Valuable E-Waste : Implications for Extended Producer Responsibility

Product take-back regulation based on Extended Producer Responsibility (EPR) holds electronics OEMs (original equipment manufacturers) responsible for the collection and environmentally friendly recovery (e.g., recycling) and landfill diversion of end-of-life products. This is because of the assumption that recycling of these products has a net cost, and unless regulated they will end up in landfills and harm the environment. However, in the last decade, advances in product design and recycling technologies, as well as the increase in the price of precious metals found in certain electronic waste (e-waste), has allowed recyclers to generate a net profit from recycling some of these products. This change in recycling economics challenges the basic assumption such regulation relies on (i.e., collection and recycling have a net cost), and creates a competitive marketplace for e-waste. That is, electronics OEMs that are subject to EPR obligations have to compete with independent recyclers in collecting and recycling valuable e-waste. A natural question in this context is whether EPR achieves its intended goal of increased landfill diversion when an OEM competes with independent recyclers for recyclable electronics and what its welfare implications are. Using a simple economic model, we find that EPR that focuses on producer responsibility alone may reduce the total landfill diversion in the presence of competition from independent recyclers. This also leads to a reduction in total welfare (i.e., the sum of OEM and recycler profits, environmental benefit, and waste-holder surplus). We show that a possible remedy in the form of counting collection volumes from independent recyclers towards OEM obligations guarantees that EPR increases the volume of landfill diversion. However, EPR may continue to reduce the total welfare even in this scenario, particularly when EPR-induced OEM recycling replaces more cost-effective independent recycler activity