Read the working paper
INSEAD Working Paper 2015/97/TOM/ISIC
Product take-back regulation based on Extended Producer Responsibility (EPR) holds electronics producers responsible for proper recovery, e.g., collection and recycling, of endof- life products. This is because of the assumption that environmentally friendly treatment of these products has a net cost, hence unless the market is regulated such waste would end up in landfills. However, advances in product design and recycling technologies as well as the increase in the price of precious metals found in certain waste electronics, now allow recyclers to generate a net profit from recycling these products. This change in recycling economics challenges the basic assumption such regulation relies on (i.e., recovery has a net cost), and creates a competitive marketplace for e-waste. That is, electronics producers that are subject to EPR have to compete with independent recyclers (that are not subject to EPR) in collecting and recycling end-of-life products. Consequently, a natural question in this context is whether take-back regulation leads to better environmental or economic outcomes in a competitive market for recyclable electronics. In this paper, we show that stringent takeback regulation that does not count recycling by independent entities toward meeting the targets imposed on producers, may lead to decreased landfill diversion and mute incentives for producers to design for recovery. We identify conditions under which these unintended outcomes may take place and discuss associated policy implications.