A joint optimal emissions tax and solid waste tax for extended producer responsibility

Abstract

For better implementing extended producer responsibility (EPR), this paper proposes a new environmental management mechanism. It allows producers to shoulder the dual responsibilities of emissions abatement and waste recycling at the lowest possible cost. For this reason, we develop a dual game model that includes a Stackelberg game between a government and manufacturers and a Cournot game between manufacturers in a differentiated product market. Moreover, we draw the following critical management insights through model analysis: (1) There is a joint optimal emissions tax and solid waste tax mechanism to implement extended producer responsibility. (2) The two tax portfolio policies lead to higher pollution reduction, waste recycling, and social welfare. (3) Higher environmental taxes result in a cleaner environment but do not necessarily lead to lower profits for oligopolies. Furthermore, according to different implementation contexts, we propose the optimal adjustment path of the joint optimal emissions tax-waste tax mechanism.