“Increasing returns through circularity: a theory of production residuals for sustainable circular transitions”

• Production residuals are modelled based on a structural dynamics approach • The use of production residuals through circular innovation and practices can trigger increasing returns trajectories promoting sustainable circular transitions • The economic implications of residuals’ use are analysed in the context of one-way and circular representations of production The concepts of environmental sustainability and economic development, the former founded on the assumption of a planet with finite resources while the latter privileges growth driven by increasing returns, find their most difficult junction in the current era of climate change. Starting from the sustainable transition literature and structural dynamics models, this paper outlines a theory of production residuals showing how residuals are generated, their typology, and how to innovatively use them. The paper analyses the economic implications of residuals in the context of 'one way' and circular representations of production and contributes to the study of sustainable circular transitions.