The organization of Extended Product Responsibility in waste policy with product differentiation

Pierre Fleckinger And Matthieu Glachant

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Niveau: Supérieur
The Organization of Extended Producer Responsibility in Waste Policy with Product Di?erentiation Pierre Fleckinger, Matthieu Glachanty This version: February 2009 Abstract The paper analyzes the e¢ ciency of Extended Producer Responsibility (EPR) for waste management. We consider a vertically di?erentiated duopoly where endogenous market quality a?ects waste disposal costs. Each producer has to meet a take-back requirement that forces it to collect and treat the waste associated with its products. In line with reality, we assume that the producers can either organize themselves in- dividually or cooperate by setting up a Producer Responsibility Organization (PRO). We study the various implementations of EPR. Central to the analysis is the trade-o? between collusion made possible by the existence of a PRO and market power in the waste industry. Key words: extended producer responsibility, waste policy, product di?erentiation JEL codes: L13, Q53 University of Paris 1 & Paris School of Economics. Email: . yCorresponding author. Mines ParisTech, CERNA, 60 Boulevard Saint-Michel 75006 Paris. Email: . Phone: + 33 140519229. Fax: . 1

• product di?erentiation


• targeting producers


• epr


• disposal costs


• costs ?like


• packaging


• waste


• reducing disposal


• producers su¢

Sujets

• Packaging

Informations

• Publié par: chaeh
• Nombre de lectures: 71
• Langue: English

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TheOrganizationofExtendedProducerResponsibility inWastePolicywithProductDi¤erentiation PierreFleckinger,  MatthieuGlachant y Thisversion:February2009 Abstract Thepaperanalyzesthee¢ciencyofExtendedProducerResponsibility(EPR)for wastemanagement.Weconsideraverticallydi¤erentiatedduopolywhereendogenous marketqualitya¤ectswastedisposalcosts.Eachproducerhastomeetatake-back requirementthatforcesittocollectandtreatthewasteassociatedwithitsproducts. Inlinewithreality,weassumethattheproducerscaneitherorganizethemselvesin- dividuallyorcooperatebysettingupaProducerResponsibilityOrganization(PRO). WestudythevariousimplementationsofEPR.Centraltotheanalysisisthetrade-o¤ betweencollusionmadepossiblebytheexistenceofaPROandmarketpowerinthe wasteindustry. Keywords:extendedproducerresponsibility,wastepolicy,productdi¤erentiation JELcodes: L13,Q53  UniversityofParis1&ParisSchoolofEconomics.Email: [e-mail] . y Correspondingauthor.MinesParisTech,CERNA,60BoulevardSaint-Michel75006Paris.Email: [e-mail] .Phone:[phone].Fax:[phone]

1Introduction Anincreasinglypopularinstrumentforsolvingsolidwastemanagementproblemsisthe ExtendedProducerResponsibility(EPR)programinwhichtheGovernmentassignstopro- ducerstheresponsibility–…nancialand/orphysical–forthetreatmentordisposaloftheir productsattheendoflife.Itisexpectedthatsuchprogramscouldprovideincentivesto preventwasteatthesource,promoteenvironment-friendlyproductdesign,andsupportthe achievementofpublicrecyclingandmaterialsmanagementgoals.Theseminalprogramin thisrespectistheGermanGreenDotschemewhichwasintroducedin1991todealwith packagingwaste.EPRnowconcernsawiderangeofproductgroupsandwastestreamssuch aspackaging,electricalappliancesandelectronics,batteriesandaccumulators,usedoil,tires andend-oflifevehiclesintheEuropeanUnion,Japan,SouthKorea,Canada,etc.TheUSA constitutesanoteworthyexceptiontothistrend. ThispaperdevelopsaformalmodelofanExtendedProducerResponsibilityprogram. Weanalyzethewelfaree¤ectsofthispolicyapproachandthewayawelfare-maximizing authorityshouldregulatetheseprograms. Inordertoconsidertheseissueswithmoreprecision,itisnecessarytodescribethekey featuresofEPRprogramsinmoredetail[10].ThecoreofanEPRprogramiseitheratake- backrequirementmandatingindividualproducerstocollectandtreatthewastegenerated, oralegalobligationto…nancetheseactivities.Inaddition,theregulatorfrequentlysets recyclingobjectives.Producerscanimplementindividualsolutionstoful…lltheirobligations. ApossibleexampleistheEuropeanDirective2000/53/CEadoptedin2000whichrequires carmanufacturerstotakebackend-of-lifevehiclesfreeofcharge.InmostEUcountries,each manufacturerhasdecidedtolaunchitsownprogrambycontractingwithcardismantlers andshredders. However,bearingtheresponsibilityindividuallyisverycostlyforcertaingoodsand products.ImaginetheCocaColaCompanysettingupasystemonitsowntodealwith 2

wastegeneratedbyitsCokecansandbottles.Fortheseproducts,companiesusuallyorganize themselvescollectivelybycreatingaso-calledProducerResponsibilityOrganization(PRO, hereafter).APROisanon-pro…torganizationcontrolledbytheproducers,whoseprimary taskistosetupandmanagetheinfrastructuresthatorganizethecollectionandprocessing ofwasteonbehalfoftheirindividualmembers.ThesalientexampleistheDualesSystem Deutschland(DSD)GmbHcreatedundertheGreenDotprogram. Thewayinwhichindividualproducers…nancethePROisacrucialaspectofEPRdesign inthatitdirectlyin‡uencesthesizeoftheincentivestopreventwaste.Theusualinstrument consistsofafeeperunitofproductthateachproducerputsonthemarket.Theproduct feeisfrequentlyuniformacrossbrands(e.g.$20perrefrigerator).Itcanalsotakeinto accountwaste-relatedproductcharacteristics.ThisisthecaseofpackagingPROslikeDSD, forwhichthefeeratesvaryacrossmaterialsanddependontheweightandsizeofeach packagingtype.Inthispaperweconsiderbothuniformfeesandincentivefeeswhichreward individualpreventione¤orts. 1 Mostimportantly,thedesignofaspeci…cEPRprogramistheresultofproducers’deci- sions.TheveryconceptofEPRisbasedpreciselyongivingproducersconsiderablefreedom inthewaytheymeettheirobligations.Thisfeatureraisesseverale¢ciencyquestions.Is theassignmentofanEPRtoindividualproducerssu¢cienttoobtainasociallye¢cient outcome?Orshouldregulatorsinterveneintheproducers’decisionstocooperateinaPRO? Shoulditregulatethewayproducers…nancethePRO?Moregenerally,doPROsallowfor collusion?Thepaperaddressesthesequestions. Weconsideraduopolyinwhicheachproducerfacesatake-backrequirementthatforces ittomanagewastegeneratedbytheconsumptionofitsproducts.Inlinewithreality,we assumethattheproducercaneithergetorganizedindividuallyorcooperatewithothers. 1 Thepracticabilityofincentivefeesvariesacrossproducts.Forinstance,packagingisasimplegoodfor whichvariablefeesarerelativelyeasytoimplementfortworeasons:thenumberofwaste-relatedparameters islimited(packagingweight,sizeandtypeofmaterials)andtheseparametersareeasytomonitor.Formore complexgoods–e.g.electricalappliancesandelectronics–incentivefeesaremoredi¢culttoimplement. 3