The Circular Economy (CE) has emerged as an economic paradigm that could provide a pathway to sustainable development. The transition to a CE is a complex process requiring wide multi-level and multi-stakeholder engagement, which can be facilitated by appropriate policy interventions. As value retention processes in the CE require additional labour, the transition from a linear to a circular economy can be viewed as a transition from a capital-based economy to a labour economy. Consequently, a ‘circular tax shift’, based on an introduction of environmental taxation paired with a reduction of labour taxation, could be a powerful lever for public policy. The aim of this research was to assess the effect of this tax shift on the financial feasibility of circularity in the construction sector. The main research question is: ‘What is the effect of a circular tax shift on the financial feasibility of circular construction, in relation to linear construction?’ To answer this question, a micro-economic analysis has been applied on two circular construction case studies: the ‘The Voice of Urban Nature’ and ‘Circuloco’ pavilions that were built at the Floriade World Expo 2022. A linear and circular variant have been developed for both case studies, for which a life cycle costing analysis has been conducted. A life cycle assessment has been applied to determine the environmental impacts, on the basis of which environmental taxation was applied under the taxation scenarios, which reflected varying levels of the circular tax shift. The results show that under the current taxation system, the total life cycle costs for the circular variants are 2,0 - 2,7% higher than for the linear variants, though environmental impacts are lower by 38,7 - 52,7%. The effect of the tax shift is that the cost differences between the linear and circular variants decrease, and in two of the high level tax shift scenarios, the circular variant of the Circuloco pavilion becomes more financially feasible than the linear variant. Although the external validity is low, the results of the research imply that the suggested circular tax shift could create incentives to use secondary and biobased materials in construction. The tax circular shift also implies many other effects, which are outside the scope of this research, but have been suggested as subjects for follow-up research.

The Paris Agreement set goals to minimize global warming by reducing CO2 emissions. In the Netherlands, the Paris Agreement is translated into policies that aim for circularity and sustainability at different governmental levels. These policies are directed at the sustainability transitions within different fields, such as the built environment. The construction sector is responsible for high levels of CO2 emissions, however, there is a big housing shortage in the Netherlands and the aim is to construct 900.000 new houses by the end of 2030. This challenge requires a transition to a more sustainable way of constructing, to stay below the critical threshold of 1.5 °C global warming. The transition from traditional housing constructions to timber constructions can arguably be a solution to this challenge. To accelerate this transition, the Metropole Region of Amsterdam (MRA) has written a covenant that aims to construct 20% of the total housing production in the MRA by timber, by 2025. This is a high ambition, as currently only some pilot projects are constructed out of timber. While the covenant might give body to this transition in the MRA, there are still a lot of questions about how different policy instruments can foster the timber transition in the MRA. Many studies have been conducted on transitions and innovation policies, and affluent policy instruments for the transition of innovations are presented in literature. However, literature lacks in presenting how a combination of different policy instruments can foster a sustainability transition. This research, which is case study based, therefore researches the different policy instruments that are or can be implemented to foster the transition of timber constructions in the MRA. The literature study presents the theories that make up the theoretical framework and give a deeper understanding of the concepts that are used. The empirical research consists of a document analysis, a stakeholder analysis, interviews with stakeholders and an expert session for validation. The stakeholders within the empirical research are stakeholders that are actively involved in the timber transition in the MRA. This research finally gives answer to the question ‘How can a combination of policy instruments foster the transition to timber housing constructions in the MRA?’. It contributes to the existing literature on policy instruments for transitions by providing concrete methods and an operationalization of the analytical framework for the development of a combination of policy instruments for the timber transition. Furthermore, this research provides policymakers with recommendations on the development of a combination of policy instruments for the timber transition, as well as for sustainability transitions in general. Lastly, this research contributes to broadening the knowledge on the timber transition, as much is yet unknown and there is a great demand for more knowledge on this topic.

The aim of this thesis project is to understand how policy instruments influence the adoption of wood-based building practices and to examine the effect of increased wood-based construction on circular practices. This study identifies key actors in the built environment, including housing associations, private owners, construction and demolition companies, and material suppliers. The behavior and relationships of these actors are analyzed. An agent-based model is developed to explore the impact of various policy instruments, such as carbon taxation, demolition notification, and knowledge sharing. The study revealed several findings. First, there is significant inertia among construction compa- nies and building owners towards adopting wood-based construction, primarily due to high initial investments and lack of familiarity. This results in a hefty premium being paid for wood-based construction before it becomes well established. It was discovered that a substantial subsidy on mass timber is essential. Additionally, significant taxation on reinforced concrete, such as through carbon taxation, helps overcome the inertia in the system. Another effective instrument is the sharing of wood-based construction knowledge among construction companies. Once wood-based construction is established, it becomes cost-competitive, reducing the need for continuous stimu- lation through policy instruments. With the establishment of wood-based construction, several effects on the circularity in the built environment and material usage have been identified. Despite a shift to wood-based construction, the demand for concrete remains significant. This underscores the importance of concrete recycling practices. The increase in wood content in construction requires enhanced mass-timber recycling practices. This study highlights the role of temporary material storage in facilitating circularity. It suggests the need for strategies to match material streams from demolition to construction. In summary, this thesis project demonstrates that a combination of policy instruments, especially carbon taxation and knowledge sharing, is crucial in transitioning to wood-based construction. The study highlights the need for continued attention to concrete use and recycling, especially when wood-based practices gain traction.