Optimal environmental policy for waste disposal and recycling when firms are not compliant
We investigate a model that considers disposal and recycling activities after the consumption of products. In the field, the deposit-refund (D-R) policy has been considered as an ideal policy for internalizing disposal costs, which can result in the realization of the first-best policy. However, the possibility of firms' illegal disposal has been neglected. We introduce a monitoring cost to prevent firms from disposing of collected residuals illegally and induce the second-best D-R policy. We find that the relation between the monitoring problem for firms and the price of the recycling market brings about a variation in the optimal level of the refunds (which is typically smaller than the first-best level). Further, we investigate an alternative policy that requires producers to take-back residuals and show how this policy works equivalently to the second-best D-R policy by applying the theory of the tradable rights market.
Year of publication: |
2011
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Authors: | Ino, Hiroaki |
Published in: |
Journal of Environmental Economics and Management. - Elsevier, ISSN 0095-0696. - Vol. 62.2011, 2, p. 290-308
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Publisher: |
Elsevier |
Keywords: | Deposit Refund Monitoring Illegal waste disposal Take-back requirement Tradable rights |
Saved in:
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