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Modeling and assessment of e-waste take-back strategies in India

https://doi.org/10.1016/j.resconrec.2015.01.003Get rights and content

Highlights

  • It is a first, limited attempt to model e-waste take-back policies for a developing country with focus on India.

  • Mathematical model proposed incorporates the market realities that exist in such countries.

  • Market equilibrium prices and equilibrium profits derived to benchmark the take-back policies.

  • Individual take-back scheme returns a win–win opportunity for both the customers and manufacturers.

Abstract

The problem of growing e-waste (also called as WEEE) quantities in developing countries have prompted governments to plan innovative control measures and to institutionalize environment friendly strategies to mitigate the threats emanating from such waste. In India, e-waste recycling has been primarily a market driven industry. Under India's newly drafted e-waste management handling rules, the producers are expected to introduce and implement EPR regimes as early as possible. The scope of implementing EPR has also been discussed in these guidelines. In this work, we make an attempt to assess different EPR take-back policies and investigate their suitability for the Indian conditions. We use an economic model to ascertain the profitability of different EPR take-back schemes. In order to sustain the higher costs of e-waste recycling, the overall profitability of the e-waste take-back scheme is vital to the success of any e-waste recycling mandate. The results from our modeling clearly show that from the viewpoint of both the consumers and the producers, an individual take-back scheme outperforms the collective take-back scheme. We also describe impacts and implications of these take-back schemes on the model parameters of interest.

Introduction

In the developed world, e-waste take-back legislations have been implemented through directives under the guiding principle of Extended Producer Responsibility (EPR). The EPR concept holds manufacturers responsible for the collection and environment friendly disposal of products at the end of their useful life. Take-back policy that invokes the EPR principle mandates the manufacturers to develop adequate systems for the collection and environmentally safe treatment of such products. The long term goal of EPR (Nnorom and Osibanjo, 2008) was to improve product reusability and recyclability, reduce material usage, downsize products, and incorporate Design for Environment (DfE) principles in the product design process to significantly reduce the environmental impact of products put into the market. Take-back legislation in developed economies (Atasu et al., 2012) principally follows one of two approaches: consumer pay or producer pay. The Japanese and the Californian states in particular, have chosen the consumer pay principle, where the end-user is charged an extra fee for the safe treatment of used products. Contrarily, several European countries favor the producer pay principle which holds the manufacturer responsible for environment friendly treatment of used products.

Several policies have been implemented to address the critical issue of e-waste management and, in particular, e-waste recycling. The European Union (EU) has framed two recent policies. The WEEE (Waste Electrical and Electronics Equipment) Directive (Directive 2002/96/EC, 2003) transfers the burden of recycling to the manufacturers by requiring them to take-back and recycle WEEE. Another EU initiative, the RoHS (Restriction of Hazardous Substances) Directive (Directive 2002/95/EC, 2003), restricts the use of certain hazardous materials in electrical and electronic equipment. Yet another initiative, the Basel Convention (Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, 1989), legally bans the export of hazardous waste and their disposal from developed countries to developing countries. The EU WEEE directive clearly imposes collection, recovery, and recycling targets on its member countries. It stipulates a minimum collection target of 4 kg/capita per year for all the member states. These collection and weight based recycling targets seek to reduce the amount of hazardous substances disposed to landfills and to increase the availability of recyclable materials which indirectly encourages less virgin material consumption in new products. Netherlands was the first member state to fully implement these directives through their own national legislation. Sepulveda et al. (2010) propose that the EU's WEEE Directive, which is more focused on toxic control and manual disassembly based recycling systems, should also aim to serve multiple and broader environmental goals like recovery of valuable materials and energy preservation. The authors justify their argument by citing latest innovations in shredding and separation technologies together with technological progress in dedicated smelting operations of valuable materials.

In 2001, Japan adopted a new legal framework (Ogushi and Kandlikar, 2007) to kick-start its own WEEE recycling system incorporating EPR and, with a view to establish a sound material-cycle society that promotes the 3R (Reduce, Reuse, Recycle) principle. Such a law was necessitated by the fact that proper treatment of e-waste would enable proper resource recovery and reduce dependence on landfill. A unique feature of the Japanese EPR law is that it is primarily based on the principle of shared responsibility wherein the responsibilities of different stakeholders are explicitly shared. For instance, according to the Home Appliance Recycling Law (HARL), retailers are mandated to collect used products, consumers are responsible for financing recycling and transportation by paying recycling fees to the retailer at the point of disposal and producers are mandated with setting-up pretreatment plants and collection networks. The above law covers four major e-waste products, namely air-conditioners, televisions, laundry machines and refrigerators. The retailers, and the municipality in some cases, are obliged to transfer the collected units to the producers’ designated collection points and subsequently pass on the recycling fee to the producers. The producers are mandated to collect e-waste from their designated collection points and achieve the recovery targets set under the legislation.

Bulk and business consumers, on the other hand, could either engage the treatment of e-waste at their own expense or return to the retailer by paying the requisite recycling fees. The law for the management of e-waste from PCs (Personal Computers) from the business sector also came into effect from April, 2001 while those from the household sector came under the purview of the EPR law from October, 2003. However, for computers, the costs of recycling are borne at the point of sale, as opposed to at the point of disposal for products under HARL. Yet another law, the Small-sized Home Appliance Law was enacted on April, 2013 to cater to small electronic and electrical home appliances such as mobile phones, gaming machines, small personal computers etc. The new law, which covers about 100 items, does not require consumers to pay recycling fees. Under the new law, the concerned municipality is responsible for setting up collection centers, from where collected waste is to be sent to certified recycling companies. Further, each municipality is stipulated to design their own collection centers and identify the products to be collected.

Take-back policy requires financial instruments in the form of disposal (or recovery) fees either at the time of disposal or at the time of purchase (advance recycling fees or advance disposal fees). For instance, the Japanese model argues for both approaches: advance fees for computers, and fees at the point of disposal for home appliances. The Californian and the Taiwanese models, on the other hand, favor advance recycling fees for all products, which are typically used to fund the state controlled recycling system (Lee et al., 2010, Atasu and Van Wassenhove, 2012). Advance disposal or recovery fees have the advantage of being visible to all the stakeholders which influences better future planning at the downstream end. Additionally, fees charged at the point of disposal might lead to an indifferent disposer who, in all likelihood, might be tempted to illegally dump the used products or perpetually store them.

Contrarily, the European WEEE directives are implemented through the manufacturer operated take-back systems (Dempsey et al., 2010, Atasu and Van Wassenhove, 2012). Yoshida and Yoshida (2010) state that the current e-waste management framework that exists in Japan not only closes the material-cycle, but is also the best system in existence that reasonably captures producer feedback through DfE (Design for Environment). As opposed to the EU take-back model, where the manufacturers’ contract the recycling activity to dedicated recycling companies, the producers in Japan are directly involved in the recycling process. Uwasu et al. (2013) in their pioneering work, reported that as far as developed countries whose objective remains to achieve a certain level of waste reduction are concerned, a deferred disposal fee system will always result in the highest recycling fees. They also report that factors like demand elasticity and consumer response to recycling fees shall dictate whether the deposit-refund system incurs lower recycling fees than the advanced disposal fee system. Shinkuma (2003) attempts to model the effect of transactional cost in the deposit-refund system on household waste recycling policy vis-à-vis the relative magnitude of the price of a recycled good. The author clearly outlines that in the event where the marginal transaction cost is relatively low, the deposit-refund system outperforms other schemes regardless of the price of a recycled good.

Besides these mandated product take-backs, there also exists voluntary take-back strategies (Widmer et al., 2005) which is generally the case observed in developing countries like China and India. Here, there are no laws that mandate compliance and therefore no penalties for not meeting the EPR goals. Increased public awareness and government attention to the problems emanating from e-waste have prompted few manufacturers from developing countries to establish individual take-back schemes for specific products as a part of their corporate social responsibility and green image.

A major issue for planners in the implementation of any form of EPR is in deciding which type of producer responsibility is optimal for the producers: individual or collective. From the long term perspective of EPR, the producers favoring the individual take-back, will ideally attempt to internalize the recycling cost into the product price, which could provide the required incentive for producers to adopt better product design features to facilitate better recovery and recycling, and to avoid the inclusion of hazardous substances in the manufacturing stage. A good number of producers engage in collective systems to take advantage of the economies of scale and thus to reduce costs (Atasu et al., 2009). Such an arrangement allows producers to delegate most take-back-related activities to third-party treatment providers, but it also leaves them with very little scope and incentive to make substantive future investments to address the long term objectives of EPR.

The argument over the cost efficiency of the two schemes remains debatable and has been inconclusive till date. Producers that favor an individual scheme argue that it is an ideal platform for producers to invest in environment friendly products which, in the long run, will reap economic benefits from reduced recovery costs. In stark contrast, certain industrial alliances and some national collective systems (Atasu and Subramanian, 2012) in countries such as Sweden, Netherlands, Belgium and Norway have supported collective take-back scheme based on the argument that a collective system is the simplest and most cost-effective way to collect and recycle e-waste.

The first significant headway in e-waste legislation in India was the e-waste guidelines issued by the Ministry of Environment and Forests (MoEF), Government of India vide its letter no. 23–23/2007-HSDM dated March 12, 2008. It then formed the benchmark for the scientific handling of e-waste in an environmentally sound manner (MoEF, 2007). Following this, on May 14, 2010, MoEF issued the draft “e-waste (Management and Handling) Rules, 2010” that came into force from May 1st 2012. The rules clearly stipulate producer responsibility for the proper collection of e-waste through an appropriate take-back system on the same lines as the European EPR directive.

The newly set rules clearly put the onus of e-waste management on the manufacturers on the lines of the principle of EPR and also restrict the use of hazardous substances in e-products. The rules explicitly define the roles and responsibilities of the producer, collection centers, consumer or bulk consumers, dismantlers and recyclers. Through this enactment, manufacturers now have to design their own take-back system. The producers, as per the new guidelines, are expected to voluntarily set up collection centers or take-back systems, either individually or collectively. Currently in India, there is an established informal sector which collects and processes e-waste (Dwivedy and Mittal, 2010). However, the disposal and recycling of e-waste in the informal sector are very rudimentary so far as the recycling techniques employed and safe recycling practices are concerned, resulting in low recovery of materials (Yu et al., 2010). The process followed by these recyclers is product reuse, refurbish, conventional disposal in landfills, open burning and backyard recycling (Dixit, 2007). Most often, the discarded electronic goods finally end-up in landfills along with other municipal waste or are openly burnt releasing toxic and carcinogenic substances into the atmosphere.

To avoid this, the proposed e-waste guidelines exhort producers to explore appropriate take-back schemes so that e-waste goes to the right channel. Customers need to be given incentives to return their end-of-life (EOL) e-products back to the collection centers. This could be done by enforcing a buy-back policy. Once a product reaches the end of its useful life, the producers would buy it back from the consumers at a price higher than that of the informal sector, thereby cutting off the supply to this sector and ensuring that e-waste goes to the right channel. This added cost to the manufacturer would be offset by increasing the selling price of new products. Wang et al. (2011) conducted the first of its kind econometric study for a developing country like China to assess the principal factors that affect residents’ e-waste recycling behavior. Subsequently, a similar study was also conducted in the Indian context by Dwivedy and Mittal (2013). Both the studies equivocally state that consumers in developing countries look for economic benefits for discarding their e-waste. The Chinese residents, in the likelihood of a take-back regime are reportedly seems to prefer the pay-in-advance scheme, as against the deposit-refund route favored by the Indian residents. Wath et al. (2010) argue that a visible advanced recycling fee is the most suitable financing instrument for recycling e-waste given that there exists a very well networked and effective door-to-door collection network in India with which the residents are willing to trade with their e-waste. The authors, like others, fear that a deposit-refund system would be operationally infeasible due to high transaction costs and administrative burdens associated with record keeping.

By take-back scheme, this study refers to collection decisions while most literature in this area (Toyasaki et al., 2011) use an integrated approach between the manufacturer and the recycler to develop a framework for analyzing and optimizing take-back schemes. Since no laws exist which mandate the responsibility for the collection and recycling of the end-of-life products in India, it is too early to speculate the extended bargaining role of recyclers in the current framework. The manufacturers, though not mandated, need to or at least seem to evolve a take-back policy as expected from the latest draft guidelines. Bereft of collection and recycling targets, it becomes imperative to identify the right take-back policy from the manufacturers’ point of view. Juxtaposing the experiences from the developed world will not suffice given that there exists serious shortcomings in the existing regulatory framework, and where the price sensitive Indian consumer not willing to pay for recycling the e-waste.

The purpose of this study is to report on research undertaken to model and investigate whether the current end-of-life product take-back theories and practices can be applied to developing countries like India. To this effect, the study investigates and builds upon the existing baseline European take-back schemes for WEEE recycling: Individual and Collective take-back scheme. The modeling framework proposed in this study is grounded to achieve and complement the newly set producer responsibility laws in India, and which in the near future could form the basis for legislators/regulators in determining the appropriate type of scheme to adopt.

Section snippets

Mathematical model

In this section, the framework used to represent the industrial structure, the modeling assumptions and the profit function of the manufacturer are formulated. For ease of analysis, a two-manufacturer case was investigated. Here, each manufacturer can be viewed as a single firm or a consortium of firms. The advantage of a two manufacturer industrial setting allows us to model competition that exists within the same tier of a network using stylized demand functions that are easy to handle (

Analysis

Next an attempt is made to study how the equilibrium price and the manufacturer profit vary with respect to variation in the different variables, for both the schemes. Since our principal motivation is to compare the two schemes, it can be assumed that the market share of both the manufacturers is the same. i.e. α1 = α2 = α. It was also assumed that all EOL products collected, in both schemes, are given to recycler i.e. γ = 1. Further, we note the following guidelines for analyzing the mathematical

Conclusions

For a peculiar nature of market for recycling in India, where consumers expect economic benefits while disposing e-waste, the EPR model practiced in the developed countries is likely to fail because it imposes cost to consumers. The objective of this research undertaken was to gain insight into the impact of such market conditions into an EPR model. Here an analytical framework was proposed and analyzed to compare two different modes of collection of EOL products. The analysis reveals key

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