Optimal Decisions and Implementation Efficiency of the Extended Producer Responsibility System for E-Waste under Take-Back Legislations

Abstract

The collection and reuse of the e-wastes have attracted increasing attention all over the world. In order to incentivize the producer to collect and recover the e-waste, more and more countries have formulated the take-back legislation with the economic or administrative instruments based on the spirit of extended producer responsibility (EPR). Facing two different types of policy instruments (economic or administrative instrument), how the take-back legislation affects the collection and reuse of the e-waste and how to ensure the efficiencies of the two types of take-back legislation have attracted the public’s attention. Therefore, this paper establishes a stylized model consisting of a monopoly manufacturer who is responsible for collection and remanufacturing under two different types of the take-back legislation. The manufacturer’s optimal production, collection, remanufacturing decisions, and optimal profit are derived using Karush–Kuhn–Tucker (KKT) conditions. Sensitivity analysis shows that stricter mandated collection rate hurts the manufacturer’s profit, but the effects of the government’s subsidy and tax on the manufacturer’s optimal decisions rely on the cost of the new product. The firm needs to adjust the cost of the new products corresponding to the specific subsidy and tax. Finally, a neutral fiscal policy is proposed to determine the government’s optimal subsidy and tax in order to ensure the consistency of the efficiencies of the two types of take-back legislation. The government should set that the ratio of the optimal tax and subsidy under the neutral fiscal policy is exactly consistent with the mandatory collection target. This policy aims to guide the manufacturer’s voluntary collection rate to meet the government’s mandated collection target and thus change the mandatory collection mode to the voluntary collection mode.