How to Make Collective EPR (Extended Producer Responsibility) Work

What is it about?

Many EPR implementations are collective—a large collection and recycling network (CRN) handles multiple producers’ products in order to benefit from scale economies. The total cost is then allocated to producers based on metrics such as their return shares by weight (i.e., if a producer's products make up 5% of the returns by weight, then it's allocated 5% of the total collection and recycling cost). Such weight-based proportional allocation mechanisms are criticized for being unfair because they do not take into account the fact that properly processing some products costs much more than others (think CRT TVs versus laptops versus cellphones, which may even bring in a net revenue). As a result, some producers/producer groups may do worse in a collective system than they would running independent systems. This may lead some producers to break away from collective systems, resulting in fragmented systems with higher total cost (e.g. Oregon has 4 parallel EPR systems). Yet cost efficiency is a key legislative and producer concern. The contribution of our paper is that it develops cost allocation mechanisms that are fair and that induce voluntary participation in collective systems, resulting in a win-win outcome for producers and total consumer welfare.

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Why is it important?

EPR is the most prevalent policy tool for handling post-consumer waste, which puts a cost burden on producers and indirectly consumers as well. Running these systems as effectively as possible is important in keeping these costs low. With a simple population-based projection of our scenario-based analysis (based on the Washington state implementation) to the United States, we estimate that the allocation mechanism we propose can result in an efficiency loss avoidance of approximately $16–$65 million for the electronics industry in the United States. This projection is based on the Washington collection rate of approximately 6 pounds per capita, which is much lower than its European counterpart that reaches approximately 18 pounds per capita because of its broader scope. If similar collection volumes are attained (e.g., via scope expansion) in the United States, the predicted efficiency improvement that fair cost allocations can deliver goes up to $50–$200 million for the electronics industry.

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