Chapter 1 Introduction
1.1 Research Background
Accompany with the rapid economic development in the world, it follows that the environmental resources are exhausted rapidly. Environment protection has become a major issue around the world. For protecting the environment from being destroyed, governments and manufacturers have started to make efforts on recycling and effectively use resources in order to reduce their impact on the environment.
Therefore, the concept of “4R” arises.
According to Environmental Protection Administration, Executive Yuan, R.O.C.
(Taiwan), the “Definition of Environmental Protection”, Chap.5, The definition of wastes and soil pollution control, ID No. 11350158: 4Rs (Four Rs) include Reduction, Reuse, Recovery, and Recycle.1 In this paper, the topic of resources reuse of recycling will be discussed.
For implementing recycling and reducing waste effectively, many countries and international organizations have begun to involve in the reverse production supply chain. In 2006, the EU promulgated the “Direction on Waste Electrical and Electronic Equipment” (WEEE), 2 requires that all trafficking in consumer durable equipment, electrical and electronic tools, vending machines, etc. in EU must take the after-use
1 See www.epa.gov.tw/FileDownload/FileHandler.ashx?FLID=863,2014.9.29.
2 WEEE control 10 kinds of electrical and electronic equipment, 1. Large household appliances 2.
Small household appliances 3. IT and telecommunications equipment 4. Consumer equipment 5.
Lighting equipment 6. Electrical and electronic tools 7. Toys, leisure and sports equipment 8. Medical devices 9. Monitoring and control instruments 10. Automatic dispensers .WEEE requires establishing recovery system and set a recovery goal.
(http://ec.europa.eu/environment/legal/law/pdf/waste_law/5%20WEEE%20revised.pdf,2014.11.05 )
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environmental pollution problems into account while manufacturing, adopt recyclable easily, environmentally friendly design, and bear the responsibility and expense of recovery.
The EU hopes that the huge consumer market will lead manufacturers at every stage of the supply chain to establish waste recycling norms at the time of manufacturing. The direction of WEEE enforces that non-compliant products cannot be sold in Europe, forcing international manufacturers to obey green specifications.
Given the trends of dedicating to waste disposal management around the world, the Republic of China promulgated the “The Regulations Governing Application of Investment Tax Credits to Resource Recycling” in 2007, to cultivate new industries and reuse of resources sustainably. Then, the Industrial Development Bureau, Ministry of Economic Affairs, R.O.C. (Taiwan) was tasked to assist industries to build
“R&D technology supply and demand information platform”. It provides a channel in R&D and technology cooperation among manufacturers, and facilitates cooperation among industries and academic institutes in technology development, to improve recycling industry's technology capabilities.
In nowadays, many companies in Taiwan have invested and implemented recycling of renewable materials to produce products. For instance, Champion Building Materials Co., Ltd. and White Horse Ceramic Co., Ltd. use waste concrete (urbanite), waste porcelain, waste glass, and stone scraps as part of inputs to produce ceramic tile; China Steel Corporation mixes the waste steel with raw steel to produce steel for bridge structure; Chung Shing Textile Co., Ltd., Far Eastern New Century Corporation, Shinkong Textile Co., Ltd., and Lealea Enterprise Co., Ltd. use recycled PET fiber yarn with the virgin raw material to produce sportswear.
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While meeting a specified percentage of mixing recycled materials into the raw material in production system, the manufactures may apply “Green Mark” as the product identification. “Green Mark” enables institutes and enterprises to identify those products with environmental friendly in the market place and thus fulfill their social responsibilities.
Taiwanese manufacturers, supported by the government, actively engage in using inputs as complementary inputs. The environmental-friendly plastic jersey is a good example. According to French newspaper Le Figaro on June 26, 2014, the 2014 FIFA World Cup is providing a great stage and sales opportunity for Taiwan's innovative fabrics made of recycled plastic bottles, the Taiwanese enterprises have turned waste into gold. With ten of the participate teams wearing jerseys made of these innovative fabrics in Brazil after they were first introduced in South Africa four years ago, the newspaper also declared that Taiwan has already won her World Cup.
Currently, the world trends and governmental policies are promoting the sustainable of reuse and recycling materials aggressively. Therefore, the government must provide relevant incentive measures to encourage manufacturers to practice the mechanisms of waste recycling. It will thus turn out the objectives of lessening environmental impact and waste reduction to be true.
1.2 Research Motivation and Purpose
From the above discussion, government plays a significant role in involving the green supply chain management. Under the consideration of social welfare, how can government encourage final product manufacturers to adopt more secondary intermediate inputs, and how to set up a feasible incentive mechanism for domestic
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intermediate input manufacturers to manipulate their efficiency are important issues.
From the perspective of manufacturers when facing international competition, the most critical criterion is to maximize their profits, while the government is to search for the optical social welfare.
This paper discusses in depth the scenario that under the consideration of social welfare effects, the government imposes advanced recycling fees on monopoly final product manufacturer, regulates the percentage of using secondary intermediate inputs, grants domestic secondary intermediate input manufacturer subsidy on R&D expenditure, and levies tariff on foreign intermediate input exporter.
The research procedure of this paper is as follows:
1. Divide the research scopes into four regimes: Autarky, open market, autarky with R&D, and open market with R&D;
2. Apply the three-stage game to explore the influence on the supply chain participants under the Government's green policy measures;
3. Decide optimal R&D level for domestic input manufacturer;
4. The impact of Government's policy on social welfare.
1.3 Research Contributions
This paper explores and discusses the government’s green policies effects on the succeeding interaction among manufacturers. We discuss four scenarios, autarky, open market, autarky with R&D and open market with R&D.
We find that the domestic secondary intermediate input manufacturer not only has the ex-ante willingness to reduce production cost but also can create ex post efficiency improvement R&D performance. There exists paradox on efficiency
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attention between the government and the domestic secondary intermediate input manufacturer. The domestic secondary intermediate input manufacturer will dedicate to pursue efficiency improvement for raising its own profit while the government is on the opposite side for the consideration of social welfare.
1.4 Research Structure
The remaining of this paper is organized as follows: In chapter 2, past literature concerning about the issues of the green supply chain, resource reusing and recycling, and government policies. In chapter 3, we firstly discuss the case of autarky. Then discuss the case that the government opens the domestic intermediate input market to foreign intermediate input manufacturers. Finally, government R&D subsidy would be included. Chapter 4 is the conclusion.
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