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Waste, recycling, and "Design for Environment": Roles for markets and policy instruments

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  • Calcott, Paul
  • Walls, Margaret

Abstract

Several studies that have solved for optimal solid waste policy instruments have suggested that transaction costs may often prevent the working of recycling markets. In this paper, we explicitly incorporate such costs into a general equilibrium model of production, consumption, recycling, and disposal. Specifically, we assume that consumers have access to both recycling without payment and recycling with payment but that the latter option comes with transaction costs. Producers choose material and nonmaterial inputs to produce a consumer product, and they also choose design attributes of that product—its weight and degree of recyclability. We find that the policy instruments that yield a social optimum in this setting need to vary with the degree of recyclability of products. Moreover, they need to be set to ensure that recycling markets do not operate—that is, that all recycling takes place without an exchange of money between recyclers and consumers. We argue that implementing such a policy would be difficult in practice. We then solve for a simpler set of instruments that implement a constrained (second-best) optimum. We find the results in this setting more encouraging: a modest disposal fee—less than the Pigouvian fee—combined with a common deposit-refund applied to all products will yield the constrained optimum. Moreover, this set of constrained optimal instruments is robust to the possibility that consumers imperfectly sort used products into trash and recyclables.

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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 27 (2005)
Issue (Month): 4 (November)
Pages: 287-305

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Handle: RePEc:eee:resene:v:27:y:2005:i:4:p:287-305

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Web page: http://www.elsevier.com/locate/inca/505569

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References

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  1. Fullerton, Don & Wu, Wenbo, 1998. "Policies for Green Design," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 131-148, September.
  2. 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.
  3. Bovenberg, A.L. & Mooij, R.A. de, 1994. "Environmental levies and distortionary taxation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-152985, Tilburg University.
  4. Kaplow, Louis, 1995. "A Model of the Optimal Complexity of Legal Rules," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(1), pages 150-63, April.
  5. Marie Lynn Miranda & Jess W. Everett & Daniel Blume & Barbeau A. Roy, 1994. "Market-based incentives and residential municipal solid waste," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 13(4), pages 681-698.
  6. repec:ltr:wpaper:1997.11 is not listed on IDEAS
  7. Don Fullerton & Ann Wolverton, 1997. "The Case for a Two-Part Instrument: Presumptive Tax and Environmental Subsidy," NBER Working Papers 5993, National Bureau of Economic Research, Inc.
  8. 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.
  9. 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.
  10. 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.
  11. Linderhof, Vincent & Kooreman, Peter & Allers, Maarten & Wiersma, Doede, 2001. "Weight-based pricing in the collection of household waste: the Oostzaan case," Resource and Energy Economics, Elsevier, vol. 23(4), pages 359-371, October.
  12. Chongwoo Choe & Iain Fraser, 2001. "On the Flexibility of Optimal Policies for Green Design," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 18(4), pages 367-371, April.
  13. Macauley, Molly & Walls, Margaret & Anderson, Soren, 2002. "The Organization of Local Solid Waste and Recycling Markets: Public and Private Provision of Services," Discussion Papers dp-02-35-rev, Resources For the Future.
  14. Palmer, Karen & Martinez, Salvador & Jenkins, Robin & Podolsky, Michael, 1999. "The Determinants of Household Recycling: A Material Specific Analysis of Unit Pricing and Recycling Program Attributes," Discussion Papers dp-99-41-rev, Resources For the Future.
  15. Louis Kaplow, 1995. "A Model of the Optimal Complexity of Rules," NBER Working Papers 3958, National Bureau of Economic Research, Inc.
  16. Eichner, Thomas & Pethig, Rudiger, 2001. "Product Design and Efficient Management of Recycling and Waste Treatment," Journal of Environmental Economics and Management, Elsevier, vol. 41(1), pages 109-134, January.
  17. 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.
  18. Hilary A. Sigman, 1995. "A Comparison of Public Policies for Lead Recycling," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 452-478, Autumn.
  19. Margaret Walls & Paul Calcott, 2000. "Can Downstream Waste Disposal Policies Encourage Upstream "Design for Environment"?," American Economic Review, American Economic Association, vol. 90(2), pages 233-237, May.
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Citations

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Cited by:
  1. Massimiliano Mazzanti & Anna Montini & Francesco Nicolli, 2011. "Embedding landfill diversion in economic, geographical and policy settings," Applied Economics, Taylor & Francis Journals, vol. 43(24), pages 3299-3311.
  2. 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.
  3. Gunasekaran, Angappa & Spalanzani, Alain, 2012. "Sustainability of manufacturing and services: Investigations for research and applications," International Journal of Production Economics, Elsevier, vol. 140(1), pages 35-47.
  4. Göran Finnveden & Tomas Ekvall & Yevgeniya Arushanyan & Mattias Bisaillon & Greger Henriksson & Ulrika Gunnarsson Östling & Maria Ljunggren Söderman & Jenny Sahlin & Åsa Stenmarck & Johan Sundberg, 2013. "Policy Instruments towards a Sustainable Waste Management," Sustainability, MDPI, Open Access Journal, vol. 5(3), pages 841-881, February.
  5. Czajkowski, Mikołaj & Kądziela, Tadeusz & Hanley, Nick, 2014. "We want to sort! Assessing households’ preferences for sorting waste," Resource and Energy Economics, Elsevier, vol. 36(1), pages 290-306.
  6. Francesco Nicolli & Nick Johnstone & Patrik Söderholm, 2012. "Resolving failures in recycling markets: the role of technological innovation," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 14(3), pages 261-288, July.
  7. Walls, Margaret, 2011. "Deposit-Refund Systems in Practice and Theory," Discussion Papers dp-11-47, Resources For the Future.
  8. 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.
  9. Özdemir, Öznur & Denizel, Meltem & Guide, V. Daniel R., 2012. "Recovery decisions of a producer in a legislative disposal fee environment," European Journal of Operational Research, Elsevier, vol. 216(2), pages 293-300.
  10. Dijkgraaf, E. & Gradus, R., 2008. "Environmental activism and dynamics of unit-based pricing systems," Serie Research Memoranda 0011, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  11. Daisuke Numata, 2011. "Optimal design of deposit–refund systems considering allocation of unredeemed deposits," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(4), pages 303-321, December.

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