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Optimal Environmental Policy for Waste Disposal and Recycling When Firms Are Not Compliant

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  • Hiroaki Ino

    ()
    (Kwansei Gakuin University)

Abstract

We 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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File URL: http://192.218.163.163/RePEc/pdf/kgdp50.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 50.

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Length: 37 pages
Date of creation: Jan 2010
Date of revision: Jan 2010
Handle: RePEc:kgu:wpaper:50

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Keywords: Deposit; Refund; Monitoring; IllegalWaste Disposal; Take-back requirement; Tradable rights;

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References

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  1. Don Fullerton & Ann Wolverton, 2003. "The Two-Part Instrument in a Second-Best World," NBER Working Papers 10140, National Bureau of Economic Research, Inc.
  2. 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.
  3. Chongwoo Choe & Iain Fraser, 1997. "An Economic Analysis of Household Waste Management," Working Papers 1997.11, School of Economics, La Trobe University.
  4. Don Fullerton & Wenbo Wu, 1996. "Policies for Green Design," NBER Working Papers 5594, National Bureau of Economic Research, Inc.
  5. repec:ebl:ecbull:v:17:y:2007:i:6:p:1-9 is not listed on IDEAS
  6. 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.
  7. 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.
  8. 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.
  9. Walls, Margaret & Palmer, Karen, 2001. "Upstream Pollution, Downstream Waste Disposal, and the Design of Comprehensive Environmental Policies," Journal of Environmental Economics and Management, Elsevier, vol. 41(1), pages 94-108, January.
  10. 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.
  11. 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.
  12. Lee, Dwight R., 1984. "The economics of enforcing pollution taxation," Journal of Environmental Economics and Management, Elsevier, vol. 11(2), pages 147-160, June.
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Cited by:
  1. Honma, Satoshi, 2013. "Optimal policies for international recycling between developed and developing countries," MPRA Paper 43703, University Library of Munich, Germany.
  2. 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.
  3. Matsueda, Norimichi & Nagase, Yoko, 2012. "An economic analysis of the Packaging waste Recovery Note System in the UK," Resource and Energy Economics, Elsevier, vol. 34(4), pages 669-679.
  4. Walls, Margaret, 2011. "Deposit-Refund Systems in Practice and Theory," Discussion Papers dp-11-47, Resources For the Future.
  5. 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.
  6. Angelo Antoci & Simone Borghesi & Mauro Sodini, 2012. "ETS and Technological Innovation: A Random Matching Model," Working Papers 2012.79, Fondazione Eni Enrico Mattei.

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