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We construct a Ramsey-type model where households recycle waste generated by con-
sumption and the not recycled waste has negative externality. The aim of this paper is
the following two points. First, we examine a structural change process from \a linear
economy" based on consumption-disposal toward "a sound material-cycle economy" or
"a circular economy" based on consumption-recycling; Second, we examine dynamics of
optimal consumption tax and recycling subsidy. In addition, we discuss the Environmen-
tal Kuznets Curve(EKC). Previous theoretical literature explains mechanism of EKC by
changes in production sectors: such as an abatement technology or technological change.
In contrast, this paper tries to show EKC through the aforementioned structural change
process.
