Toward a circular economy: A system dynamic model of recycling framework for aseptic paper packaging waste in Indonesia

Abstract

In a circular economy, extended producer responsibility (EPR) is a regulatory approach that accounts for all environmental costs associated with a product throughout its life cycle. When considering the EPR, the regulator must (1) design an integrated framework for different stakeholders and (2) provide effective policies to create financial incentives to accelerate the circular system. Recycling funds and subsidies are the most prominent financial strategies that can either encourage or curtail the flows of recycled products. In Indonesia, a few companies provided recycling bonus s to their customers as incentives to increase the recycling rate. However, the recycling rate was not as effective as expected by the enterprise because recycling was practiced by a limited number of companies, rendering it economically unviable. The enterprises hope the government could develop a recycling fund system. In order to develop the recycling fund system, a system dynamic model was proposed and simulated to optimize the recycling funds and subsidies based on decentralized reverse supply chains. Although it is not a novelty model; however, the research show a very significant results for the government in Indonesia. This enabled a more precise, well-planned, and sustainable decision-making process for the EPR. In addition, by utilizing the system dynamic model with different scenarios in a real case study (aseptic paper packaging waste), we found that the capacity of the recycler could become the reference for the funds to be paid by the importer-producer group, wherein the recycling rate will increase with an increase in the recycling fund.