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• The paper develops a new closed-loop hybrid system dynamics-optimization approach. • The system dynamics model and hybrid model are compared. • Energy production from waste is considered in the paper. • Social, environmental, and economic aspects are studied in the models. System dynamics approach is a tool to study socio-economic systems and make strategic decisions. However, it is not an appropriate planning method. For this purpose, optimization models are more powerful options. This paper represents a new combination of a system dynamics simulation with an optimization model to consider both aspects. For this purpose, a system dynamics model is developed to simulate the system in a feed-forward path. Then, it is connected to an already developed multi-objective optimization model on the feedback path in a real-time manner to constitute a hybrid closed-loop model. The hybrid model is applied to study the waste management system in Tehran. The focus of the hybrid model is on waste-to-energy technologies and how the system decides to install them. Comparing the hybrid model's results with those of the system dynamics model proves that the optimized policies considerably improve the system financially and environmentally. As far as technologies are concerned, the hybrid model suggests more capacities and diversity of technologies rather than the open-loop system dynamics model. Overall, the framework can be applied to all decision-making models that can add an advantage to system dynamics models. Moreover, the system dynamics model obtained through several scenarios shows that raising awareness, increasing Feed-in-Tariff, and investment in waste-to-energy technologies positively affect the waste management system. [ABSTRACT FROM AUTHOR]