On International Harmonization of Policy Instruments to Promote Recycling

Harmonization of the instruments used in environmental policy has been considered necessary to guarantee fair competition in international markets. The choice of common policy measures is of the utmost significance, inasmuch as each country has different types of environmental problems, and, accordingly, the urgency of a given problem will vary from country to country. As a case study we investigate alternative policy measures for promoting paper recycling in Europe. First, we discuss the current state of waste paper recovery and raw material use in Europe and present our analytical framework for policy comparisons of input taxes, subsidies and requirements for the minimum amount of recycled material to be used in production. Using aggregate production data for individual countries, we estimate empirically the technologically feasible input combinations of pulp and waste paper for paper production in Europe. Given that the individual countries currently optimize their input choices freely, we impose a common minimum content requirement to see the extent of relative changes in input combinations which this policy measure would imply for each country. We then ”translate ” the standard into market-based instruments to illustrate how a common recycling goal implemented in different countries could be achieved through taxes or subsidies. Finally, we discuss the tributional effects of harmonized policy and suggest an alternative policy design which would acknowledge country-specific features in order to truly improve the state of the environment by promoting paper recycling. Key words: recycling, minimum content requirement, taxes, subsidies, environmental policy harmonizatio