Waste, recycling, and "Design for Environment": Roles for markets and policy instruments
AbstractSeveral 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 productâits 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 operateâthat 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 feeâless than the Pigouvian feeâcombined 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 InfoArticle provided by Elsevier in its journal Resource and Energy Economics.
Volume (Year): 27 (2005)
Issue (Month): 4 (November)
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Web page: http://www.elsevier.com/locate/inca/505569
Other versions of this item:
- Walls, Margaret & Calcott, Paul, 2002. "Waste, Recycling, and "Design for Environment": Roles for Markets and Policy Instruments," Discussion Papers dp-00-30-rev, Resources For the Future.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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