Municipal solid waste management in circular economy: A sequential optimization model

We develop a sequential optimization model to analyze a circular economy framework where waste is collected by municipalities and it is partially reused by a recycling company for the production of electricity, thermal energy and other goods. The considered municipalities collect recyclable and not-recyclable waste types, sorted by citizens, which are sold to the recycling company and sent to landfill, respectively. Each municipality aims at maximizing its profits deriving from selling the recyclable waste to the recycling company, taking into account the waste collection and the dismantling costs. On the other side, the recycling company maximizes its total profit obtained from the difference between the revenues of selling the new goods produced and the costs of purchasing and treating recyclable waste. In this closed-loop supply chain, the municipalities define the prices at which they can offer recyclable waste to the recycling company and the tax that citizens has to pay for the waste management service. In contrast, the recycling company selects the processing volumes of recyclable waste to purchase depending on the offer prices set by the municipalities. In order to find the equilibrium of the whole supply chain, we propose an iterative decomposition method, applied to waste collection in the Lombardy Region in Italy, that accounts for the sequence of the decisions taken by the municipalities and the recycling company.