The market-incentive recycling system for waste packaging containers in Taiwan

https://doi.org/10.1016/j.envsci.2004.07.002Get rights and content

Abstract

This paper presents a new market-incentive (MI) system to recycle waste-packaging containers in Taiwan. Since most used packaging containers have no or insufficient market value, the government imposes a combined product charge and subsidy policy to provide enough economic incentive for recycling various kinds of packaging containers, such as iron, aluminum, paper, glass and plastic. Empirical results show that the new MI approach has stimulated and established the recycling market for waste-packaging containers. The new recycling system has provided 18,356 employment opportunities and generated NT$ 6.97 billion in real-production value and NT$ 3.18 billion in real GDP during the 1998 survey year. Cost-effectiveness analysis constitutes the theoretical foundation of the new scheme, whereas data used to compute empirical product charge are from two sources: marketing surveys of internal conventional costs of solid-waste collection, disposal and recycling in Taiwan, and benefit transfer of external environmental costs in the United States. The new recycling policy designed by the authors provides a reasonable solution for solid-waste management in a country with limited land resources such as Taiwan.

Introduction

Over the last few decades, along with fast economic growth, consumption behavior in Taiwan has changed dramatically. Easy-to-access stores and multiple choices of complex commodities are the norm for modern consumption. Household-garbage disposal has caused serious problems since Taiwan has limited land resources-over three-quarters of the island's 36,000 square kilometers are hilly and mountainous. In addition, it has one of the highest population densities of any country in the world (620 persons per square kilometer, DGBAS, 2002).

Lacking sufficient landfill sites and incinerator capacity has made the solid-waste problem even worse. In 2001, not including industrial solid waste, per capita household garbage generated was about 0.90 kg per person per day or 7.25 million tonnes per year (see Table 1 and EPA, 2002). Annual household-garbage load factor to land was about 201.4 tonnes per square kilometer, and the load factor quadrupled in limited low-lying plains regions. Recycling has, thus, become an important remedy for managing solid-waste for government agencies.

Recycling is important because it not only reduces amount of solid waste but also mitigates depletion of natural resources resulting from economic development. In order to sustain Taiwan's development, it is crucial to find a balance between development and conservation. Fundamental concepts of Taiwan's Solid Waste Clearing Act (SWCA) contain the four commonly recognized principles of natural-resource conservation–reduction, reuse, recovery and recycling-the “4-R” principles.

According to the 2001-amended SWCA, it is the responsibility of producers, importers and retailers to manage solid waste from merchandise that is produced, imported and sold. Before 1997, the Environmental Protection Administration in Taiwan had set up a command-and-control (CAC) recycling policy that mandated recycling rates for declared containers such as iron, aluminum, glass, paper and plastic. Producers, importers and retailers were responsible for recycling what they produced, imported and sold, at least up to the enforced recycling rate, which could exceed 80 percent, otherwise, they could be fined or even ordered to shut their businesses. In practice, enterprises set up recycling organizations to comply with the law and try to meet enforced recycling rates.

Prior to 1997, more than 13 organizations helped enterprises fulfill recycling tasks. However, since the EPA simply neglected the market mechanism of recycling behavior, quite often enterprises either recycled more than the secondary-material market could absorb, or they falsely over-reported recycling rates. As result, solid-waste recycling rates were far below expected. In addition, enforced recycling rates were highly controversial. Under pressure from awakened environmentalism, the EPA proposed more effective policies to manage solid waste, and market-incentive approaches presented in this paper provided the EPA with innovative methods to reduce solid waste and preserve resources.

The new market-incentive recycling system, in contrast to the CAC recycling policy, was implemented by the EPA March 3, 1997 to integrate four major players, namely the community, local government solid-waste collection and disposal teams, private collection and sorting businesses, the recycling industry,1 and recycling foundation. This later became know as “four-in-one”. The goal is to improve efficiency of recycling in Taiwan. The EPA has charged associated producers and importers recycling fees2 and subsidizes the following local government solid-waste collection and disposal teams, community, collection and sorting businesses, and recycling industry to promote recycling of waste-packaging containers. The following sections and Fig. 1 for further information about the basic functions and material and monetary flows of the four-in-one system.

In Section 2, relative literature is reviewed, then the social-optimization theorem of recycling is explained briefly in Section 3. The basic mechanism of selecting a recycling-product charge is introduced in Section 4. An empirical recycling-cost survey and recycling fee are discussed in Section 5. In Section 6, achievement of the new market-incentive recycling system is depicted. Section 7 concludes the paper.

Section snippets

Literature review

Most local studies on solid-waste management focus on policy planning and recycling technology, as in Huang and Chang (1997), Su (1994) and Wei, 1993, Wei, 1997. Few studies deal with cost-benefit analysis of waste recycling. Bor et al., 1995, Bor et al., 1997a and Shaw (1993) represented pioneer research in analyzing cost-benefit of recycling food-packaging containers. Their major findings were that not every type of packaging container was worth recycling under the cost-benefit criterion, and

Principles of economic efficiency and cost effectiveness

Garbage-disposal problems usually occur when demand for waste-collection and disposal services are greater than supply of services. This is caused by limited government budgets. Like most environmental problems, garbage is a public bad because it causes negative externality for the environment. In the fundamental theory of environmental economics (Tietenberg, 2000, Turner et al., 1994), existence of externality misleads society in resource utilization. For producers, externality may lead to

Mechanism to select recycling product charge

Before discussing detailed cost structure of product charge, it is better to know that arbitrary choice of T level, however, is very unlikely to be accepted in a modern democratic society. The reason is that any tax policy (economic-instrument policy) inevitably concerns rights and obligations of the people, and justification of such a measure must be clearly presented to the public and the legislative organizations so as to conform to the law and principles of fairness and justice. Therefore,

Cost analysis of solid-waste management

There are four groups of agents involved in a market system of solid-waste management, namely, private collecting and sorting businesses, private recycling industry, public solid-waste collection and disposal teams, and final-disposal facilities (landfill sites and incinerators). Costs of waste management consist of both internal conventional costs and external environmental costs.5

Building a market-oriented recycling system

After successful amendment of SWCA in 1997, the EPA shifted its focus from quantity control to price control. Instead of setting up enforced recycle rates, the EPA imposed solid-waste recycling and disposal fees (product charges) on declared waste-packaging containers. Under this newly built recycling system, the four-in-one recycling policy, the community, general public, officials and private industry all work together to increase recycling capacity. The market-incentive approach presented in

Conclusions

The government has, for many years, made great strides in promoting recycling, but until now, outcome has been poor. Deficiencies (such as limited scale of waste-packaging-container recycling) still exist in the new recycling system. Yet, the present paper shows, irrespective of whether one assumes a perspective of accomplishments in terms of household-garbage reduction, improvements in environmental quality, effects of recycling, promotion of the recycling market (part of the green market)

Yunchang Jeffrey Bor is a research fellow in the Chung-Hua Institution for Economic Research, Taiwan. Bor gained his PhD from the Department of Agricultural Economics, Purdue University, USA. His major areas of research are Environmental Economics, Resource Economics, Energy Economics and Quantitative Analysis. He received research awards from the National Science Council in Taiwan and a Fulbright Senior Researcher award from the U.S. Department of State.

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    Yunchang Jeffrey Bor is a research fellow in the Chung-Hua Institution for Economic Research, Taiwan. Bor gained his PhD from the Department of Agricultural Economics, Purdue University, USA. His major areas of research are Environmental Economics, Resource Economics, Energy Economics and Quantitative Analysis. He received research awards from the National Science Council in Taiwan and a Fulbright Senior Researcher award from the U.S. Department of State.

    Yu-Lan Chien obtained a PhD from the University of California at Davis on valuing environmental amenities with revealed and stated preference information. She is currently an assistant professor at National Taipei University. She is involved with policy development in the field of solid-waste recycling and unit-based pricing, air-pollution control and sustainable development.

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