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Optimal environmental policy for waste disposal and recycling when firms are not compliant

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  • Ino, Hiroaki

Abstract

We investigate a model that considers disposal and recycling activities after the consumption of products. In the field, the deposit-refund (D-R) policy has been considered as an ideal policy for internalizing disposal costs, which can result in the realization of the first-best policy. However, the possibility of firms' illegal disposal has been neglected. We introduce a monitoring cost to prevent firms from disposing of collected residuals illegally and induce the second-best D-R policy. We find that the relation between the monitoring problem for firms and the price of the recycling market brings about a variation in the optimal level of the refunds (which is typically smaller than the first-best level). Further, we investigate an alternative policy that requires producers to take-back residuals and show how this policy works equivalently to the second-best D-R policy by applying the theory of the tradable rights market.

Suggested Citation

  • Ino, Hiroaki, 2011. "Optimal environmental policy for waste disposal and recycling when firms are not compliant," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 290-308, September.
    • Handle: RePEc:eee:jeeman:v:62:y:2011:i:2:p:290-308
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    Cited by:

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    2. Shteryo Nozharov, 2018. "Transaction Costs In Collective Waste Recovery Systems In The Eu," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 1 Year 20, pages 18-30.
    3. Matsueda, Norimichi & Nagase, Yoko, 2012. "An economic analysis of the Packaging waste Recovery Note System in the UK," Resource and Energy Economics, Elsevier, vol. 34(4), pages 669-679.
    4. D’Amato, Alessio & Mazzanti, Massimiliano & Nicolli, Francesco, 2015. "Waste and organized crime in regional environments," Resource and Energy Economics, Elsevier, vol. 41(C), pages 185-201.
    5. Acuff, Kaylee & Kaffine, Daniel T., 2013. "Greenhouse gas emissions, waste and recycling policy," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 74-86.
    6. Hirotaka Kumamaru & Kenji Takeuchi, 2023. "The recycled content of plastic products: estimating the impact of a recycling law on the input mix," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 25(3), pages 355-376, July.
    7. Wolfram Berger & Yoko Nagase, 2018. "Waste management regulation: policy solutions and policy shortcomings," Scottish Journal of Political Economy, Scottish Economic Society, vol. 65(3), pages 205-223, July.
    8. Yixuan Wang & Xingle Long & Liang Li & Qinglin Wang & Xiping Ding & Sijia Cai, 2021. "Extending theory of planned behavior in household waste sorting in China: the moderating effect of knowledge, personal involvement, and moral responsibility," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(5), pages 7230-7250, May.
    9. Daniel T. Kaffine, 2014. "Scrap Prices, Waste, and Recycling Policy," Land Economics, University of Wisconsin Press, vol. 90(1), pages 169-180.
    10. Hiroshi Kinokuni & Shuichi Ohori & Yasunobu Tomoda, 2019. "Optimal Waste Disposal Fees When Product Durability is Endogenous: Accounting for Planned Obsolescence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(1), pages 33-50, May.
    11. Mansikkasalo, Anna & Lundmark, Robert & Söderholm, Patrik, 2014. "Market behavior and policy in the recycled paper industry: A critical survey of price elasticity research," Forest Policy and Economics, Elsevier, vol. 38(C), pages 17-29.
    12. Satoshi Honma, 2019. "Optimal policies for international recycling between developed and developing countries," Letters in Spatial and Resource Sciences, Springer, vol. 12(2), pages 143-153, August.
    13. Diana Roa & Knut Einar Rosendahl, 2023. "Policies for Material Circularity: the Case of Lithium," Circular Economy and Sustainability, Springer, vol. 3(1), pages 373-405, March.
    14. Walls, Margaret, 2011. "Deposit-Refund Systems in Practice and Theory," RFF Working Paper Series dp-11-47, Resources for the Future.
    15. Angelo Antoci & Simone Borghesi & Mauro Sodini, 2012. "ETS and Technological Innovation: A Random Matching Model," Working Papers 2012.79, Fondazione Eni Enrico Mattei.
    16. Hiroaki Ino & Norimichi Matsueda, 2019. "The curse of low-valued recycling," Journal of Regulatory Economics, Springer, vol. 55(3), pages 282-306, June.
    17. Patrik Söderholm & Tomas Ekvall, 2020. "Metal markets and recycling policies: impacts and challenges," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 33(1), pages 257-272, July.

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    More about this item

    Keywords

    Deposit Refund Monitoring Illegal waste disposal Take-back requirement Tradable rights;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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