Evaluating the Swedish producer responsibility for packaging materials policy design and outcome

Abstract: During the last decades the promotion of recycling of used packaging materials has become an integral part of environmental policy. In 1994, a producer responsibility ordinance was introduced for different packaging materials in Sweden. The overall purposes of this thesis are to: (a) evaluate the design - and primarily the cost-effectiveness - of this waste management regime, and (b) attempt to explain differences in collection rate outcomes across Swedish municipalities. The thesis consists of an introductory part and two self-contained papers. Paper [1] outlines a theoretical model that is designed to link the necessary conditions for a cost effective waste management policy to specific policy designs. The main purpose of the paper is to make use of this model and analyze the incentive structure and the effectiveness of the Swedish producer responsibility ordinance in the empirical context of paper packaging. A secondary purpose is to discuss if the empirical evidence suggests that an alternative waste management regime, i.e., the so-called UCTS-system, could be more effective. According to the results, both the Swedish producer responsibility scheme and the UCTS system fulfill two important cost effectiveness conditions. The packaging fee in the present Swedish system and the packaging tax in the UCTS system provide similar incentives to an output effect. Furthermore, both systems also give rise to input substitution effects, e.g., they encourage the use of secondary materials at the expense of virgin materials by subsidizing collection and recycling activities. However, in the Swedish producer responsibility system, waste collection entrepreneurs in areas with high marginal costs of collection often obtain high refunds, a situation that is in violation with the cost effectiveness criterion. Neither of the systems tends to encourage enough of design for recyclability, although the Swedish producer responsibility seems to perform somewhat better here. Our analysis of the transformation and transaction costs involved in the two waste management systems suggests that it is hard to a priori determine which system will minimize these costs. It will depend on, for instance, households' valuation of sorting efforts, and the presence of economies of scale in the waste collection system. This implies that different systems in different parts of the country can be preferred. Paper [2] focuses on the actual outcome of the producer responsibility in the case of household plastic packaging collection. The paper investigates the main determinants of collection rates of household plastic packaging waste in Swedish municipalities. This is done by employing regression analysis based on cross-section data for 252 Swedish municipalities. The results suggest that pure cost, economic-demographic, and socio-demographic factors as well as environmental preferences all help explain inter-municipality collection rates. For instance, the collection rate appears to be positively affected by increases in the unemployment rate, the share of private houses, and the presence of immigrants (unless newly arrived) in the municipality. The impacts of distance to recycling industry, urbanization rate and population density on collection outcomes turn out, though, both statistically and economically insignificant. A reasonable explanation for this is that the compensation from the material companies varies depending on region and is likely to be higher in high-cost regions. However, if true, this also suggests that the plastic packaging collection is cost ineffective. Finally, the analysis also shows that municipalities that employ weight-based waste management fees have on average a higher collection rate than municipalities in which flat and/or volume-based fees are used. A major conclusion of the thesis is that public policy in the waste management field ought to focus more on regional cost differences in the collection and recycling of packaging materials.