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Deposit-Refund Systems in Practice and Theory

Author

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  • Walls, Margaret

    () (Resources for the Future)

Abstract

A deposit-refund system combines a tax on product consumption with a rebate when the product or its packaging is returned for recycling. Deposit-refunds are used for beverage containers, lead-acid batteries, motor oil, tires, various hazardous materials, electronics, and more. In addition, researchers have shown that the approach can be used to address many other environmental problems beyond waste disposal. By imposing an up-front fee on consumption and subsidizing “green” inputs and mitigation activities, a deposit-refund may be able to efficiently control pollution in much the same way as a Pigovian tax. Theoretical models have shown that alternative waste disposal policies, such as virgin materials taxes, advance disposal fees, recycled content standards, and recycling subsidies are inferior to a deposit-refund. These results have been corroborated in calibrated models of U.S. waste and recycling. And in theoretical models that consider joint environmental problems and product design considerations, the deposit-refund continues to have much to recommend it as a component of an overall socially optimal set of policies. More empirical research into deposit-refund systems is needed, particularly the upstream systems used for many products. In these systems, the processors or collectors of recyclables—rather than consumers—receive the refund. Upstream systems may have lower transaction costs and better environmental outcomes than traditional downstream systems.

Suggested Citation

  • Walls, Margaret, 2011. "Deposit-Refund Systems in Practice and Theory," Discussion Papers dp-11-47, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-11-47
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-11-47.pdf
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    References listed on IDEAS

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    2. 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.
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    5. 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.
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    Cited by:

    1. Damien BROUSSOLLE, 2017. "Quel Systeme Incitatif Realiste Pour La Politique De Reduction Des Dechets Menagers ? Enseignements Tires De La Litterature Economique Et Du Cas Français / What Workable Incentive Scheme For The Reduc," Working Papers of LaRGE Research Center 2017-11, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.

    More about this item

    Keywords

    deposit-refund; waste disposal; recycling; source reduction; illegal dumping; Pigovian tax; advance disposal fee; upstream pollution; design for environment;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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