Study on subsidy policies of waste recycling

We analyze optimal recycling quantity of waste where production consisting of two modes of production, manufacturing with virgin material and with recycled material. We develop a differential dynamic model of recycling in which accumulated waste quantities depend on instantaneous waste disposed and waste degradation rate. We find that market demand increasing will lead to the increasing of accumulated waste quantities and recycling rate. Based on this conclusion, we propose subsidy policy instead of tax policy to stimulate firm to produce using recycled material. Two ways of granting subsidy have been studied in this paper, which is subsidy on remanufacture cost and subsidy on collection cost. Study result shows that the amount of subsidy on collection is only half of that on remanufacture under obtaining the same amount of accumulated waste.