Tax-subsidy schemes for recycling when quantity and quality of waste matter

Karima Afif (), Bocar Samba Ba () and Eugénie Joltreau ()
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Karima Afif: Department of Agri-Food Economics and Consumer Sciences, Faculty of Agriculture and Food Sciences, Université Laval, Canada
Bocar Samba Ba: Department of Agri-Food Economics and Consumer Sciences, Faculty of Agriculture and Food Sciences, Université Laval, Canada
Eugénie Joltreau: RFF-CMCC European Institute on Economics and the Environment (EIEE), Fondazione Centro Euromediterraneo sui Cambiamenti Climatici (CMCC), Milan, Italy

No 2024.02, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: This paper seeks to theoretically understand the impact of a tax-subsidy system (as implemented in Extended Producer Responsibility) on packaging source reduction, waste generation, and recycling in the presence of economies of scale and quality concerns in the recycling industry. We use a static equilibrium and a non-homothetic technology function to study asymmetric substitution between the virgin and the recycled material. The model displays a trade-off between recycled content and material productivity, and between waste generation and the recycling industry's profitability. A tax-subsidy scheme in the form of an excise charge and a dual subsidy restores the social optimum, providing that the recycler reaches a positive profit. We find that the excise tax favors virgin material and packaging refinement, all else equal. At the same time, it decreases the use of recycled material, sales, and total waste generation. The subsidy granted to the producer has the opposite effect. The subsidy granted to the recycler increases its profit and the recycling rate.

Keywords: Waste; Recycling; Substitutability; Plastics; Tax-subsidy (search for similar items in EconPapers)
JEL-codes: H23 Q53 (search for similar items in EconPapers)
Pages: 88 pages
Date: 2024-02
New Economics Papers: this item is included in nep-env, nep-eur and nep-pbe
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