A Market‐Based Framework for Quantifying Displaced Production from Recycling or Reuse

Summary The most significant environmental benefit of recycling or reusing a wide range of products and materials is typically the potential to displace primary material production; lack of displacement significantly reduces the environmental benefits of these activities. Because no consensus method to estimate displacement rate has emerged, environmental assessments have tended to assume that displacement occurs on a one‐to‐one basis. However, displaced production is a complex phenomenon governed primarily by market mechanisms, rather than physical relationships. This article advances the understanding of displacement by presenting a market‐based framework describing the displacement relationship and a methodology for quantifying displacement rate based on partial equilibrium modeling. Using this methodology, a general symbolic equation for displacement rate after an increase in recycling is derived. The model highlights the market mechanisms that govern displaced production and identifies five price response parameters that affect displacement rate. Results suggest that one‐to‐one displacement occurs only under specific parameter restrictions that are unlikely in competitive commodity markets, but zero displacement is possible if secondary materials are poor substitutes for primary materials; displacement is likely to be reduced if secondary materials have inferior technical properties. The presented methodology can be generally applied to any system in which recycled or reused materials are substitutes or complements for primary materials. Implications for improving recycling and reuse efficacy and environmental assessment methodology are discussed, and suggestions are presented for expanding the displacement methodology in future research.