Testing eco-modulation policy incentives: Experimental evidence on extended producer responsibility

Extended producer responsibility (EPR) is an environmental policy strategy that aims to make producers responsible for the post-consumer stage of their products. Within this policy frame-work, different types of “eco-modulations” are discussed as alternative incentive strategies to the current basic fee by governmental institutions aiming to improve the sustainability of the eco-design of firms’ products. Using a large-scale behavioral experiment with industry profes-sionals (N = 377), we systematically examine, under controlled conditions, the effectiveness of different incentive strategies on product eco-design and weight, environmental outcomes, and regulator revenues, as well as the underlying psychological mechanisms driving decision-mak-ing. Our results demonstrate, for the first time in this field, that eco-modulations exert a direc-tional effect toward more sustainable eco-designs and a reduction of environmental externali-ties. In contrast, the current weight-based fee mainly incentivizes producers to reduce the weight of their products. Environmental values have a strong positive effect on eco-design choices; however, EPR policies induce a crowding-out effect, particularly among female par-ticipants. Further, we show that, despite being confronted with a revenue decline, eco-modula-tions appear to improve the cost efficiency of EPR institutions.