32 / 2024-04-16 10:41:22

Fighting the Plastic Pollution: Product Ban Regulation and Voluntary Compliance

Waste management,product ban regulation,recycling rate,voluntary compliance

Plastic products have brought convenience to our daily lives but also lead to severe environmental concerns when end-of-life units are not properly managed and leak into the ecosystem. While some regions have turned to recycling rate regulation as a remedy, an alternative regulatory approach has gained rapid traction among regulators: product ban regulation, which reduces the environmental burden of plastic waste by curbing their production and sales volumes. Despite its increasing popularity, the effects of product ban regulation are not yet well understood. For example, in restricting product volume, a ban may be more effective than a recycling requirement based on the "reduce, reuse, recycle'' waste management hierarchy. Nevertheless, its direct market intervention may compromise market freedom and firm profit. Importantly, firms also may seek to proactively engage in voluntary recycling to manage the environmental impact of their products in the face of future product ban.  As such, we study the economic and environmental implications of the emergent trend of product ban regulation while explicitly accounting for firms' voluntary recycling incentives. We further enrich our study by comparing a ban to recycling rate regulation. We reveal multiple useful insights for firms, regulators, and environmental groups. In particular, we show that when the production cost is high or the existing recycling rate is low, the firm has a stronger voluntary recycling incentive. However, in these cases, the regulator may set an even more stringent ban despite higher voluntary recycling efforts. It can, however, be more effective to manage highly polluting products through the counter-intuitive strategy of encouraging higher voluntary recycling but relaxing product ban stringency. We also show that while a ban allows the firm to choose its own voluntary recycling level, it can lead to a higher total recycling rate than the optimal target the regulator sets. Meanwhile, in spite of direct sales restrictions, a product ban is not necessarily more detrimental to firm profit than recycling rate regulation.