Abstract
During the last decade waste management has been characterized by two main trends: the growth of international trade of waste materials and the introduction of extended producer responsibility (EPR) as a policy instrument. In this paper a two-country stylized model with imperfect competition in the recycling market is used to address two research questions. First, how do EPR recycling targets interact with other policy instruments such as taxes on recycling residues and excise duties? Second, how does strategic behavior of national policy makers influences the use of policy instruments? The model demonstrates that a combination of EPR with other instruments is needed to achieve the first-best outcome. When governments do not coordinate policies across borders, strategic behavior may lead to a ‘race to the bottom’ for taxes on recycling residues. Conversely, strategic behavior may lead to a counter-intuitive ‘race to the top’ for excise duties and EPR recycling targets. It is shown that these instruments are not only used to stimulate waste prevention but also to extract rents from foreign recyclers.
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Notes
Note that \({\partial \alpha }/{\partial \theta =1}\) if \(\theta =\alpha \) and \({\partial \alpha }/{\partial \theta =0}\) otherwise.
This approach is consistent with a two-stage game set up. In the first stage, Home and Foreign governments simultaneously choose policy instruments (disposal tax rates, excise duties and recycling rates) in a non-cooperative way. Given the outcome of this first stage game, market participants decide in the second stage on their optimal production levels in the product market and recycling market (Cournot oligopoly). The two-stage model is solved backwardly.
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We thank Herman Vollebergh, Yoko Nagase, Sandra Rousseau and Stef Proost for their valuable suggestions.
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Dubois, M., Eyckmans, J. Efficient Waste Management Policies and Strategic Behavior with Open Borders. Environ Resource Econ 62, 907–923 (2015). https://doi.org/10.1007/s10640-014-9851-3
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DOI: https://doi.org/10.1007/s10640-014-9851-3