Two Generalizations of a Deposit–Refund System

Abstract

This paper suggests two generalizations of the deposit-refund idea. In the first, we apply the idea not just to solid waste materials, but to any waste from production or consumption-including wastes that may be solid, gaseous, or liquid. Using a simple general equilibrium model, we derive the optimal combination of a tax on a purchased commodity and subsidy to a "clean" activity (such as emission abatement, recycling, or disposal in a sanitary landfill). This "two-part instrument" is equivalent to a Pigovian tax on the "dirty" activity (such as emissions, dumping, or litter). In the second generalization, we consider the case where government must use distorting taxes on labor and capital incomes. To help meet the revenue requirement, would the optimal deposit be raised and the refund reduced? We derive the second-best revenue-raising DRS or two-part instrument to answer that question.

The Effect of Bottle Laws on Income: New Empirical Results

“…Putting a bounty on trash is the most efficient way of internalizing the external costs of waste disposal. One of the most general models of a deposit-refund program is described in Fullerton and Wolverton (2000).…”

Design for E-Waste Recycling Deposit System and Expense Mechanism in China

“…However, a direct tax is not easy to impose on dumping or litter, therefore, an effective alternative is to apply the deposit-refund system (DRS) (Don Fullerton, 2000). With DRS, consumers pay deposits when they purchase items and get refund when they return the items for recycle.…”

Environmental and Pro-Social Norms: Evidence on Littering

“…taxes, fines, charges and market incentives) that can be used to minimize the problem of public littering (cf. Fullerton and Wolverton, 2000;Ackerman, 1997;Dobbs, 1991). One study (Kinnaman and Fullerton, 1994), dealing with garbage recycling, examines why some households participate in curbside recycling programs, even in the absence of a user fee; why other households do not participate, even in the presence of a user fee; and why some households choose to litter while others do not.…”