The circular economy, in other words, the reuse or recycling of products, components, or materials, has been shown to have significant environmental potential. The environmental benefits of reuse and recycling are calculated as the difference between the incurred impacts of collection and reprocessing and the avoided impacts from displaced production processes and avoided landfill. In other words, reuse and recycling create environmental benefits only to the extent that they displace primary or other production activities. Since displaced production is market-mediated, it may not occur on a one-to-one basis. This phenomenon is called circular economy rebound and reduces the environmental benefits of circular economy activities. This chapter explains the mechanisms behind displaced production and circular economy rebound. It presents methods available to quantify both effects and also discusses potential tools and approaches to avoid, or at least reduce, circular economy rebound.
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