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Creating Incentives for Greener Products

A Policy Manual for Eastern Partnership Countries

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The European Union’s Eastern Partnership (EaP) countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) struggle with environmental challenges related to the consumption and end-of-life management of many harmful products. This policy manual considers the potential use and implementation of four categories of product-related economic instruments to address some of these challenges: product taxes, tax differentiation based on environmental factors, deposit-refund systems and extended producer responsibility (EPR).

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Deposit-refund systems: Design and implementation

Deposit-refund systems (DRS) can be employed to ensure high rates of recovery of certain tightly defined and specific products, where the mechanism of charging deposits and paying refunds can be operated at an acceptable cost relative to the gains from achieving high rates of return of the products concerned. However, despite the relative simplicity of the concept, implementation of a DRS may involve considerable complexity and high costs of operation which may act as a burden on producers, distributors or retailers. This section discusses key decisions and practical steps to be taken in introducing a DRS, such as commodity coverage, the choice between a singleproducer and a common industry-wide scheme, treatment of smaller producers and importers, setting the level of the deposit, and the need for government intervention in a DRS.

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