Design Implications of Extended Producer Responsibility for Durable Products

Abstract

We analyze product design implications of extended producer responsibility (EPR)-based take-back legislation on durable goods. In particular, we observe that durable product design incentives under EPR may involve an inherent trade-off that has not been explored to date: Durable goods producers can respond to EPR by making their products more recyclable or more durable, where the former decreases the unit recycling cost and the latter reduces the volume the producer has to recycle. When these two design attributes do not go hand in hand, as is the case for many product categories, product design implications of EPR can be counterintuitive. We find that more stringent collection targets (defined as the portion of total product volume to be collected) or recycling targets (defined as the portion of each collected product unit to be recycled) may imply reduced recyclability or durability. Moreover, although collection and recycling targets appear to be similar EPR implementation levers for increasing the total amount of materials recycled, they, in fact, have opposing effects in driving producers’ design choices. As a result, EPR may have unintended consequences for the environment. A calibrated numerical study on the photovoltaic panel (PVP) industry allows us to show that more stringent EPR requirements (such as those proposed by the recent recast of the WEEE directive) can lead to a PVP technology choice with lower recyclability and higher durability and, consequently, result in higher greenhouse gas emissions. These results call for a careful analysis of the benefits of EPR legislation in the context of durable goods. The online appendix is available at https://doi.org/10.1287/mnsc.2018.3072 . This paper was accepted by Vishal Gaur, operations management.