Toward a circular economy: A system dynamic model of recycling framework for aseptic paper packaging waste in Indonesia

https://doi.org/10.1016/j.jclepro.2021.126901Get rights and content

Highlights

  • When formulating an EPR scheme, two points must be considered: framework and policies.

  • A system dynamic model was proposed and simulated to get the optimal solution.

  • A related case study involving aseptic paper packaging (APP) was considered.

Abstract

In a circular economy, extended producer responsibility (EPR) is a regulatory approach that accounts for all environmental costs associated with a product throughout its life cycle. When considering the EPR, the regulator must (1) design an integrated framework for different stakeholders and (2) provide effective policies to create financial incentives to accelerate the circular system. Recycling funds and subsidies are the most prominent financial strategies that can either encourage or curtail the flows of recycled products. In Indonesia, a few companies provided recycling bonus s to their customers as incentives to increase the recycling rate. However, the recycling rate was not as effective as expected by the enterprise because recycling was practiced by a limited number of companies, rendering it economically unviable. The enterprises hope the government could develop a recycling fund system. In order to develop the recycling fund system, a system dynamic model was proposed and simulated to optimize the recycling funds and subsidies based on decentralized reverse supply chains. Although it is not a novelty model; however, the research show a very significant results for the government in Indonesia. This enabled a more precise, well-planned, and sustainable decision-making process for the EPR. In addition, by utilizing the system dynamic model with different scenarios in a real case study (aseptic paper packaging waste), we found that the capacity of the recycler could become the reference for the funds to be paid by the importer-producer group, wherein the recycling rate will increase with an increase in the recycling fund.

Introduction

Extended producer responsibility (EPR) has been a driving force behind the adoption of circular economy initiatives although in reality it is quite difficult to achieve a closed loop recycling system. Most recycling schemes are open loop, since the material degrades or accumulates contaminants and can no longer be safely used in the original application. The primary goal of EPR policies is to increase product recovery and minimize the environmental impacts of waste materials. EPR is a regulatory approach whose aim is to shift the responsibility of managing EOL products from municipalities to producers (Pazoki and Zaccour, 2019). When formulating an EPR scheme, it needs to balance the interests of the stakeholders and EPR policies need to be finely tuned to these interests to raise recycling rates (Hong, 2011; Pazoki and Zaccour, 2019; Shan and Yang, 2020). Recycling funds (RFs) and subsidies are two most common and significant approaches to accelerate recycling.

An increase in the recycling rate is essential to minimize the disposal of residues in landfills, reduce emissions, and allow partial recovery of raw materials used in manufacturing (Mourad et al., 2008). Even though recycling has the potential to reduce the amount of material reaching end of life but without displacement, recycling can only delay and not prevent any existing end of life materials from reaching final disposal (Zink and Geyer, 2019). Under the EPR regulatory approach, a producer’s responsibility may be extended to the post-consumer phase of their products. This mandates appropriate treatment and disposal of the EOL product by the producers. In other words, producers need to take the responsibility of managing waste from their products (Hotta, 2009).

In Indonesia, the Ministry of Environment and Forestry has issued regulations that mandate the industry to participate in handling waste from the products they manufacture (Wattimena, 2017). This regulation includes three major perspectives: waste management, waste reduction, and special waste management. The government has affirmed that waste management is not only a governmental obligation, but also applies to industries where producers have a responsibility of managing waste. However, there are several challenges in implementing waste management, such as the deficiency of waste management facilities to recycle obsolete products, lack of proper and feasible collection methods to handle waste, and the relatively weak authority in the local government to supervise the waste management program in regional production sites. Additionally, the Indonesian society lacks a comprehensive awareness on disposing and managing waste and the government does not regulate a policy that requires a company to pay a recycler company to take EOL Tetra Pak from customers for reuse. Unlike in Taiwan, the government in Taiwan regulates a policy that regulates all of them. There are other companies besides Tetra Pak for example Elo Pak and SIG Combibloc, but in this paper, we use Tetra Pak as our data for case studies.

In order to manage waste disposal, the Ministry of Industry in Indonesia planned to conduct an evaluation of a subsidy-based policy for local companies, it includes collection agencies and recycling facilities along with recycling funds. It means that collection agencies receive a subsidy and that recycling facilities receive a subsidy and a recycling fund. For this evaluation, two research questions need to be addressed:

  • What is the joint framework based on the various stakeholders in Indonesia? As there are multiple stakeholders involved in the recycling system, all stakeholder requirements are described in this framework.

  • What is the optimal subsidy for different recycling rates? The optimal subsidy here is intended for the benefit of various stakeholders, which includes government, recycler, remanufacturer, customer, retailer and manufacturer. It means the lowest possible subsidy, which still allows the recycling system to operate.

In order to answer these questions, first, a recycling framework was prepared that covered all stakeholders’ requirements. Second, the tariff scenarios of the total amount of subsidies (collecting fee, production fee, and recycling fee) were simulated using a system dynamic model. Then, a system dynamic model was simulated based on all the variables in the recycling process that could be adjusted. In the proposed model, all performance measures were evaluated based on the duration in which the recycling rate was optimized and subsidies obtained by recycling entrepreneurs, and compared with the cost of waste management incurred by producers using packaging in their businesses. The system dynamic model is used because it has never been used in previous research and the use of system dynamic makes it easy to adjust existing parameters and to know the consequences of changes that have occurred. The model has been used before in Taiwan, but because it is applied in Indonesia there are a few changes made in the model. A case study involving aseptic paper packaging (APP) in the pulp and paper industry was considered and we assume all the cartons have an aluminum interior inside. The results could be used as a reference by the industry and the Indonesian government. The main objective of this study was to investigate the APP waste recycling system, which includes (1) a recycling framework with stakeholders and (2) the effects of recycling funds and subsidies on the performance of recycling activities. To achieve this goal, a system dynamic model was developed for a recycling system. The model comprised of several components (entities) that interact with each other to achieve a particular goal. Three key issues were formulated in this study:

  • The relationships between entities involved in the recycling supply chain system were identified.

  • The associated costs incurred in the recycling supply chain system were identified.

  • The minimization of the recycling fund and maximization of the recycling rate were achieved.

The remainder of this paper is organized as follows. In Section 2, the existing literature on recycling framework and recycling fund is reviewed. In Section 3, we present a system dynamic model of the recycling framework. Section 4 shows the case study and analysis and Section 5 provides conclusions and suggestions for future research directions.

Section snippets

Literature review

The literature review was divided in two parts: modeling technique of recycling framework and the financial mechanisms.

Research method

Although system dynamic models have been used in a wide variety of disciplines, their application in APP waste and recycling is limited. As its technology is already developed, the EOL Tetra Pak could be collected and recycled as Polylum board. Fig. 2 shows the recycling system.

As the EOL Tetra Pak could be recycled into corrugated paper or polylum board, there is economic value in the recycling system. Previously, in order to manufacture corrugated paper or polylum board, few private companies

Simulation results and discussion – a case study of APP

We developed a case study of an integrated APP waste recycling network model while accounting for stakeholders such as consumers, scavengers, agents, factories, as well as the final consumer markets. The entities involved in the waste recycling supply chain system were identified with reference to the existing system.

Conclusions

In this work, we use a dynamic system model to identify any parameters that significantly affect the EPR fund generated. As mentioned in the literature review, the use of dynamic system model has never been used before. This study investigated the recycling framework of APP waste in Indonesia, targeted towards achieving a circular economy. However, for a recycling system to function smoothly the active engagement and commitment of all stakeholders is required. In order to obtain the support of

CRediT authorship contribution statement

Tsai-Chi Kuo: Methodology, Investigation, Supervision, Writing – review & editing. Ni-Ying Hsu: Data, Investigation, Writing – review & editing, Methodology, Supervision, Writing – review & editing. Reza Wattimena: Conceptualization, Methodology, Investigation, Writing – review & editing, Method approach, result writing. I-Hsuan Hong: Discussion, Writing – review & editing. Chin-Jung Chao: Discussion, Writing – review & editing. Jonathan Herlianto: Methodology, Writing – review & editing,

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgement

This research was funded by the Ministry of Science Technology of the Republic of China, Taiwan [grant numbers 107-2621-M-033 -001 and 108-2621-M-011 -001.

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