Determining Recycling Fees and Subsidies in China’s WEEE Disposal Fund with Formal and Informal Sectors

Huihui Liu, Xiaolin Wu, Desheng Dou, Xu Tang and G. Keong Leong
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Huihui Liu: Academy of Chinese Energy Strategy, China University of Petroleum, Beijing 102200, China
Xiaolin Wu: Academy of Chinese Energy Strategy, China University of Petroleum, Beijing 102200, China
Desheng Dou: Academy of Chinese Energy Strategy, China University of Petroleum, Beijing 102200, China
Xu Tang: School of Business Administration, China University of Petroleum, Beijing 102200, China
G. Keong Leong: College of Business Administration and Public Policy, California State University Dominguez Hills, Carson, CA 90747, USA

Sustainability, 2018, vol. 10, issue 9, 1-14

Abstract: At present, most of China’s waste electrical and electronic equipment (hereafter referred to as WEEE) flow into the informal recycling sector, which has no official disassembly certification. To regulate the WEEE recycling industry, the policy of the WEEE disposal fund has been implemented to levy recycling fees from producers and subsidize the formal recycling sector. This paper aims to solve the challenging problem of how to optimize recycling fees and subsidies. We first study the competition between the formal and informal sectors, and construct the game models of the dismantling and refurbishing processes. Based on the equilibrium outcomes, we then examine the impact of the disposal fund on producers, as well as the formal and informal recycling sectors. With the goal of maximizing social welfare and maintaining a balanced budget for the disposal fund, we study the optimal recycling fee levied on producers and the corresponding subsidy provided to the formal sector. Social welfare is a function of producer and formal-recycler profits, consumer surplus, and the negative externality caused by informal dismantling and refurbishing, such as environmental pollution and safety problems. Results show that the use of subsidy can increase the acquisition quantity of used products in the formal sector, but the increase will slow down with higher subsidy. If the recycling fee that producers are charged is small, social welfare will be improved. In addition, as the fee is increased, social welfare will rise first and then fall. As such, any excessive increase in recycling fees should be avoided.

Keywords: waste electrical and electronic equipment (WEEE); disposal fund; formal sector; informal sector; producers; subsidy; recycling fee (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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