Gökçe Esenduran

Take‐Back Legislation: Consequences for Remanufacturing and Environment

In the last two decades, many countries have enacted product take-back legislation that holds manufacturers responsible for the collection and environmentally sound treatment of end-of-use products. In an industry regulated by such legislation, we consider a manufacturer that also sells remanufactured products under its brand name. Using a stylized model, we consider three levels of legislation: no take-back legislation, legislation with collection targets, and legislation with collection and reuse targets. We characterize the optimal solution for the manufacturer and analyze how various levels of legislation affect manufacturing, remanufacturing, and collection decisions. First, we explore whether legislation with only collection targets causes an increase in remanufacturing levels, which is argued to be an environmentally friendlier option for end-of-use treatment than other options such as recycling. While increased remanufacturing alone is usually perceived as a favorable environmental outcome, if one considers the overall environmental impact of new and remanufactured products, this might not be the case. To study this issue, we model the environmental impact of the product following a life cycle analysis–based approach. We characterize the conditions under which increased remanufacturing due to take-back legislation causes an increase in total environmental impact. Finally, we model the impact of legislation on consumer surplus and manufacturer profits and identify when total welfare goes down because of legislation.

Product Take-Back Legislation and Its Impact on Recycling and Remanufacturing Industries

Take-back legislation holds producers financially responsible for handling and treating their products at end of life. A growing number of countries around the world have enacted such legislation, especially for electrical and electronic products. Clearly, such legislation impacts the strategic and operational decisions of companies operating in the affected industries and the operations management literature recently started to analyze these problems. In this chapter, we provide an overview of existing take-back legislation and the papers that have studied various research questions associated with them. Our focus is particularly on papers that have studied the impact of these regulations on the recycling and remanufacturing industries.

The Effect of EPR on the Markets for Waste

Extended Producer Responsibility (EPR), a widely used policy tool, requires producers to assume financial and/or operational responsibility for ensuring their end-of-life products are properly collected and treated. EPR implementation in today’s economy, however, poses a change as some basic, underlying assumptions do not hold. Today’s economy challenges assumptions that (1) waste is costly to recover, (2) waste consists only of end-of-life products, and (3) waste is homogenous with respect to its geographic location, design, or condition. In this chapter, we discuss the impact of EPR on waste markets when these assumptions are challenged.