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The Curse of Low-valued Recycling

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  • Hiroaki Ino

    (School of Economics, Kwansei Gakuin University)

  • Norimichi Matsueda

    (School of Economics, Kwansei Gakuin University)

Abstract

This paper discusses how to deal with low-valued recyclable residual wastes whose reprocessing itself does not pay financially. While such a recycling activity can potentially improve social welfare if the social costs associated with their disposal are sufficiently significant, governmental policies to promote recycling may lead to illegal disposal. Explicitly considering the government’s monitoring cost in preventing firms from disposing of collected wastes illicitly, we show that the second-best policy for a low-valued recyclable is either one of the two following schemes: a deposit-refund scheme (DRS) that gives birth to a recycling market or an advanced-disposal fee (ADF) that does not create a recycling market. However, in order to select the optimal policy scheme and implement it appropriately, recycling market information is needed. Thus, the structure of the second-best policy itself indicates that a policy-maker has to face critical information issues in implementing it, which is in stark contrast to a DRS for a non-low-valued recyclable.

Suggested Citation

  • Hiroaki Ino & Norimichi Matsueda, 2014. "The Curse of Low-valued Recycling," Discussion Paper Series 123, School of Economics, Kwansei Gakuin University, revised May 2018.
    • Handle: RePEc:kgu:wpaper:123
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    References listed on IDEAS

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    1. Diana Roa & Knut Einar Rosendahl, 2023. "Policies for Material Circularity: the Case of Lithium," Circular Economy and Sustainability, Springer, vol. 3(1), pages 373-405, March.

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    JEL classification:

    • 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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