International Review of Waste Management Policy - Department of ...

external cost of improper disposal by foregoing the refund, which would typically be
set equal to the initial deposit.
This incentive is considered particularly appropriate for items with hazardous
contents where it is important to keep them out of landfills or incinerators, as well as
to discourage their illegal dumping. Likewise for products where the temptation to
litter is high, or the resulting litter is considered to create significant disamenity
impacts, mandatory deposits may be imposed.
The distinction between deposit refund schemes on the one hand, and ADFs coupled
with a household recycling refund on the other, is in the re-collection of the product at
the end of its useful life. Mandatory deposit schemes involve a separate collection
path, rather than being collected as part of the municipal recycling system.
Several theoretical studies have argued that a deposit/refund is the best policy in the
presence of illegal disposal. 321 Palmer et al model paper, glass, plastic, aluminium,
and steel. They find a substantial difference in the intervention levels necessary to
achieve reductions in disposal with the various policies. A $45/ton deposit /refund
would reduce all wastes by 10%. Alternatively, the government could obtain a
comparable reduction using an ADF of $85/ton or a recycling subsidy of $98/ton.
A key point is that the deposit/refund creates incentives for both recycling and source
reduction, whereas an ADF or a recycling subsidy takes advantage of only recycling or
source reduction in isolation. 322 However, it is important to note that the theoretical
studies, in abstracting from the real world situation, have not taken into account all
the potential costs of administering such schemes. In fact they are not precisely
modelling existing ‘bottle bill’ programmes, but rather a more generalised version of
deposits and refunds, applied ‘upstream’ on manufacturers and recyclers.
Palmer and Walls accept that in practice there could be significant administrative
costs associated with refunding deposits, which could reduce the efficiency of the
approach. 323 This issue is discussed by Palmer et al with numerical estimates of the
effects of administrative costs on the overall efficiency of deposit refunds relative to
product taxes and recycling subsidies. 324 Viewing their results alongside empirical
evidence from Ackerman et al., they suggest that administrative costs may be of the
321 T. Dinan (1993) Economic Efficiency Effects of Alternative Policies for Reducing Waste Disposal,
Journal of Environmental Economics and Management 25: 242–56; D. Fullerton and T. C. Kinnemann
(1995), Garbage Recycling and Illicit Burning or Dumping, Journal of Environmental Economics and
Management, 29 (1); Peter S. Menell (1990) Beyond the Throwaway Society: An Incentive Approach to
Regulating Municipal Solid Waste, Ecology Law Quarterly, vol. 17, pp. 655-739; Hilary Sigman (1995) A
Comparison of Public Policies for Lead Recycling, RAND Journal of Economics, vol. 26, no. 3 (Autumn),
pp. 452-478.
322 K. Palmer, H. Sigman and M. Walls (1997) The Cost of Reducing Municipal Solid Waste, Journal of
Environmental Economics and Management 33, 128-50.
323 Palmer and Walls (1997) Optimal Policies for Solid Waste Disposal Taxes, Subsidies and Standards.
Journal of Public Economics 65(8): 193-205.
324 K. Palmer, H. Sigman and M. Walls (1997) The Cost of Reducing Municipal Solid Waste, Journal of
Environmental Economics and Management 33, 128-50.
298
29/09/09