Deposit-refund system

A deposit-refund system (DRS), also known as deposit-return system, advance deposit fee or deposit-return scheme, is a surcharge on a product when purchased and a rebate when it is returned. A well-known example is when container deposit legislation mandates that a refund is given when reusable packaging is returned. Deposit-refund system are a market-based instrument to address externalities. As with Pigovian taxes a DRS aims to limit pollution of various types by creating an incentive to return a product.[1]

While most commonly used with beverage containers it can be used on other materials including liquid and gaseous wastes.[2] Deposit-refund systems are used on products such as batteries, tyres, automotive oil, consumer electronics and shipping pallets.

There are three potential advantages of a DRS: it reduces illegal dumping by giving a financial incentive, it makes monitoring and enforcement easier, and evading the costs is difficult.[1]

Deposit-refund systems can be both voluntary or mandated by legislation.

See also

References
  1. Walls, Margaret (November 2011). "Deposit-Refund Systems in Practice and Theory" (PDF). RFF DP 11-47. Resources for the Future. Archived from the original (PDF) on 1 August 2014. Retrieved 22 August 2012.
  2. Fullerton, Don; Wolverton, Ann (2000). "Two Generalizations of a Deposit-Refund System" (PDF). American Economic Review. 90 (2): 238–242. doi:10.1257/aer.90.2.238.
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