Does International Harmonization of Environmental Policy Instruments Make Economic Sense? The Case of Paper Recycling in Europe

Harmonization of the instruments used in environmental policy has been considered necessary to guarantee fair competition in international markets. We investigate alternative policy measures for promoting paper recycling in seven European countries and present a theoretical framework for analyzing policy requirements for the minimum amount of recycled material to be used in production. We estimate empirically the technologically feasible input combinations of pulp and waste paper for paper production. We then "translate" the standard into market-based instruments to illustrate how a common recycling goal could be implemented in different countries through taxes or subsidies. Finally, we discuss the distributional effects of harmonized policy.recycling; minimum content requirement; taxes; taxes; subsidies; environmental policy harmonization.