Deposit-refund system vs. compliance scheme membership: How to comply with producer responsibility regulations?

This study models and analyzes two alternatives available for producers to comply with the producer responsibility regulations: (i) individual compliance alternative, which is modeled through a producer-managed deposit-refund system and (ii) collective compliance, which is modeled through a compliance scheme network managed by an authorized organization. We provide closed-form solutions for both models and analyze the impact of various parameters (e.g., price for recyclable materials, recycling yield, the legally required recycling rate) on the minimum cost to be incurred by a producer and the return/recycling rate under each model. We also compare the two models with respect to the return/recycling rate and the producer cost. As a result of our analysis, we observe that the deposit-refund model guarantees lower cost for the producer while the compliance scheme ensures a slightly higher return/recycling rate on average. The cost advantage of the deposit-refund model augments for packaging materials with a higher recycling value, but is weakened by the legally imposed recycling rate.