ABSTRACT
Introduction One of the most remarkable developments in analyses of waste management and recycling is that a theoretical foundation was given to upstream policies such as Extended Producer Responsibility (EPR), Design for Environment (DfE) and so on, which were implemented without sound theoretical justification. Based upon reasoning quite different from the conventional one to justify upstream policies, this paper demonstrates that a downstream policy does not work, and an upstream policy is inevitable for the reduction of waste under certain conditions, even when there is a well-defined market for treatment service of household waste. One of the upstream policies, such as producers’ obligation of treatment of household waste, is shown to give a correct signal of the treatment cost to all the economy, so that green technology for waste reduction should be chosen if it is cheaper than non-green technology. There are several explanations for the necessity of upstream policies as the means of reduction of waste, according to conventional theories. Let us have a brief look at some of those explanations to sharpen the difference between the conventional reasoning and ours. Since there are a lot of contributions to this topic, we could not help but refer to a limited number of works. Dinan (1993), taking current and future disposal costs into account, examines policies which may lead to the reduction of waste disposal in a society where it is not feasible to charge households directly. He shows that a virgin material tax is not, contrary to general perception, an efficient method for reducing waste. Further to this, he demonstrates that a combination of a tax on upstream producers and a subsidy for downstream users of recycled resources gives a correct signal to an economy, so that the efficient level of waste disposal may be attained. On the other hand, Fullerton and Kinnaman (1995) examine policies to be implemented for waste reduction using a general equilibrium model. They are interested in a case where illicit disposal of waste is an option for households. Clearly, finding and penalizing all illicit disposal of waste is very costly and not realistic, and this implies the superiority of an upstream consumption tax which reflects “possible externality from illicit burning or dumping”.
