Abstract
This paper examines the impact of the Chinese recycling subsidy policy (CRS-policy) on the recycling and reuse industry across the whole product life cycle. We propose a closed-loop dynamic system to illustrate the production flow and interactions among various industry and market factors. A simulation analysis is conducted using data on gas auto engines in China to evaluate the effectiveness of the CRS-policy in encouraging product recycling and reuse. Specifically, we analyze the preventative and regenerative effects of the CRS-policy, and its impact on environmental pollution and social welfare. We further investigate how market factors, including the manufacturer’s innovation environment, consumer environmental awareness and sensitivity to the subsidy, and recycling and reuse industry profit, affect the effectiveness of the CRS-policy. The study provides strong evidence of the important role of the subsidy policy in the recycling and reuse industry and offers insightful recommendations for enhancing the effectiveness of the subsidy policy.
Highlights
With concern about environmental problems increasing in recent years, the Chinese government has introduced several recycling subsidy policies to commit to environmental protection by accelerating recycling, reuse and remanufacturing
How does the CRS-policy affect the reduction in the resource consumption and waste production in the upstream supply chain? How does the policy influence recycling and reuse practices in the downstream supply chain? What is the overall effectiveness of the CRS-policy if we synthetically consider the environmental and economic benefits? In this study, we aim to answer these questions using the system dynamics simulation method, to provide in-depth understanding of the CRS-policy, and to offer insightful recommendations to improve the policy’s effectiveness
Hong and Ke [12] and Hong et al [13] discussed Advanced recycling fees (ARFs) and government subsidy decision-making in the reverse supply chain
Summary
With concern about environmental problems increasing in recent years, the Chinese government has introduced several recycling subsidy policies to commit to environmental protection by accelerating recycling, reuse and remanufacturing. Lorentziadis and Vournas [15] proposed a quantitative model of vehicle-retirement subsidy policy to explore the quantity change in the new-energy automobiles that are replacing traditional automobiles and determined the appropriate subsidy These studies mainly used game theory or optimization methods that have more assumptions. This study seeks to extend the existent literature by examining the impact of the CRS-policy with simultaneous considerations of the environmental effect and economic performance using system dynamics methodology and the computer simulation method. We introduce several market factors, including the manufacturer’s innovation environment, consumer environmental awareness and sensitivity to the subsidy, and recycling and reuse industry profit, and investigate their influence on the effectiveness of the CRS-policy. We discuss the causal relationships among several important factors in the whole product life cycle based on this recycling subsidy policy in China. We discuss the key relationships of each subsystem in the following subsections
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