On the Foundations of Environmental Policy
Chapter 15: Waste Paper: Price Ambivalence
∗ with Ralph Winkler 15.1 Introduction Many factors need to be considered in the design of environmental policies. Household behaviour, technology, environmental scarcities, market forces, political forces, delegation of responsibility and regulatory institutions interact in a complex way to determine the ultimate eﬀect of policy measures on both the economy and the environment. In this chapter, we present a case study of how economic market forces, production technology and environmental legislation interact to generate price ambivalence of joint products – a phenomenon that we discussed in detail on a conceptual level in Chapter 8. The case we are drawing upon is the price ambivalence of waste paper on the German market between 1985 and 2000. The phenomenon of price ambivalence – that is the price of a commodity is positive at some times and negative at other times – is apparent in that particular market in a highly illustrative manner. Its causes are a number of technical and institutional characteristics of the German waste paper market. While some of these characteristics are common in all secondary resource markets, some characteristics are unique to the German waste paper market. Natural resources are necessary inputs in many production processes and are usually paid according to their marginal productivity. Thus, primary resources like wood, pulp, crude oil etc. are only harvested or produced in amounts which enable a proﬁtable sale on markets. The same goes, according to standard economic wisdom, for so-called secondary resources which are recovered from waste materials from consumption or production, for...
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