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The Curse of Low-valued Recycling

Hiroaki Ino and Norimichi Matsueda ()

No 123, Discussion Paper Series from 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.

Keywords: advanced disposal fee; deposit-refund; illegal waste disposal; monitoring; recycling (search for similar items in EconPapers)
JEL-codes: H21 Q21 Q28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env
Date: 2014-10, Revised 2018-05
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http://192.218.163.163/RePEc/pdf/kgdp123.pdf Second version, 2018 (application/pdf)

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Journal Article: The curse of low-valued recycling (2019) Downloads
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