Global Reuse and Optimal Waste Policy

Electronic waste generated from the consumption of durable goods in developed countries is often exported to underdeveloped countries for reuse, recycling and disposal with unfortunate environmental consequences. The lack of efficient disposal policies within developing nations coupled with global free trade agreements make it difficult for consumers to internalize these costs. This paper develops a two-country model, one economically developed and the other underdeveloped, to solve for optimal tax policies necessary to achieve the efficient allocation of economic resources in an economy with a durable good available for global reuse without policy measures in the underdeveloped country. A tax in the developed country on purchases of the new durable good combined with a waste tax set below the domestic external cost of disposal is sufficient for global efficiency. The implication of allowing free global trade in electronic waste is also examined, where optimal policy resembles a global deposit-refund system.

Economic Policies to Address the Environmental Consequences of Global Reuse

This paper summarizes a two-country model that solves for optimal tax rates to achieve efficiency in an economy with international trade in used consumer electronics. If only the developed nation can tax the disposal of e-waste, then the global Pareto Optimum can be obtained by either imposing an import tariff on used consumer electronics or subsidizing the return of e-waste for disposal in the developed country. The global Pareto Optimum can also be obtained by reducing the disposal tax in the developed country to a level below the external marginal cost of disposal should no other policy option be available.

Why do Municipalities Recycle?

The disposal of municipal solid waste is believed to emit foul odor, threaten groundwater, and increase road congestion. As remote regional landfills have replaced local town dumps, these costs are no longer internalized by garbage-producing households or their municipalities. Instead, rural property owners located adjacent to large regional landfills and along the roadways accessing those landfills bear the external costs of garbage disposal. This paper uses a comprehensive nine-year panel data set of aggregated state data to empirically examine why 8,937 municipalities continue to operate costly recycling programs designed to reduce the external costs of garbage disposal. Results suggest that local tastes for recycling drive municipal decisions. If household preferences for recycling are short lived, then we can expect a future decrease in the number of municipal recycling programs. Recent data indicate the number of recycling programs in operation in the U.S. has indeed fallen.