Rebound Effects of Digital Textile Microfactories in Fashion, a System Dynamics Study of CO ₂ Emissions

ABSTRACT The fashion industry's high resource use and globalised supply chains generate environmental degradation through overproduction, waste and pollution. Digital Textile Microfactories (DTMFs) are promoted as a more sustainable alternative because they enable fast, digitalised and often localised production, but lower costs and a greener image may also trigger rebound effects. We develop a stylised system dynamics model of a T‐shirt market in a fictional city to analyse how DTMF diffusion may affect market behaviour and CO 2 ‐eq emissions over time. The model represents feedbacks between production capacity, prices, sustainability perception, overconsumption and emissions and is used to simulate a baseline diffusion scenario and policy variants with price competition and an introductory subsidy. The results show that a technology shift towards DTMFs alone is insufficient to reduce emissions, because increased demand and overconsumption can outweigh per unit efficiency gains, which underscores the need for complementary demand side measures.