Joint tax-subsidy for a manufacturing-recycling system under further extended producer responsibility

Abstract

The dual constraints of resource scarcity and environmental pollution have affected sustainable socio-economic development. However, the widely used Extended Producer Responsibility (EPR) system has paid little attention to resource conservation. Therefore, this paper proposes a different extended producer responsibility system (FEPR) to fill this gap. It includes two types of games, i.e., a Stackelberg game that a government games with manufacturers and a recycler, and a Cournot game between manufacturers in a product market. Through game analysis and data example analysis, draw the following critical management insights: an optimal joint tax-subsidy policy can maximize social welfare and incentive eco-innovations; market competition between manufacturers can simultaneously improve market efficiency and ecological efficiency in a well-run FEPR system; resource use tax should raise in both vertical and horizontal technology overflow, environmental cost, recycling difficulty, and the number of manufacturers while the optimal subsidy rate is only positively affected by the environmental cost of waste. The research results show that our FEPR system can save resources, reduce waste pollution, and improve social welfare simultaneously. According to different implementation backgrounds, the government should adjust the joint tax subsidy mechanism for the system to achieve optimal results.