Environmental Engineering Reference
In-Depth Information
end-of-life products, to the state of California's electronic waste recycling act
that charges customers a fee for end-of-life product recovery at the point of sale.
Such regulatory moves and the accompanying parameters and constraints have
forced supply chain managers to rethink traditional business models. In partic-
ular, the traditional supply chain optimization problem is affected by product
take-back in the following ways:
•
Product mix decisions are now affected by the costs involved in recovering
end-of-life products
. Some products are inherently more viable to recover
than others, and might therefore become more attractive to manufacture
than before.
•
Pricing decisions are affected by the fees faced by consumers and the costs
of product recovery
. It is likely that optimal production quantities under
product take-back are lower than those in absence of product take-back,
due to increased prices.
•
Product take-back legislation has prompted businesses to evaluate alterna-
tives to selling, such as leasing or servicizing
. By selling a service rather
than the product
per se
, manufacturers have better control over the quality
and recovery of end-of-life products. Manufacturers, facing the take-back
of products at end-of-lease, have incentives to design their products to
facilitate remanufacturing or reuse. New business models such as
serviciz-
ing
radically change the optimization problem. Instead of simply having to
add new constraints or modify cost parameters in an existing problem, the
structure of the optimization problem itself can change significantly (due
to the need to relate variables such as product design choices, customer
behavior, lease durations, and the likelihood or extent of product recovery).
2.2
Cap and Trade
Market-based programs such as emissions trading have emerged as the legisla-
tive instruments of choice to limit levels of pollutants into discharge streams.
Under a permit trading program, a firm must account for each unit of pollution
with a valid emissions permit. Unused permits can be banked for future use and
represent a valuable, relatively liquid asset. The most successful program to date
has been the U.S. Acid Rain Program to control sulfur dioxide (SO
2
) emissions.
Such programs offer firms the flexibility to choose amongst a variety of com-
pliance methods and eliminate the regulatory and administrative costs typical of
“command and control” instruments such as taxes. The European Union has also
initiated a greenhouse gas emissions trading scheme (ETS) for controlling carbon
dioxide (CO
2
) emissions. With the Kyoto protocol coming into force, transna-
tional cap and trade programs for carbon dioxide have been posited as ways to
achieve targeted reductions. One such program that has been contemplated is the
establishment of CO
2
emissions caps across point and distributed sources that
constitute various steps in the value addition process from raw material suppliers,
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