Waste, Recycling, and "Design for Environment": Roles for Markets and Policy Instruments

Margaret Walls and Paul Calcott

RFF Working Paper Series from Resources for the Future

Abstract: Several studies that have solved for optimal solid waste policy instruments have suggested that transaction costs may often prevent the working of recycling markets. In this paper, we explicitly incorporate such costs into a general equilibrium model of production, consumption, recycling, and disposal. Specifically, we assume that consumers have access to both recycling without payment and recycling with payment but that the latter option comes with transaction costs. Producers choose material and nonmaterial inputs to produce a consumer product, and they also choose design attributes of that product—its weight and degree of recyclability. We find that the policy instruments that yield a social optimum in this setting need to vary with the degree of recyclability of products. Moreover, they need to be set to ensure that recycling markets do not operate—that is, that all recycling takes place without an exchange of money between recyclers and consumers. We argue that implementing such a policy would be difficult in practice. We then solve for a simpler set of instruments that implement a constrained (second-best) optimum. We find the results in this setting more encouraging: a modest disposal fee—less than the Pigouvian fee—combined with a common deposit-refund applied to all products will yield the constrained optimum. Moreover, this set of constrained optimal instruments is robust to the possibility that consumers imperfectly sort used products into trash and recyclables.

Keywords: Dfe; deposit-refund; disposal fee; constrained optimum (search for similar items in EconPapers)
JEL-codes: H21 Q28 (search for similar items in EconPapers)
Date: 2002-12-01
New Economics Papers: this item is included in nep-env and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Waste, recycling, and "Design for Environment": Roles for markets and policy instruments (2005)
Working Paper: Waste, Recycling, and "Design for Environment": Roles for Markets and Policy Instruments (2002)
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