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Stable recycling networks under the Extended Producer Responsibility

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  • Tian, Fang
  • Sošić, Greys
  • Debo, Laurens

Abstract

A recently emerging concept, Extended Producer Responsibility (EPR), is being adopted by the government in more and more countries and regions. It shifts the burden of proper disposal of end-of-life consumer products from (local) governments to the producers that bring the products to the market. To comply with governments’ EPR-type legislation, producers form coalitions to have their products recycled in a more efficient way. In this paper, we study how two important determinants of recycling costs, fixed recycling costs and material-stream heterogeneity, influence producers’ recycling network (structure of producers’ recycling coalitions). On one hand, large fixed recycling costs make the coalitions typically larger, due to the economies of scale. On the other hand, large coalitions generate typically more heterogeneous material streams, which increase the variable recycling costs due to additional separation and disassembly efforts. This paper discusses two currently existing scenarios: one exists prior to EPR-type legislation (referred to as the Disparate Problem, or DP) and the other is motivated by EPR-type legislation (referred to as the Endogenous Problem, or EP). In DP, the recycling of end-of-life products is not the responsibility of any producer but the government. Therefore, the recycling network is determined to minimize the total recycling cost, which also maximizes the social welfare, while the outputs are determined by producers without concerns about recycling. In EP, producers who compete in a horizontally differentiated primary market may also collaborate at the same time to organize proper disposal of their products. As each producer is only interested in maximizing its own payoff and there may exist conflict of interests, we use the game-theoretical methodology to analyze the endogenous process of coalition-formation. We find structural differences in these two scenarios and conclude by discussing implications for social welfare of imposing tax or subsidy.

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  • Tian, Fang & Sošić, Greys & Debo, Laurens, 2020. "Stable recycling networks under the Extended Producer Responsibility," European Journal of Operational Research, Elsevier, vol. 287(3), pages 989-1002.
    • Handle: RePEc:eee:ejores:v:287:y:2020:i:3:p:989-1002
    DOI: 10.1016/j.ejor.2020.05.002
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    4. Compagnoni, Marco & Grazzi, Marco & Pieri, Fabio & Tomasi, Chiara, 2023. "Extended producer responsibility and trade flows in waste: The case of batteries," FEEM Working Papers 338789, Fondazione Eni Enrico Mattei (FEEM).
    5. Iyer, Ananth V. & Vedantam, Aditya & Lacourbe, Paul, 2023. "Recycled content claims under demand benefit and supply uncertainty: Multi-period model and application to glasswool insulation," European Journal of Operational Research, Elsevier, vol. 309(2), pages 745-761.
    6. Xu, Jie & Ng, C.T. & Cheng, T.C.E., 2021. "Remanufacturing strategies under product take-back regulation," International Journal of Production Economics, Elsevier, vol. 235(C).
    7. De, Arijit & Ray, Ankita & Kundu, Tanmoy & Sheu, Jiuh-Biing, 2023. "Is it wise to compete or to collaborate? Remanufacturing business models under collective extended producer responsibility legislation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 179(C).
    8. Tsan-Ming Choi & Tana Siqin, 2024. "Can government policies help to achieve the pollutant emissions information disclosure target in the Industry 4.0 era?," Annals of Operations Research, Springer, vol. 342(2), pages 1129-1147, November.
    9. Tao Chu & Jingai Ma & Yongguang Zhong & Hao Sun & Weiqiang Jia, 2024. "Shared recycling model for waste electrical and electronic equipment based on the targeted responsibility system in the context of China," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-26, December.
    10. Guo, Xiaolong & Li, Xiansen & Bian, Junsong & Yang, Chenchen, 2023. "Deposit or reward: Express packaging recycling for online retailing platforms," Omega, Elsevier, vol. 117(C).

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