Restoring the Incentives for Eco-Design in Extended Producer Responsibility : The Challenges for Eco-Modulation

Extended producer responsibility (EPR) is an environmental policy strategy that makes producers responsible for the waste management of their products and packages. A key goal of EPR is to incentivize producers to (re)design their products and packages to improve their environmental performance, especially at end of life. However, because of the way in which the financial structure of EPR has evolved, those incentives have largely been muted or undetectable. Eco-modulation has emerged as an additional component in EPR to restore the missing incentives for eco-design. Eco-modulation operates through changes in the fees that producers pay to meet their EPR obligations. Eco-modulation includes both increased differentiation of types of products and associated fees, and additional bonuses and penalties—environmentally targeted discounts and surcharges on the fees that each producer pays.Eco-modulation faces challenges if it is to restore the incentives for eco-design. These include weak linkages to environmental outcomes, fees that may be too low to induce changes in materials or design, lack of adequate data and ex post policy evaluation, and implementation that differs across jurisdictions. Opportunities to address these challenges include use of life cycle assessment to inform eco-modulation, increased eco-modulation fees, strategies to increase harmonization of eco-modulation implementation, mandated provision of data, and policy evaluation tools that establish the efficacy of different eco-modulation schemes. Considering the scope of the challenges and the complexity of establishing eco-modulation programs, we suggest treating eco-modulation at this stage as an experiment on promoting eco-design