Optimal Environmental Policy for Waste Disposal and Recycling When Firms Are Not Compliant
AbstractWe investigate, considering disposal and recycling activities after the consumption of products, the models that explicitly incorporate both the product market and the recycling market. In the field, the deposit-refund (D-R) policy has been discussed as an ideal policy to internalize disposal cost, which can result in the realization of the first-best policy. However, the possibility of firmsf illegal disposal has been neglected. We introduce monitoring cost to prevent firms from disposing of collected residuals illegally and induce the second-best D-R policy. We find that the monitoring problem for firms brings about a variety in the optimal level of the refunds (which is typically be smaller than the first best level). Furthermore, 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 tradable emission permits market. We find that the second-best system of this policy is the combination of the take-back requirement depending on the amount of each firmfs outputs and initial exemption from that requirement.
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Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 50.
Length: 37 pages
Date of creation: Jan 2010
Date of revision: Jan 2010
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Deposit; Refund; Monitoring; IllegalWaste Disposal; Take-back requirement; Tradable rights;
Other versions of this item:
- Ino, Hiroaki, 2011. "Optimal environmental policy for waste disposal and recycling when firms are not compliant," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 290-308, September.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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