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On the Second-best Policy of Household's Waste Recycling

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  • Takayoshi Shinkuma

Abstract

This study analyzes the second-best household's waste recycling policy. If we assume the first-best economy with no illegal disposal or transaction costs, then unit pricing, an advance disposal fee and a recycling subsidy are required in order to achieve the social optimum such that both the sum of unit pricing and an advance disposal fee and the sum of unit pricing and a recycling subsidy are equal to the marginal disposal cost. Furthermore, the first-best outcome can also be obtained by a producer take-back requirement system. In the real economy, however, various factors prevent the first-best optimal outcome. In this study we consider two factors, one being the transaction cost associated with a recycling subsidy (or refund) and the other being illegal disposal by the consumer. If a recycling subsidy (or a deposit-refund system) is adopted, a transaction cost associated with it will be generated. Alternatively, if unit pricing is adopted, some of the consumed goods may be disposed of illegally. We show the complete trade-off between unit pricing and a recycling subsidy. In other words, we can not adopt unit pricing and a recycling subsidy simultaneously. As a result, there are three candidates for the second-best policy: unit pricing with an advance disposal fee, a deposit-refund system, and a producer take-back requirement system. Which of these three policies is the second-best policy will depend on the relative magnitude of the price of a recycled good and the marginal transaction cost associated with a recycling subsidy (or the refund in a deposit-refund system). Generally, if the price of a recycled good is positive and the marginal transaction cost is relatively high, unit pricing with an advance disposal fee is the second-best policy. However, where the price of a recycled good is negative and the marginal transaction cost is relatively high, a producer take-back requirement system is the second-best policy. Further, where the marginal transaction cost is relatively low, a deposit-refund system is the second-best policy, regardless of whether the price of a recycled good is positive or negative. Copyright Kluwer Academic Publishers 2003

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  • Takayoshi Shinkuma, 2003. "On the Second-best Policy of Household's Waste Recycling," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 24(1), pages 77-95, January.
    • Handle: RePEc:kap:enreec:v:24:y:2003:i:1:p:77-95
    DOI: 10.1023/A:1022842617469
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    1. Don Fullerton & Wenbo Wu, 2002. "Policies for Green Design," Chapters, in: Don Fullerton & Thomas C. Kinnaman (ed.), The Economics of Household Garbage and Recycling Behavior, chapter 5, pages 102-119, Edward Elgar Publishing.
    2. Don Fullerton & Thomas C. Kinnaman, 2002. "Household Responses to Pricing Garbage by the Bag," Chapters, in: Don Fullerton & Thomas C. Kinnaman (ed.), The Economics of Household Garbage and Recycling Behavior, chapter 4, pages 88-101, Edward Elgar Publishing.
    3. Don Fullerton & Thomas C. Kinnaman, 2002. "Garbage, Recycling, and Illicit Burning or Dumping," Chapters, in: Don Fullerton & Thomas C. Kinnaman (ed.), The Economics of Household Garbage and Recycling Behavior, chapter 2, pages 49-62, Edward Elgar Publishing.
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    5. Choe, Chongwoo & Fraser, Iain, 1999. "An Economic Analysis of Household Waste Management," Journal of Environmental Economics and Management, Elsevier, vol. 38(2), pages 234-246, September.
    6. Palmer, Karen & Walls, Margaret, 1997. "Optimal policies for solid waste disposal Taxes, subsidies, and standards," Journal of Public Economics, Elsevier, vol. 65(2), pages 193-205, August.
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    1. Hong, I-Hsuan & Lee, Yi-Ting & Chang, Pei-Yu, 2014. "Socially optimal and fund-balanced advanced recycling fees and subsidies in a competitive forward and reverse supply chain," Resources, Conservation & Recycling, Elsevier, vol. 82(C), pages 75-85.
    2. Dwivedy, Maheshwar & Suchde, Pratik & Mittal, R.K., 2015. "Modeling and assessment of e-waste take-back strategies in India," Resources, Conservation & Recycling, Elsevier, vol. 96(C), pages 11-18.
    3. S. Ferreira & M. Cabral & N.F. da Cruz & P. Simões & R.C. Marques, 2017. "The costs and benefits of packaging waste management systems in Europe: the perspective of local authorities," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 60(5), pages 773-791, May.
    4. Norimichi Matsueda & Yoko Nagase, 2008. "Economic Instruments and Resource Use in a Recyclable Product Market," Economics Bulletin, AccessEcon, vol. 17(21), pages 1-10.
    5. 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.
    6. 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.
    7. Mariko Onoda, 2012. "On second-best policing effort against the illegal disposal of recyclable waste," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 14(2), pages 171-188, April.
    8. Massarutto, Antonio, 2014. "The long and winding road to resource efficiency – An interdisciplinary perspective on extended producer responsibility," Resources, Conservation & Recycling, Elsevier, vol. 85(C), pages 11-21.
    9. Fleckinger, Pierre & Glachant, Matthieu, 2010. "The organization of extended producer responsibility in waste policy with product differentiation," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 57-66, January.
    10. Alessio D'Amato & Massimiliano Mazzanti & Francesco Nicolli & Mariangela Zoli, 2014. "Illegal Waste Disposal, Territorial Enforcement and Policy. Evidence from regional data," SEEDS Working Papers 0314, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Feb 2014.
    11. Mariko Onoda, 2010. "On Second-best Policing Effort against the Illegal Disposal of Recyclable Waste," Discussion Paper Series 56, School of Economics, Kwansei Gakuin University, revised May 2010.
    12. Berardino Cesi & Alessio D’Amato & Mariangela Zoli, 2019. "Corruption in environmental policy: the case of waste," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(1), pages 65-78, April.
    13. Saphores, Jean-Daniel M. & Ogunseitan, Oladele A. & Shapiro, Andrew A., 2012. "Willingness to engage in a pro-environmental behavior: An analysis of e-waste recycling based on a national survey of U.S. households," Resources, Conservation & Recycling, Elsevier, vol. 60(C), pages 49-63.
    14. Carlo Reggiani & Francesco Silvestri, 2018. "Municipal Solid Waste, Market Competition and the EU Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(2), pages 457-474, October.
    15. Sukanya Das & Ekin Birol & Rabindra N. Bhattacharya, 2010. "Informing Efficient Solid Waste Management to Improve Local Environmental Quality and Public Health in West Bengal, India," Chapters, in: Jeff Bennett & Ekin Birol (ed.), Choice Experiments in Developing Countries, chapter 10, Edward Elgar Publishing.
    16. Alessio D’Amato & Shunsuke Managi & Massimiliano Mazzanti, 2012. "Economics of waste management and disposal: decoupling, policy enforcement and spatial factors," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 14(4), pages 323-325, October.
    17. 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.
    18. Houévoh Amandine R. Gnonlonfin, 2016. "An evaluation of French municipal solid waste pricing system," Working Papers 2016.18, FAERE - French Association of Environmental and Resource Economists.
    19. Shinkuma, Takayoshi, 2007. "Reconsideration of an advance disposal fee policy for end-of-life durable goods," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 110-121, January.
    20. Baraldi, Anna Laura & Cantabene, Claudia & De Iudicibus, Alessandro, 2023. "Fighting crime for improved recycling: evaluating an anti-mafia policy on source separation of waste," MPRA Paper 120296, University Library of Munich, Germany.
    21. Bilal Boubellouta & Sigrid Kusch-Brandt, 2023. "Driving factors of e-waste recycling rate in 30 European countries: new evidence using a panel quantile regression of the EKC hypothesis coupled with the STIRPAT model," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(8), pages 7533-7560, August.
    22. Francisco J. André & Emilio Cerdá, 2005. "Gestión de residuos sólidos urbanos: Análisis económico y políticas públicas," Economic Working Papers at Centro de Estudios Andaluces E2005/23, Centro de Estudios Andaluces.
    23. Hiroaki Ino & Norimichi Matsueda, 2019. "The curse of low-valued recycling," Journal of Regulatory Economics, Springer, vol. 55(3), pages 282-306, June.
    24. Rob Aalbers & Herman Vollebergh, 2008. "An economic analysis of mixing wastes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(3), pages 311-330, March.
    25. Ulli-Beer, Silvia & Andersen, David F. & Richardson, George P., 2007. "Financing a competitive recycling initiative in Switzerland," Ecological Economics, Elsevier, vol. 62(3-4), pages 727-739, May.

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