Waste management regulation: policy solutions and policy shortcomings

Published date01 July 2018
AuthorYoko Nagase,Wolfram Berger
Date01 July 2018
Wolfram Berger* and Yoko Nagase**
A model of packaging waste management is presented to explore the policy
options available to governments to implement waste regulation in light of the
Extended Producer Responsibility (EPR). Our model endogenizes the packaging
design as an additional determinant for the overall amount of waste jointly with
consumers’ sorting effort and producers’ output decisions. The model shows that
the policies that yield the first-best allocation may not find public support. Fur-
thermore, if the set of available policy instruments is limited, production and
consumption of the good is likely to settle on a sub-optimal level even though the
optimal allocation may be achievable. Finally, the model demonstrates that a
landfill tax may actually increase landfill waste in the presence of tradable cred-
its for recycling activities. The results shed light on some shortcomings of exist-
ing regulatory schemes such as the Producer Responsibility Obligations
(Packaging Waste) Regulations of the UK.
Waste management regulations motivated by the principle of Extended Pro-
ducer Responsibility (EPR) that is, the idea to hold producers responsible
for products throughout their entire life cycles are intended to stimulate
choices by the regulated producers that will reduce pollution generated by
their products. The (EU) Council Directive 94/62/EC sets the minimum recov-
ery and recycling targets for packaging waste for the EU member states, with
the intention of motivating the regulated parties to reduce packaging waste.
An EPR-driven packaging waste regulation requires producers to either treat
(dispose or recycle) the packaging waste used for their products, or contract
out the treatment to reprocessors and bear the cost. After more than a decade
of implementing the required corresponding legislations at the national level,
there are signs that the original intention is bearing fruit. For example,
WRAP (2011, 2012) report over 100 case studies of so-called Courtauld
*Brandenburgische Technische Universitat Cottbus-Senftenberg
**Oxford Brookes University, Department of Accounting, Finance and Economics
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12137, Vol. 65, No. 3, July 2018
©2017 Scottish Economic Society.
Commitments 1, 2 and 3 in the UK grocery sector. Signatories are brand
owners, manufacturers and retailers of household products who committed
themselves to reduce packaging waste. Most of these studies report packaging
design and method changes made by producers, resulting in a reduction in the
use of packaging material.
Previous studies show that the first-best (socially optimal) waste manage-
ment outcome can be characterized by a combination of a waste charge for
consumers and an advanced disposable fee for producers or a recycling sub-
sidy for consumers (e.g. Fullerton and Kinnaman, 1995; Shinkuma, 2003).
As these papers, our study analyses the optimal policy strategies to imple-
ment waste management regulations but departs from them in several ways.
First, in order to capture EPR-motivated packaging waste management regu-
lation we use a model that specifically incorporates and jointly determines
three key choice variables: producers’ packaging design effort, households’
sorting effort, and output and consumption decisions. The vast majority of
the previous literature, as cited above, endogenizes some of these variables,
but not all. However, all three variables are critical determinants of the
amount of waste in reality. The overall amount of waste in our model there-
fore results from the decisions on these variables.
Second, we take into account that policy solutions need not only be optimal
but also politically feasible. In reality, policy makers may face difficulties in
implementing theoretically optimal policies, for example, due to high adminis-
tration costs or statutory barriers. But even optimal policy solutions that do
not involve such problems may not end up on the political agenda. Politicians
who are anxious about their re-election prospects will be wary of policies that
are unlikely to attract public support. Any policy solution intended to imple-
ment EPR-driven waste regulation needs to comply with the general public’s
notion of producer responsibility to win sufficient political support. This
dimension of the policy problem may lead to a serious additional challenge
for policy makers.
Third, we evaluate the policy maker’s options if not all policy instruments
considered in our (general) theoretical analysis are available. This step is sug-
gested by existing waste regulation as implemented, for example, in the United
Fullerton and Wu (1998) were among the first to address green design for-
mally and spawned a by now considerable literature. They analyse the effi-
ciency restoring policy response to various market failures. They show that, in
the presence of the most common market failures, a subsidy to product recy-
clability or a subsidy to recycling by consumers in combination with other
An advanced disposal fee means producers must pay a fee per unit of the product (and
hence waste) produced and sold in anticipation of the resulting waste.
In related research streams, the relation between packaging design and waste reduction is
studied from different angles. For example, Aydinliyim and Pangburn (2012) point out that
low-waste packaging may be inconvenient for consumers and require a compensating price
discount. They show that an optimally chosen discount can lead to less waste while increas-
ing profit and consumer surplus at the same time.
Scottish Journal of Political Economy
©2017 Scottish Economic Society

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