Extended Producer Responsibility for Durable Products

Abstract

Problem definition: We study how extended producer responsibility (EPR) legislation implementations for durable products should differ from those for nondurable products. Academic/practical relevance: Certain unique characteristics of markets for durable products, which make designing EPR implementations more challenging, have not been explored to date in academia and practice. We fill this void by investigating the effect of EPR on durable-goods markets. Methodology: We develop a game-theoretic model to analyze durable-goods producers’ secondary market strategy under EPR and analytically explore its environmental implications. Results: The implications of EPR are not straightforward for durable products. On one hand, despite being focused on recycling, EPR may lead to an unintended benefit in the form of higher reuse levels by reducing producers’ secondary market interference. On the other hand, EPR can also induce or increase secondary market interference by producers. This diminishes environmental goals, such as reducing new production and increasing reuse levels—two key environmental goals with higher priority than increasing recycling. Policy implications: We offer insights for how the environmental effectiveness of EPR for durable products can be improved by appropriately choosing its implementation parameters. We show that implementation approaches that may be considered successful for nondurable products (e.g., packaging or end-of-life batteries) may not be suitable for durable products, such as electronics. For example, more stringent collection targets and infrastructure requirements can backfire in EPR implementations for durable products.