Metal markets and recycling policies: impacts and challenges

Abstract

An increased understanding of the existing markets for recycled (secondary) metals, including interactions with virgin material production, is essential for public decision-making processes concerning the implementation and evaluation of different categories of recycling policies. In this paper, we review the existing literature with the purpose of discussing (1) the impacts of various recycling policies on metal markets in which aggregate demand can be met by both primary and secondary production, and (2) a number of challenges that policy-makers need to confront in choosing between various types of recycling policies and policy designs. A simple partial equilibrium model is used as a pedagogical tool for shedding light on the impacts of tradable recycling credits, virgin material taxes, and recycling subsidies. In a second step, the paper identifies and discusses a few key challenges that policy-makers will need to address in recycling policy-making. These challenges include improving the functioning of secondary material markets by addressing various non-environmental market inefficiencies; identifying and designing (second-best) policy mixes due to the presence of incomplete monitoring and enforcement of waste disposal behavior, and regulating environmental impacts through price- or quantity-based policies. Throughout the analysis, we consult the empirical literature on the functioning of scrap metal markets (e.g., steel, copper, and aluminum).