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Optimal Recycling Policy for Used Lubricating Oil: The Case of California’s Used Oil Management Policy

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  • Stephen Hamilton
  • David Sunding

Abstract

This paper develops a conceptual framework for the management of used oil that encompasses a tax (deposit) on manufactured oil and sector-specific subsidies (refunds) on producers who purchase recycled oil as an input in production. The framework mirrors the deposit-refund systems implemented in the used oil recycling programs of Italy, Spain, Australia and in the US State of California that favor re-refining uses over re-processing routes that lead to combustion of recycled oil as fuel. Our analysis considers environmental damage to arise jointly from improper disposal of used oil and from air pollution created by combustion of used oil. We demonstrate that the optimal policy involves a tax on manufactured oil and a subsidy of equal value on used oil collection irrespective of the ultimate end-use of used oil as re-refined lubricating oil or fuel oil. We derive policy implications to evaluate recently proposed changes to the management system for used oil in California. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • Stephen Hamilton & David Sunding, 2015. "Optimal Recycling Policy for Used Lubricating Oil: The Case of California’s Used Oil Management Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(1), pages 3-17, September.
    • Handle: RePEc:kap:enreec:v:62:y:2015:i:1:p:3-17
    DOI: 10.1007/s10640-014-9812-x
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    References listed on IDEAS

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    1. 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.
    2. Hilary Sigman, 1998. "Midnight Dumping: Public Policies and Illegal Disposal of Used Oil," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 157-178, Spring.
    3. Ann Wolverton & Don Fullerton, 2000. "Two Generalizations of a Deposit-Refund Systems," American Economic Review, American Economic Association, vol. 90(2), pages 238-242, May.
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    Cited by:

    1. Artur Wolak & Kamil Fijorek & Grzegorz Zając, 2020. "Professional Car Drivers’ Attitudes toward Technical, Marketing and Environmental Characteristics of Engine Oils: A Survey Study," Energies, MDPI, vol. 13(8), pages 1-14, April.
    2. Botas, Juan A. & Moreno, Jovita & Espada, Juan J. & Serrano, David P. & Dufour, Javier, 2017. "Recycling of used lubricating oil: Evaluation of environmental and energy performance by LCA," Resources, Conservation & Recycling, Elsevier, vol. 125(C), pages 315-323.

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    More about this item

    Keywords

    Recycling; Deposit-refund systems; Environmental policy; H21; Q53;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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