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Challenging pollution and the balance problem from rare earth extraction: how recycling and environmental taxation matter

Published online by Cambridge University Press:  21 April 2020

Bocar Samba Ba ,
Pascale Combes-Motel  and
Sonia Schwartz Open the ORCID record for Sonia Schwartz [Opens in a new window]
Bocar Samba Ba
Affiliation:
Terres Univia, Paris, France
Pascale Combes-Motel
Affiliation:
Université Clermont Auvergne, IRD, CNRS, CERDI, Clermont-Ferrand, France
Sonia Schwartz*
Affiliation:
Université Clermont Auvergne, IRD, CNRS, CERDI, Clermont-Ferrand, France
*
*Corresponding author. E-mail: sonia.schwartz@uca.fr
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Abstract

Rare earth element extraction induces environmental damages and the balance problem. In this article, we show that recycling can challenge both problems in a two-period framework. We also find other results depending on the amount of scrap that can be recycled. If the recycling activity is not limited by available scrap, it does not change extraction in the first period. Environmental taxes on extracted quantities reduce extraction and favor recycling. But if the recycling is limited, the extractor reduces extraction in period one, adopting a foreclosure strategy, and environmental taxes can decrease recycling. In all cases, environmental taxes are never equal to the marginal damage from pollution, in order to take into account the recycling effect.

Keywords

rare earth elementspollutionbalance problemrecyclingPigouvian taxationCournot competition

JEL classification

Q58: Government Policy L72: Mining, Extraction, and Refining: Other Nonrenewable Resources Q53: Air Pollution • Water Pollution • Noise • Hazardous Waste • Solid Waste • Recycling L13: Oligopoly and Other Imperfect Markets
Type
Research Article
Information
Environment and Development Economics , Volume 25 , Special Issue 6: The Environment, Resources and Pollution – New Challenges for Economic Development , December 2020 , pp. 634 - 656
Copyright
Copyright © Cambridge University Press 2020

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