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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.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 62 (2011)
Issue (Month): 2 (September)
Pages: 290-308

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Handle: RePEc:eee:jeeman:v:62:y:2011:i:2:p:290-308

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Web page: http://www.elsevier.com/locate/inca/622870

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

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References

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  1. 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.
  2. repec:ebl:ecbull:v:17:y:2007:i:6:p:1-9 is not listed on IDEAS
  3. Ann Wolverton & Don Fullerton, 2003. "The Two-Part Instrument in a Second-Best World," NCEE Working Paper Series 200304, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Aug 2003.
  4. Fullerton Don & Kinnaman Thomas C., 1995. "Garbage, Recycling, and Illicit Burning or Dumping," Journal of Environmental Economics and Management, Elsevier, vol. 29(1), pages 78-91, July.
  5. Palmer, Karen & Walls, Margaret, 2000. "Upstream Pollution, Downstream Waste Disposal, and the Design of Comprehensive Environmental Policies," Discussion Papers dp-97-51-rev, Resources For the Future.
  6. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
  7. Malik, Arun S., 1990. "Markets for pollution control when firms are noncompliant," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 97-106, March.
  8. Lee, Dwight R., 1984. "The economics of enforcing pollution taxation," Journal of Environmental Economics and Management, Elsevier, vol. 11(2), pages 147-160, June.
  9. Fullerton, Don & Wu, Wenbo, 1998. "Policies for Green Design," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 131-148, September.
  10. Dinan Terry M., 1993. "Economic Efficiency Effects of Alternative Policies for Reducing Waste Disposal," Journal of Environmental Economics and Management, Elsevier, vol. 25(3), pages 242-256, November.
  11. Don Fullerton & Ann Wolverton, 2000. "Two Generalizations of a Deposit-Refund System," NBER Working Papers 7505, National Bureau of Economic Research, Inc.
  12. 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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Cited by:
  1. Angelo Antoci & Simone Borghesi & Mauro Sodini, 2012. "ETS and Technological Innovation: A Random Matching Model," Working Papers 2012.79, Fondazione Eni Enrico Mattei.
  2. 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.
  3. Norimichi Matsueda & Yoko Nagase, 2011. "An Economic Analysis of the Packaging Waste Recovery Note System in the UK," Discussion Paper Series 72, School of Economics, Kwansei Gakuin University, revised Jun 2011.
  4. Walls, Margaret, 2011. "Deposit-Refund Systems in Practice and Theory," Discussion Papers dp-11-47, Resources For the Future.
  5. Honma, Satoshi, 2013. "Optimal policies for international recycling between developed and developing countries," MPRA Paper 43703, University Library of Munich, Germany.
  6. 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.

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