management systems.

A circular economy could be achieved If countries share recyclable materials. Trading in recyclable raw materials can help diversify a country’s resources and reduce dependence on certain reserves (de Jong et al. 2016).

Circular economy theories. In this chapter, the authors describe six main theories of the circular economy: economic and environmental theory, theory of resource efficiency, waste hierarchy theory, environmental impact theory, green growth theory, and sustainable development theory.

Economic and environmental theories highlight the role of trading in recycled raw materials to transition to a CE (Ghisellini et al. 2016; Allwood 2014). The European Economic and Social Committee recommends that resources be protected for as long as possible and that they be easier to transport through trade to places where they would best be reused or recycled (Hönnige and Panke 2016). The CE theory is a transformational system that emphasizes moving from a linear “take, do, and move” model to one that prioritizes sustainability and resource conservation (Corona et al. 2019; Lang-Koetz et al. 2010). Essentially, the theory proposes to keep materials and products in a closed cycle for as long as possible, in which companies specialize in regions or countries for collecting and recovering recyclable materials and using their comparative advantages (de Oliveira et al. 2012). This theory emphasizes the importance of uncoupling resource usage from economic growth, and trade has a main role in reaching this goal by ensuring an efficient flow of recyclable materials (Ali et al. 2018).

According to the theory of resource efficiency, trade in recyclable raw materials contribute to resource efficiency by reducing the need to destroy and process primary resources, which is consistent with the theory that a sustainable economy requires the maximum use of resources (Farzin 2004). Trade makes it possible to redistribute materials where they can be recycled or reused most efficiently, thus reducing waste and facilitating the circulation of resources. Placing recyclable raw materials on the market directly contributes to resource efficiency, reducing the need to dispose of and recover internal resources (Ghisellini et al. 2016). Marketing recyclable materials contributes to developing recycling infrastructure and technologies, thereby improving efficiency in general recycling processes (Zhang et al. 2019). This theory recognizes that regions can have different processing capacities for each material, so marketing is a way to balance supply and demand (Franco 2017). The efficient use of resources in trade stimulates innovation by creating market incentives to improve recycling practices and product development (Shooshtarian et al. 2022).

According to the waste hierarchy theory, which establishes a hierarchy of waste management strategies (Awino and Apitz 2023), the best solutions are waste prevention and reduction, management, recycling, and reuse, which are at the top of waste management strategies (Ilankoon et al. 2018). By promoting recycling and reuse, retailers reduce waste generation Ilankoon, I.M.S.K. and the need to dispose of it, thereby contributing to the essential objectives of the CE. This theory recognizes that recycled materials should be preferred wherever possible over landfill or incineration. The marketing of recyclable products facilitates the efficient flow of materials from surplus areas to areas where they can be optimally recycled or reused, thus contributing to waste prevention and resource conservation (Zhang et al. 2022). This ensures that materials that would otherwise end up in the trash are used productively and sustainably. The theory of waste hierarchy emphasizes the importance of avoiding environmental damage, which is significantly reduced by the recycling and sale of recyclable raw materials (Loiseau et al. 2016). Finally, the waste hierarchy theory emphasizes that trade in recyclable raw materials is essential to implement the waste hierarchy (Gregson and Crang 2015) and promote the transition to a CE, with recycling and reuse taking precedence over disposal.

The environmental impact theory emphasizes the importance of reducing environmental impact. It promotes responsible waste management (Sáez-Martínez et al. 2016) and ensures that recyclable materials are recycled and reused environmentally. Trade in recyclable materials promotes responsible management (De Sa and Korinek 2021) and hazardous waste disposal, thereby reducing further environmental damage. This theory is based on reducing the unfavorable impact of economic activity on the environment, which fits perfectly into the goals of the CE. This theory recognizes that recycling (Culiberg and Bajde 2013), a core principle of the CE, reduces the emissions of greenhouse gas and energy consumption, thereby helping to mitigate climate change (Culiberg and Bajde 2013). Retailers divert waste from landfills and incinerators, thereby reducing the negative impact of such disposal practices on air, water, and soil quality (Joensuu et al. 2020). The environmental impact theory emphasizes that recycling and marketing reduce the depletion of economic resources (Awan 2013), such as minerals and metals, which are necessary to protect ecosystems (Awan 2013). Overall, the environmental impact theory emphasizes that trade in recyclable raw materials is a main factor in the shift to a CE (Yamaguchi 2018), as it directly contributes to protecting the environment, reducing waste, and reducing environmental damage (Yamaguchi 2018).

The green growth theory states that environmentally friendly practices can achieve sustainable economic growth (Fernandes et al. 2021). It highlights the importance of sustainable economic development (Loiseau et al. 2016), and trade in recycled raw materials is meaningful in the shift to a CE (Vazquez-Brust and Sarkis 2012). The green growth theory shows that economic growth and environmental sustainability are incompatible but can be achieved together (Ekins 2002). Recycling and marketing recyclable materials creates economic opportunities and stimulates the development of a green economy (Di Maio and Rem 2015). This theory recognizes that the circular economy, including trade, reduces pressure on ecosystems (Sehnem et al. 2019) and contributes to biodiversity conservation (Sehnem et al. 2019). It encourages companies to adopt sustainable practices, including developing environmentally friendly products and managing waste responsibly. The green growth theory recognizes the potential for innovation in recycling technologies (Kemp et al. 2013) and sustainable business models driven by the circular economy and trade in recycled materials. In short, trade in recycled raw materials is at the heart of the green growth theory (Ikram 2022), balancing the development of the economy with the sustainability of the environment, promoting resource efficiency and a prosperous green future.

According to the theory of sustainable development, trade in recyclable raw materials contributes to the sustainable use of resources, which is in line with the broader theory of combining social, economic, and environmental goals (Kryshtanovych et al. 2020). The sustainability theory emphasizes that long-term prosperity requires a balance of economic, social, and environmental goals and that trade in recyclable raw materials is essential for achieving sustainability in the shift to a CE (Hysa et al. 2020). The sustainability theory recognizes that economic systems must not harm the environment or waste economic resources that meet the goals of the CE (Ghisellini et al. 2016). Sustainable practices facilitate trade in recyclable raw materials, reducing the need for resource and waste extraction. These practices focus on conserving resources and reducing the impact of goods manufacturing on the environment (Hojnik et al. 2023). This theory states that marketing contributes to efficiently distributing secondary raw materials and ensures their full potential is exploited. The sustainability theory emphasizes that trading in recyclable raw materials helps reduce pollution and protect ecosystems (Joensuu et al. 2020). Finally, the sustainability theory emphasizes that trade in recyclable raw materials is key to a more sustainable and equitable future, promoting resource efficiency, reducing waste, and protecting natural ecosystems.

These six theories provide a solid basis for understanding why trading in recyclable raw materials is essential to the shift to a CE, helping optimize resource usage, reduce waste, and promote economic and environmental sustainability.

Circular economy and green growth. Bauwens (2021) looked at two paths linking the circular economy to economic growth: it is a tenacious attempt to align the circular economy with economic growth or shape attitudes towards the circular economy after growth. Combining the circular economy with economic growth requires the consideration of the circular strategy aspects of the business models proposed by Geissdoerfer et al. (2018) regarding material loops that narrow, slow, close, and use fewer resources to produce goods or services.

Kirchherr (2022) notes that a recent Ellen MacArthur Foundation report outlines the assumption that circularity can become problematic “after growth” because it is defined as economic reduction as it applies biophysical limit principles of circularity such as how to reduce, reuse, or recycle.

Schultz (2022) also contributes to the debate among scientists about whether CE is compatible with economic growth and what kind of mindset. The author highlights two strands of speeches about circularity, which stimulates growth. Post-growth circulation identifies four elements that facilitate the transition to a CE: the trajectory of intensive growth, the creation of markets through internalizing negative external influences, the institutional incentive to spread positive externalities, and dissemination. Schröder et al. (2019) also examined the CE and the jugs of growth and degrowth, highlighting the need to better understand the overlapping and contradictory sustainability principles underpinning the current concepts of CE and degrowth.

3. Participants in Circular Economy Activity and Trade in Recyclable Raw Materials

The CE model avoids waste and pollution (Lebreton and Andrady 2019) and stimulates the prolonged use of materials and products, thus creating a sustainable manufacturing and consumption cycle (Luo et al. 2019). CE refers to circularity with several components, including resource efficiency (Smol et al. 2020), waste reduction and recycling, avoiding the depletion of resources, and protecting the environment (Barford and Ahmad 2021). The trade In recycled materials (Sugeta and Shinkuma 2012) contributes to CE development (Circular Economy 2023). It involves the sale, purchase, and exchange of recycled or secondary production materials recycled from waste or end-of-life products to create a new product cycle (Heller et al. 2020). This avoids the output of new raw materials and reduces the amount of waste that could end up in landfills or as waste products (Costa et al. 2022).

The authors highlight participants In CE activity and their links with trade in recycled materials, which are presented in

Table 1. Essential aspects of trade in recycled materials.

Essential	Description	References
Policymakers or regulators	Policymakers determine the regulation of the system. For example, a sustainable product policy program includes three main elements: product-design-dedicated actions, actions that empower consumers, and more sustainable production process-related actions.	(Ali et al. 2018; Lebreton and Andrady 2019)
Primary producers	Primary producers contribute to the legislative initiative initiated by the European Commission on sustainable products and transition from a linear production model to sustainable production.	(Corona et al. 2019; Lang-Koetz et al. 2010)
Recycling companies	These companies play a key role in transforming waste into secondary production materials that could be sold to manufacturers or used to develop new products.	(Barford and Ahmad 2021; Fuss et al. 2021)
Secondary raw material markets	These are markets where recycled or secondary raw materials are traded. Manufacturers can buy the raw materials needed to make products without using new resources.	(Van der Ven 2020; Glogic et al. 2021; Chen and Pao 2022)
Environmental and sustainability organizations	These organizations aim to promote recycling and the use of recycled materials in manufacturing and aim for the ecological design system to be applied to the broadest possible range of product spectrum and ensure circularity.	(Glogic et al. 2021; Siman et al. 2020; Walker et al. 2022)
Consumers	Consumers play an essential role in the CE. They support sustainable consumption patterns by buying products made from recycled materials and encouraging manufacturers to develop products made from recycled materials.	(Yeow and Loo 2018; Wagner et al. 2020; Paço et al. 2021; Rabiu and Jaeger-Erben 2022)

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Trade in recycled materials in the CE promotes circularity, sustainability, responsible consumption, and the long-term conservation of natural resources (Paço et al. 2021; Rabiu and Jaeger-Erben 2022). This is essential for reducing pollution and resource depletion and promoting sustainable economic growth (Moslehpour et al. 2023).

Barford and Ahmad (2021), examining how circularity-minded companies address the challenges of waste collection for recycling, noted that waste pickers in countries with a low and average income are the backbone of the recycling cycle and that on purpose to increase circular activity, it is imperative to address the deep-rooted social issues at play (Fuss et al. 2021). Glogic et al. (2021) described circularity scenarios that aim to improve the use and recovery of resources, considering their potential environmental impacts and assessing their effectiveness using the material circularity index (MCI) and assessment of life cycle (LCA) approaches as well as their changes concerning secondary raw materials recycling (Glogic et al. 2021). Van der Ven (2020) looked at changes in international trade flows as global value chains move towards a CE and the trends expected to be most pronounced in developing countries as follows: increasing TRRM, waste, and secondhand products, increasing trade in services, and declining trade in primary raw materials (Van der Ven 2020). Chen and Pao (2022) noted that promoting floriculture is one of the essential tools for the global development of sustainability. Their study found a causal relationship between the following indicators: the municipal waste recycling rate, CE-related investment, per-inhabitant generation of municipal waste, CE rate, and TRRM. Walker et al. (2022) described the corporate adoption of circularity as new opportunities for businesses and environmental impact reduction and described the relationship between CE and sustainability (Walker et al. 2022). The scientific study showed that organizations applying the principles of the CE increase their value by using environmentally friendly resources and trading recycled raw materials. Siman et al. (2020) described waste collectors’ organizations’ management chain in urban solid waste (Siman et al. 2020). The core business of waste collectors is organizations interested in circular activities involving materials in a production cycle, recycling, and promoting trade (Barrie and Schröder 2022).

Trade in recycled raw materials is also influenced by consumers, their needs, habits, and purchasing power (Paço et al. 2021; Rabiu and Jaeger-Erben 2022), investigating the roles of users, the conditions of use, and the appropriation practices necessary for the repair, reuse, and recycling of circular products and services (Paço et al. 2021).

The Interface between TRRM and CE Is receiving more attention (Hanusa 2021). Although the main role of trade plays a role in the shift to a CE, the interface between these concepts is not well analyzed. To address such a research gap, this paper investigates the intersections between CE and trade in recycled and secondary raw materials (Mesjasz-Lech and Michelberger 2019).

Some of these papers focus on modeling the dynamics of trade flows to support the shift to a CE. One method proposed by the authors is multi-region input–output analysis, which helps model the dynamic changes in trade in recyclables after the performance of CE-related activity. The authors Aguilar-Hernandez et al. (2021), in their study presented in 2021, also used multi-region input–output analysis to estimate the impacts of the gross domestic product (GDP), employment level, and CO₂ changes towards the implementation of CE.

4. Recyclable Raw Materials

Recycling secondary raw materials is a key direction for the sustainable transition of primary product production sectors. Every phase of moving secondary raw materials for recycling creates workplaces and allows businesses to create values, such as collecting, sorting, transporting, and recycling. In most cases, recycling is used to move secondary raw materials to reproduction and create a new product. It could be a solution that orients managers toward sustainable business performance.

Another problem is that 70–80% of secondary raw materials containing potentially useful substances are wasted. This means the loss of economically valuable materials that can be recycled again. The aim is to find ways to reduce the release of valuable materials and reuse them (Risch 1978).

Society has difficulty ensuring the responsible collection and supply of such raw materials and expanding their recycling rates. Different secondary raw materials are collected, such as high-value base metals, plastics, glass, and rubber, which are the most important raw materials.

The most urgent environmental problems for which governments and scientists must constantly seek solutions are the excessive consumption of raw materials and plastic waste generation, which leads to uncontrolled plastic pollution (Lebreton and Andrady 2019). One of the most critical tasks is to improve recycling and minimize the depletion of fossil resources, which would reduce environmental pollution and simplify the collection of organic waste, reduce incineration and disposal in landfills, and provide an opportunity to reduce the consumption of carbon dioxide emissions and petroleum raw materials (Smol et al. 2020).

In many countries, the prevailing opinion is that too much municipal waste is disposed of in landfills (Ncube et al. 2021). Changing the approach to the sustainable management of waste based on the provisions of EAA could help to review the opportunities and challenges of waste management, develop strategies for reusing and recycling materials, diverting them to secondary markets, as well as composting, landfilling, energy production and incineration. A set of complex methods is applicable for developing sustainable approaches to waste management and providing, creating, and operating a sustainable waste management system.

The sustainable management of waste application promotes a CE in Europe by creating business models of waste as resources (Gregson and Crang 2015), which are necessary to develop secondary markets for raw materials and waste diversion strategies.

These strategies consist of subsidies, regulations, legal responsibilities for raw material extraction, appropriate taxes, including household and business efforts to recycle, and pricing based on the full (i.e., social) marginal cost of waste disposal.

The authors raise and examine the following topics in this article: the productivity and optimality of waste disposal, the efficiency of managing waste in landfills and added value (Lebreton and Andrady 2019), the selection of waste management methods and decisions about processing or incinerating waste to extract energy and/or change its physical state, and reducing the volume of waste or extracting useful materials (Gregson and Crang 2015); the authors also consider whether waste should be sent to landfills which are extracted from spent plant material that may contain biological compounds further used as secondary raw materials (Veličković et al. 2008). The authors also review how waste should be sorted before it is processed to extract the desirable or marketable properties of secondary raw materials. The strategy proposed by Morici et al. (2022) suggests increasing the supply of high-quality recycled plastic by increasing the efficiency of material production. Fu et al. (2021) propose a new attitude for glass waste recycling using low-cost glass waste powder as the raw material for preparation (Fu et al. 2021).

Recycling other materials, such as e-waste (Ilankoon et al. 2018), batteries, and textiles, is limited due to insufficient legal regulations to provide incentives for regulating pollution control during recycling, and more research is needed in these areas. Examining the circularity of different types of materials and their relationship with environmental sustainability processes, it is distinguished that metals are the most integrated into the CE’s processes due to their wide recycling possibilities (Barford and Ahmad 2021).

Investments in circularity are very important. First, production will be increasingly focused on green materials and processes in the future, so it is important to use circular materials with better recyclability, recycling, and reuse (Dumée 2022). Circularity is important because of the possibility of having positive effects, which reduces raw material consumption and generates basic resources, creating new jobs (Skare et al. 2023).

The amount of secondary raw materials and their accumulation places, collection, sorting trends, distribution, and final locations in different waste streams in the city are insufficient. In Europe, no unified institution manages all primary and secondary raw material information. Such information is dispersed among various institutions, including government agencies, universities, NGOs, and industries. Unified solutions for managing primary and secondary raw materials in a one-stop trailer are required (Lucarini et al. 2020).

The research findings reveal that “ithi” the European Union (EU), there is a lack of adequate tools and standards ensuring the quality of secondary raw materials, hindering their recovery and trade flows, which are both needed for the circular economy’s development.

5. Trade in Recyclable Raw Materials

Waste is a secondary resource for countries with lower incomes; its collection is a substantial economic activity, and the resulting recovery of resources is a major section of the CE (Gregson and Crang 2015).

The authors found that trade issues in recycled raw materials are not widely studied in the scientific literature. For example, in their article, Mesjasz-Lech and Michelberger (2019) propose a methodological framework for EU countries to determine the development impact of sustainable waste logistics TRRM. Liang et al. (2021) researched the generation, trade, management, and processing of waste plastic in Asia (Liang et al. 2021). To understand the nature of the waste from the plastic trade in different Asian countries, the authors examined the relationship between the trade in plastic waste and the waste of plastic. Morici et al. (2022) examined the recycling of various types and specifications of plastic, emphasizing that a system of waste management following the specificity of the materials increased the cleanliness and reduced the level of contamination in the collected materials as well as the possible recycling of plastics and bioplastic-based materials (Morici et al. 2022). D’Amato et al. (2019) describe how China’s export restrictions have affected European countries, who have felt that the rapidly growing number of plastics harms the environment and climate. Yoshida (2022) conducted field research in China and Taiwan and reviewed China’s import policy of recycled waste and its impact on the plastics recycling industry (Yoshida 2022). The investigation results showed that China switched from direct imports of plastic waste from countries of export to imports of recycled pellets through third countries, mainly from Southeast Asia.

The essential aspects of recycling are the impact on the environment of the trade of recycled materials and the possibility of promoting recycled materials as raw materials to produce a recyclable end product that can be sold. The authors distinguish the essential types of secondary raw materials generating volumes for trade.

Table 2. Trade in different types of recyclable materials.

Recyclable Material Type	References
metal	(Bergthorson 2018; Bertram et al. 2017; Hu et al. 2020; Shamsdini et al. 2020; Söderholm and Ekvall 2020; Sommerville et al. 2021; Sun et al. 2019; Van Ruijven et al. 2016; Wang et al. 2019)
glass	(Barfod et al. 2022; Ganio et al. 2012; Gliozzo et al. 2022; Henderson et al. 2020; Jackson and Paynter 2022; Koleini et al. 2019; Neri et al. 2019; Plank et al. 2022; Wiedenhofer et al. 2019)
plastic	(Morici et al. 2022; Barford and Ahmad 2021; Wagner et al. 2020; Liang et al. 2021; D’Amato et al. 2019; Yoshida 2022; Brooks et al. 2018; Hossain and Shams 2020; Huang et al. 2020; Leal Filho et al. 2019; Navarre et al. 2022; Schultz and Reinhardt 2023; Schultz and Pies 2023; Wang et al. 2020; Wen et al. 2021)
paper, cardboard	(Aytaç and Korkmaz 2022; Aravossis and Fountzoula 2014; Westmorland and Furness Council 2023; Yang et al. 2020; Yuan 2022; Zhou et al. 2021)
batteries	(Sommerville et al. 2021; Chen et al. 2019; Igogo et al. 2019; Mayyas et al. 2019; Song et al. 2019)
e-waste	(Ilankoon et al. 2018; Dias et al. 2022; Hijazi et al. 2021; Petridis et al. 2020; Rathore 2020; Shamim et al. 2015; Shinkuma and Huong 2009; Shittu et al. 2021; Theis 2021)
household appliances	(Luo et al. 2019; Yoshida 2022; Yoshida 2013; McCollough 2009; Sasaki 2021; Shigetomi et al. 2015)
textile	(DeVoy et al. 2021; Hawley 2006; Norris 2012; Norris 2019; Pensupa et al. 2017; Stone et al. 2020)

shows the most popular recyclable materials, which receive the highest attention from authors: metal, plastic, glass, and e-waste. The publications fit into time slots between 2003 and 2022. The selected revision of different secondary materials for generating trade volumes reflects this article’s research novelty, as most papers focus on a single type of raw material.

Lebreton and Andrady (2019) and Ncube et al. (2021) examined the accumulation of improperly managed waste in the environment, citing the suspension of imports of waste for recycling from China as one of the reasons for this; (Ncube et al. 2021). Brooks et al. (2018) observed that this ban could have two consequences as follows: in some countries, there will be vast amounts of plastic waste, or it will create a system of reliable waste management that has results in the future. It should be noted that the most impacted countries are East Asian and Pacific countries, all countries of Europe and Central Asia, and countries located in America. Gregson and Crang (2015) examined economic illegitimacy and the impact of importing illegally used goods on the domestic industry. Considering the 2018 China ban on importing plastic waste to other countries, Asian countries have severely restricted other countries’ plastic waste imports (D’Amato et al. 2019; Yoshida 2022). Wang et al. (2019) assessed the direct and indirect import effects of China-generated plastic waste on the international trade networks of plastic waste.

Paletta (2019) looked at the possibility of reducing plastic consumption, increasing recycling, and accelerating the transition of plastic systems to circularity. Leal Filho et al. (2019), in their study on the use of plastics and bioplastics in Europe, point out that the conventional production of plastics is based on fossil fuels and is growing steadily and that this is making the release of plastics into the environment an increasingly important issue (Shamsdini et al. 2020). The plastic pollution of living organisms in soil, marine, and freshwater ecosystems is causing problems that pose risks to human health. It is, therefore, important to find new ways of collecting and properly managing plastic waste. Gong et al. (2023) also looked at the issue of waste management and the links between the role of CE and plastics and investigated the elimination of non-recyclable plastics, packaging innovation, in-store retailer programs, and label changes. The author stressed that the CE can stimulate economic growth and allow companies to save on waste management and reduce their environmental impact.

Schultz and Reinhardt (2023) conducted a study identifying the main CE barriers and drivers. They studied how certain factors hinder or promote systemic “eco-efficient” CE innovation in the European polyurethane plastic industry and proposed how to facilitate and further develop the management of systemic CE innovation activities. The authors Schultz and Reinhardt (2023) extended their study and, in the next article, described how to facilitate CE’s ambitions by overcoming technological challenges and identifying opportunities in the European plastics industry. The authors found that the technological challenges in the plastics sector are mainly related to the contamination of secondary materials, recycling problems, production processing problems, the quality problems of production materials, and quality problems of final products, while opportunities are related to the effective management of secondary materials; chemical recycling innovations; production and processing innovations; and innovative materials and innovative final products.

Moving towards more effective resource utilization, the implementation of the CE is closely intertwined with trade. These connections play a crucial role in ensuring that global value chains, facilitated by trade, contribute to enhancing the efficiency of resource utilization. The authors undertook a study to identify key variables influencing the trade in recycled raw materials, serving as a primary indicator of circular economy development.

6. Materials and Methods

The authors analyzed the scientific literature, reviewed the quantitative methods used in the research of other authors, and constructed

Table 3. Hierarchy of quantitative methods and models for researching the trade of recyclable raw material.

Model	Modeling Technique	Method of Solution	Sources
Mathematical programming methods	Single objective	Linear programming	(Pati et al. 2006; Ohno et al. 2017)
	Multi-objective	Mixed-integer linear programming	(Rajak et al. 2022)
		Mixed-effect linear model	(Petridis et al. 2020)
		VAR model	(Mesjasz-Lech and Michelberger 2019)
		Multi-objective linear programming	(Govindan and Sivakumar 2016; Paksoy et al. 2010)
		Multiple regression	(Person 2011)
		Analysis of hierarchical regression	(Yeow and Loo 2018; Vedantam et al. 2022)
		Fuzzy programming	(Arora et al. 2021)
		Stochastic dynamic programming	(Mesjasz-Lech and Michelberger 2019)
		Non-linear causality	(Feng 2022)
	Time series	Dynamic regression analysis	In this paper
Causal models	Causality identification	Causal effect modeling	(Lessard et al. 2021; Pao and Chen 2022; Giljum et al. 2008)
		Diagram of causal systems	(Tong et al. 2021)
Heuristic methods	Simple heuristic	Simulated annealing heuristics	(Taheri and Moghaddam 2022)
	Artificial intelligence	Markov chain	(Eckelman et al. 2012)
		Object-oriented Petri nets	(Xu et al. 2021)
		Fuzzy logic	(Arora et al. 2021; Chen et al. 2018)
		Rough sets	(Amiri et al. 2022)
		Neighbourhood rough sets	(Furedy 1997; Benjamin 2000)
	Metaheuristic	Genetic algorithm	(Demirel et al. 2014)
		Particle swarm optimization	(Wang et al. 2015)
Analytical models	Multiple-criteria decision making	Analytical hierarchy process	(Handfield et al. 2002)
		DEMATEL	(Shih-Hsiung et al. 2018)
	Systematic models	Delphi method	(Al-Agele and Al-Kaabi 2016)
		Network model	(Bing et al. 2015)

. Table 3 summarizes and provides a revision of the previous studies and research methods used in their studies. The authors found that among the quantitative methods listed above, the mathematical ones are occasionally mentioned in the research works of other scientists. In the meantime, time-series analysis allows us to identify variables, which help to trigger trade research for main recyclables.

The research results in Table 3 show that the most popular methods are causal effect modeling, single-objective and multiple-objective linear programming, the analysis of hierarchical regression, fuzzy logic, rough neighborhood sets, and network models. However, some other methods, including the dynamic regression method, do not receive attention or are rarely used in particular studies. Within this section, a detailed analysis and investigation into the trade of recyclables was conducted using the dynamic regression method, representing a relatively novel approach in similar studies, which is essential for circular economy development.

The authors of the CE might view this differently, including the dynamics of transitions. Considering such an approach, the authors proposed a methodology for researching the progress regarding a CE on the thematic area of ‘recycled raw materials’ using an indicator—trade in recyclable raw materials. The methodology is presented in

Table 4. Two-stage methodology for researching trade in recyclable raw materials.

Step of applied methodology	Approach toward evaluation of trade	Technique to achieve results and implement validation	Assessment of compliance with the requirements important for the transition to a CE
First step
Revision of variables	Identification of strong and weak connections with variables under the current situation.	Normalization, panel data analysis, and formation of the correlation matrix to identify critical variables.	Achievement of efficient use of environmental resources; achieving environment-oriented management and reduction in waste through recycling
Second step
Identification of dynamics	Construction of equations among identified pairs of variables with significant relationships.	Dynamic regression analysis, formation of regression equations, and testing the statistical validity of formed equations by applying the Chow test.	Identification of means necessary for TRRM development, which policymakers could apply.

.

To review essential variables, the authors used several steps. The authors identified the relationships by applying the suggested two-stage methodology (Table 4) and constructing Equations (1)–(2) describing the dynamics of trade volumes in recyclable raw materials.

The authors collected panel data for this study and investigated the links among monthly data about trade in recyclable raw materials from the Eurostat (2023) database. This article uses a dynamic regression model, as stated in Table 3. Using a simple regression analysis procedure, the authors seek regression coefficients in a model reflecting a linear relationship between the dependent and the regressor.

The authors determined the variables affecting the trade amount in recyclable raw materials based on the dynamic regression equation. The process has the following four steps:

• To accurately perceive new phenomena and systematize the variables important for phenomena, the authors formed a set of critical variables;
• The data selection phase was based on analytical reliability, measurability, and phenomenon adequacy. The quality of the available data was checked by assessing the availability of the required data, checking data sources, and analyzing their strengths and weaknesses.
• The authors performed a normalization step to compare variables regarding annual percentage differences. Compared to the historical period, the value differences showed a percentage change.
• At the validation stage of the analysis, the regression equation was estimated based on the normalization scheme. The authors analyzed if the correlation between private investments in CE sectors and the trade regarding recyclables exists and answered this question.

By applying the four steps mentioned above, the authors of this paper designed (1) the Equations (1) and (2). For Equation (2), the authors selected the data following the correlation coefficients and probabilities based on a designed matrix of research variables, which are presented in the Appendix A. In a specific section, the researchers focused on variables essential to recycling, excluding those considered less significant; (3) furthermore, data were normalized using a logarithmic process; and (4) later, the authors showed the validation analysis presented in Appendix B.

The model of dynamic regression developed to estimate how recycling variables affect the amount of trade in recyclables:

$${trd\_rec}_t={\beta }_0+{\beta }_1{trd\_rec}_{\left(t-1\right)}+{\beta }_2{prinv\_circ}_{\left(t\right)}+{\beta }_3{recov\_cnstr}_{\left(t\right)}+u_t$$

(1)

Variables:

$trd\_re{c}_t$—dependent variable of TRRM in year t;

${\beta }_0$—intercept;

$trd\_re{c}_{t-1}$—TRRM i—year t − 1;

$prinv\_cir{c}_t$—private investments, jobs, and gross value added in relation to circular economy sectors in year t;

$recov\_cnst{r}_t$—recovery rate of construction and demolition-generated wastes (CDWs) in year t;

$u_t$—random model error,

${\beta }_1,{\beta }_2,{\beta }_3$—coefficients of elasticity reflect the influence of independent variables on TRRM.

The variables included in the research are presented in Equation (1). The values of these variables are connected with period t.

This analysis reveals trend dynamics and provides insights into relationships in pairs. For the revision of dependent variables, the authors collected monthly information about trade in recyclable raw materials from the Eurostat (2023) database between 2000 and 2019.

7. Results

The trade volumes in recyclables are researched following a two-stage methodology. Following the first step, the authors must prove that the suggested equation is possible and matches statistical validity. The formula of the dynamic regression model is presented herein (see Equation (2)), where information from Table 5 is used. The authors included the coefficients of the formula and standard error values:

$$\begin{array}{cc}{tr{d}_{rec}}_t=190461.7+0.36{tr{d}_{rec}}_{\left(t-1\right)}& +17.92{prin{v}_{circ}}_{\left(t\right)}+915.17{reco{v}_{cnstr}}_{\left(t\right)}\\ \hfill \left(81698.4\right) \left(0.07\right)& \left(5.64\right) \left(384.3\right)\end{array}$$

(2)

Variables from Equation (1):

$trd\_re{c}_t$—dependent variable of TRRM in year t;

$trd\_re{c}_{t-1}$—TRRM i—year t − 1;

$prinv\_cir{c}_t$—private investments, jobs, and gross value added in relation to circular economy sectors in year t;

$recov\_cnst{r}_t$—recovery rate of construction and demolition-generated wastes (CDWs) in year t.

The strongest link is between private investments, jobs, and the gross value added in relation to circular economy sectors (PRINV_CIRC) and trade in recyclables (TRD_REC), which is presented in Figure 1.

Aiming to summarize the concrete values of the regression analysis (2), the authors incorporate the results of the correlation tests conducted for this empirical study, following identified correlation coefficients and probabilities among the pairs of variables normalized for this test’s performance. Later, the authors selected the pairs of variables with significant relationships (see Appendix A) and applied the panel least squares method to obtain the outputs provided below (see Table 5 and Appendix B).

Table 5 shows the following statistics: coefficients, which are used in Equation (2); standard error values, which are placed under each variable of Equation (2); and the probability, which shows that the coefficients mentioned above are valid when the probability is lower than 0.05.

Table 5. Coefficients for forming Equation (2) applying the panel least squares revision method.

Variable	Coefficient	Standard Error	t-Statistic	Probability
C	190,461.7	81,698.4	2.33	0.021
$trd\_re{c}_{t-1}$	0.36	0.07	4.95	0
$prinv\_cir{c}_t$	17.92	5.64	3.17	0.001
$recov\_cnst{r}_t$	915.17	384.3	2.38	0.018

Table 5. Coefficients for forming Equation (2) applying the panel least squares revision method.

Variable	Coefficient	Standard Error	t-Statistic	Probability
C	190,461.7	81,698.4	2.33	0.021
$trd\_re{c}_{t-1}$	0.36	0.07	4.95	0
$prinv\_cir{c}_t$	17.92	5.64	3.17	0.001
$recov\_cnst{r}_t$	915.17	384.3	2.38	0.018

Variables from Equation (1):

$trd\_re{c}_{t-1}$—TRRM i—year t − 1;

$prinv\_cir{c}_t$—private investments, jobs, and gross value added in relation to circular economy sectors in year t;

$recov\_cnst{r}_t$—recovery rate of construction and demolition-generated wastes (CDWs) in year t;

The table above shows the relationship between trade for recyclable raw materials and other variables. Table 5 shows that the trade in recyclable raw materials has links with the following two indicators: the recovery rate of CDW and private investments into circularity. According to Equation (2), if the recovery rate of CDW and private investments into circularity increase, then the trade for the recycling amount also increases.

The authors Identified that R-squared equals 0.994, and the Durbin–Watson statistic equals 1.84. In addition, the statistical validity is tested using the Chow test, which presents the correct statistical validity.

The results show that the constructed residuals of the equation are spread by following normal distribution (see Figure 2). The statistics demonstrate that the mean is close to zero. Figure 2 shows that the average of residuals is close to zero.

The results show that the authors formed a correlation matrix and dynamic regression model, which was used to determine the amount of trade in recyclable raw materials.

The dynamic regression model is formed following the two-stage methodology suggested by this paper’s authors. The suggested model can be used to predict the use of trade in recyclable raw materials in the EU-27 countries.

The authors revised and proposed a regression equation that characterizes the variables influencing the trade in recyclables. This system can be practically applied and proves valuable for individuals interested in analyzing cases related to the trade of recyclables and circular economy development.

8. Discussion

The CE has become one of the newest solutions to environmental sustainability problems. Also, CE is gaining increasing attention as a way of transforming current production and consumption patterns, which are based on continuous economic growth and increasing resource scarcity. The shift towards CE and the drive for more resource efficiency drives the economic system towards closed-loop production models, with a particular focus on waste reduction, recycling, and a strong link to trade.

These interactions are key to ensuring that global value chains can increase resource efficiency through trade while ensuring the best possible balance between the economy, environment, and society.

This paper contributes to the theoretical understanding of circular economy principles by exploring trade dynamics in recyclable raw materials. It may lead to refining and expanding existing circular economy frameworks, offering insights into how trade practices can be integrated into theoretical models.

Research gaps have been identified in the EU’s lack of adequate tools and standards to ensure the quality of secondary raw materials to increase their use and trade flows. Causal modeling, single-objective and multi-objective linear programming, hierarchical regression analysis, fuzzy logic, fuzzy neighborhood sets, and network modeling were found to be the most popular methods used to investigate the dynamics of trade. However, the use of other methods is still being refined. The authors revised six economic and environmental theories to cover the research gap, highlighting trade’s role in recyclables.

Such trade is a specific phenomenon and highly depends on the contribution of industry sectors.

This topic must receive more attention in the context of sustainability, circularity, the CE, and their interaction with the economy. In the shift to a CE, it is important to quantify the contribution of the circularity of services and products to the CE and look at circularity indicators while minimizing the environmental impact and considering economic and social aspects.

The theoretical implications of this paper contribute to an academic understanding of circular economy dynamics, while its practical implications guide businesses, policymakers, and practitioners in implementing sustainable practices and navigating the evolving landscape of global trade in recyclable raw materials.

Countries engaged in international trade can practically consider this paper’s implications for collaboration. These findings may influence trade agreements and partnerships, fostering a more coordinated global approach to circular economy practices and the trade of recyclable materials and interactions with the economy.

In addition, the formed equation shows that private investments, jobs, and the gross value added in relation to CE sectors are the most important factors affecting the trade volumes of recyclable raw materials. This phenomenon could argue that investments into circularity have positive effects and help the EU-27 to reduce the consumption of raw materials and basic resources. According to research, the private investments, jobs, and gross value added in relation to circularity and CE sectors have the highest correlation coefficient in pair with the trade of recyclable raw materials.

The study’s design is quite new and highlights the potential of the dynamic regression model, whose application showed fairly good results in this study.

In this article, the authors studied variables important for recycling, excluding other less significant aspects. The authors plan to conduct a study that includes more variables and a more in-depth examination of the economic impact in future research.

9. Conclusions

The research shows the links between the CE’s development and trade in recycled raw materials. Such links are seen in two ways: first, the trade in recyclable raw materials is the main indicator for CE development; on the other hand, private investments in CE sectors show trade growth in recycled raw materials. Understanding such links is important for the transition process toward a CE and gives valuable insights for policy formers and decision makers.

The authors researched how the Increase in secondary waste could influence the change in trade volumes. The authors identified many quantitative methods generally used to analyze trade volumes’ dependency on recyclable raw materials. Among these quantitative methods, the most popular methods applied in the research of other authors are causal effect modeling, single-objective and multiple-objective linear programming, the analysis of hierarchical regression, fuzzy logic, rough neighborhood sets, and network models.

Using the dynamic regression model, the authors propose a two-step methodology for researching trade in recyclable raw materials. Such a model could be used for notified investigations in this area. The authors applied panel data analysis in the EU-27, constructed the equation, and tested its statistical validity. The model follows several trends: the recovery rate of CDW, private investments, jobs, and the gross value added in relation to circularity and CE sectors. It analyzes how these trends influence the trade volumes in recyclable raw materials. The authors determined the direct relationship and statistical significance of the mathematical description of researched phenomena.

The development of trade In recyclable raw materials could have far-reaching effects, influencing political decisions, societal behavior, and the practices of practitioners in businesses and industries. The development of trade in recyclable raw materials has the potential to drive positive change by fostering sustainability, resource efficiency, and economic resilience.

This research has some limitations. Not all the types of secondary waste (i.e., plastic metal, e-waste, etc.) were analyzed in this paper, including trade’s evolution toward them. Such investigations could be the future direction for further studies. Also, the authors could analyze the development of trade volumes when more types of waste are included. The research is delivered over a ten-year time frame. As the research cycle continues, this study could cover other periods. This research has geographical territory limitations as the research was delivered in the EU-27.