Waste, recycling, and “Design for Environment”: Roles for markets and policy instruments

Households sometimes have two recycling options. Curbside recycling collections are convenient, but do not provide payment. Alternatively, payment might be available from ‘reverse vending machines’ or drop-off centers, but some transaction costs would be incurred. We examine policies to encourage efficient product design and recycling in a setting with these two recycling options plus the option of putting recyclables in the trash. We find value in having two parallel recycling options. Constrained optimal outcomes can be attained by combining a ‘deposit–refund’ with a modest disposal fee. Furthermore, producers should not be permitted to keep deposits, that are not claimed by consumers.