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research-article2015
WMR0010.1177/0734242X15587932Waste Management & ResearchKaushal et al.
Original Article
Strategic exploration of battery waste management: A game-theoretic approach
Waste Management & Research 2015, Vol. 33(7) 681–689 © The Author(s) 2015 Reprints and permissions: sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/0734242X15587932 wmr.sagepub.com
Rajendra Kumar Kaushal1, Arvind K Nema2 and Jyoti Chaudhary1
Abstract Electronic waste or e-waste is the fastest growing stream of solid waste today. It contains both toxic substances as well as valuable resources. The present study uses a non-cooperative game-theoretic approach for efficient management of e-waste, particularly batteries that contribute a major portion of any e-waste stream and further analyses the economic consequences of recycling of these obsolete, discarded batteries. Results suggest that the recycler would prefer to collect the obsolete batteries directly from the consumer rather than from the manufacturer, only if, the incentive return to the consumer is less than 33.92% of the price of the battery, the recycling fee is less than 6.46% of the price of the battery, and the price of the recycled material is more than 31.08% of the price of the battery. The manufacturer’s preferred choice of charging a green tax from the consumer can be fruitful for the battery recycling chain. Keywords Game theory, green tax, lead-poisoning, inverter-battery recycling
Introduction The increased use of household appliances, cell phones, and computers leads to larger amounts of e-waste generation. This development is fostered by the fast economic growth in industrialising countries, but also developed countries contribute to this development owing to ever shorter life spans of electronic consumer goods. India generates about 1250,000 tonnes (The Hindu, 22 April 2014) of waste annually, which is increasing at the rate of 10%–15%, 70% of which comes from government institutions and business. A total of 65 cities in India generate more than 60% of the total e-waste generated in India. Ten states generate 70% of the total e-waste generated in India (T.O.I., Sept 2013). Kolkata figures among top electronic waste-generating cities in India, with a ‘garbage output’ of 35,000 t annually (The Hindu, 22 April 2014). Developing countries are facing enormous challenges related to the generation and management of e-waste, which are either internally generated or imported illegally; India is no exception to it (Borthakur and Singh, 2012). E-waste contains valuable materials, such as aluminium, copper, gold, palladium, and silver; it also contains harmful substances like cadmium, lead, and mercury. These electronic gadgets changed the look of world at one side, but on another side the waste of various types generated from them creates serious circumstances for the environment. In the absence of suitable techniques and protective measures, recycling e-waste can result in toxic emissions to the air, water, and soil and pose serious health and environmental hazards (Kaushal and Nema, 2013a).
Of these e-waste hazards, batteries account for a larger section. Used oil, battery wastes, and other non-ferrous wastes like zinc and lead are commonly recycled in India (Dutta Shantanu et al., 2006). Used lead-acid batteries are classified as hazardous waste and should not be disposed of with the regular garbage (Ministry of Environment and Forests, 1989). Each lead-acid battery contains about 2–3 L of sulphuric acid, as well as lead, both of which are toxic. Lead accumulates in the environment and has high acute and chronic toxic effects on plants, animals, and microorganisms. Lead is known to cause damage to the central and peripheral nervous systems, blood system, and kidneys in humans. Consumer electronics constitute 40% of lead found in landfills. The Batteries Management and Handling Rules was enacted in 2001 (Ministry of Environment and Forests, 2001) with the primary objective of ensuring safe disposal of discarded lead-acid batteries involving all stakeholders. In the Batteries Rules, responsibilities have been fixed for manufacturers, importers, re-conditioners, and assemblers to ensure that used batteries are collected back and routed to registered recyclers. 1BIET
Jhansi (UP), India Institute of Technology Delhi, New Delhi, India
2Indian
Corresponding author: Rajendra Kumar Kaushal, BIET Jhansi (UP), Kanpur Road, Jhansi, Uttar Pradesh, Jhansi 284128, India. Email: [email protected]
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Eliminating solid and electronic waste is a top priority today, since they are creating an imbalance in the ecosystem that is almost irreparable (Suganya, 2013). Effective battery waste management requires a systematic decision-making procedure and an environmentally sound recycling facility so as to prevent hazardous material from entering landfills. There are some key stakeholders, such as regulatory bodies, manufacturers, recyclers, and consumers, playing major roles in this regard whose actions reflect a good or bad battery waste management system. They may act either independently or show their interest in cooperation as per the resulting payoffs. The regulatory body may charge some penalty from the manufacturer for improper battery disposal by the consumer and thus encouraging the system of recycling of obsolete, discarded batteries. The manufacturer may either stick on the conventional deposit refund system (DRS) or follow the extended producer responsibility (EPR) system. The producer responsibility principle has been recently reinforced in the new Directive for waste with the introduction of the EPR principle, comprising waste management obligation and efficient use of resources during the whole life-cycle of products, including design and production, use and re-use, disassembly, and recycling (Cabugueira and Felisberto, 2012). The battery scraper (or recycler) may gain a recycling fee from manufacturer when companies have their own collection system or he may obtain benefits from the selling price of recycled material through their own collection facilities. The incentive return is a good trend that motivates the consumer to return back their old batteries to the retailer and thus discouraging land disposal. It is suggested that a new incentive system is needed to encourage collection and the consolidation of used lead batteries that can facilitate investment in the recycling sector (OK International, 2010). Hence, it is the economy that alone governs the actions or strategies of the involved stakeholder. The interaction of the stakeholders, including regulatory body, manufacturer, dismantler (or recycler), and consumer in the battery recycling process are shown in Figure 1. Game theory studies multiple-person decision problems involving conflict, competition, and cooperation (Huyu Wu, 2012). Game theory is the formal study of decision-making where several players must make choices that potentially affect the interests of the other players (Turocy and von Stengel, 2001). Game theory was established as a field in its own right after the 1944 publication of the monumental volume Theory of Games and Economic Behavior by Von Neumann and the economist Oskar Morgenstern. Game theory as a solution to various complex management problems can be helpful in e-waste management scenarios. Based on the interest of the players, the game can be classified as cooperative and non-cooperative. The Nash equilibrium is the solution in non-cooperative game theory. The idea is that each player individually, and independently from each other maximises his or her utility (Stolwijk, 2010). In non-cooperative game theory, we focus on the individual player’s strategies and their influence on payoffs, and try to predict what strategies players will choose (equilibrium concept). In this study non-cooperative game theory is applied for decision
Figure 1. Material and financial flow in battery recycling.
support as a novel approach, which aids decision-making by selecting appropriate strategies for both key stakeholders involved in the battery recycling chain and policy makers to reduce environmental impacts. In this context, a game among four players, namely regulatory body, manufacturer, recycler, and consumer in the field of battery waste management, is generated with various game scenarios to reflect the variation in trend of strategic actions, and also identifying the points critical to the actions of stakeholders.
Literature review There are several studies based on decision-making process, conducted worldwide, giving best policies about e-waste management. Gupt (2012) suggested that the green tax can be considered as an alternate policy instrument for batteries that were coupled with a partial or complete refund when the manufacturer ensures environment-friendly recycling. The practices of reuse and recycle could be recognised as a best-suitable solution to hazardous batteries. Studies of some researchers and experts are presented here. Borocz and Foldesi (2008) analysed the decision theory of logistic packaging by the application of game theory and thus suggested that balance in all prospects is difficult to achieve if the customers or the suppliers are not motivated enough to return devices. Grimes-Casey et al. (2007) applied game theory to the lifecycle of bottle packaging and presented a framework for analysis of the choice between refillable and disposable bottles and showed how the prevalence of disposable bottles in the United States has attributed to changes in consumer behaviour which make it less likely that refillable bottles will be returned for deposit, and thus suggested that under this condition, the logical strategy for most bottlers is to switch to disposable, despite higher lifecycle packaging costs. Moretti and Patrone (2013) presented contributions from different areas of strategic behaviour analysis dealing with multi-agents decision problems
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Kaushal et al. Table 1. Stakeholders involved and their strategies. Strategy
Player 1 (regulatory body)
Player 2 (manufacturer)
Player 3 (recycler)
Player 4 (consumer)
Strategy 1 Strategy 2
Penalty (j = 1) Assistance (j = 2)
DRS (k = 1) Green tax(EPR) (k = 2)
Collection by recycler (l = 1) Collection through manufacturer (l = 2)
Land disposal (m = 1) Recycle (m = 2)
arising from the exploitation of environmental resources, and where information and communication technologies (ICTs) are crucial for the selection or the implementation of environmental policies. They suggested multi-criteria analysis requires the integration of environmental, social, economic aspects, and other multi-disciplinary issues, as well as stakeholder interests. Huyu Wu (2012) had explored the application of game theoretic models in the field of reverse logistic. They introduced game-theoretic applications in supply chain management (SCM) and addressed a retailer’s single-period inventory problem with a high rate of resalable customer returns. Karmperis et al. (2013) used a decision support model for solid waste management and showed how cooperative and non-cooperative game-theoretic approaches can be used for the purpose of modelling and analysing decision-making in situations with multiple stakeholders. They suggested that since a waste management model is sustainable when considering not only environmental and economic but also social aspects, the waste management bargaining game is introduced as a specific decision support framework. Kaushal and Nema (2013b) used game-theory and analysed the strategies by identification of the equilibrium points for various scenarios, which further help in deciding the incentives and penalties for deriving the self-propelling market-based mechanism for the efficient management of e-waste. Sakultung et al. (2007) suggested that valuable metals like cobalt and nickel can be recovered from spent mobile phone batteries by the acid-leaching process. The Chinese National Development and Reform Commission have launched four national pilot projects in four major cities, including Hangzhou, Qingdao, Beijing, and Tianjin, since 2004. The objectives of the pilot projects include: setting up a network for e-waste collection, supporting the development of standards and regulations for e-waste management, and developing key technologies, as well as equipment for waste electrical and electronic equipment (WEEE) recycling and also emphasize recycling models such as EPR, the online recycling system, and the DRS. Zhao (2012) developed a decision support system for engineers and policy makers that help to limit environmental burden by reducing the environmental risk from the perspective of hazardous materials in product design, through the application of game theory and grey theory (a carbon labelling technique). The above studies reveal that policy majors and/or decisionmakers are critical for e-waste management and create win–win situations for all involved stakeholders. Game theory is the study of conflicts and cooperation and it is a rapidly advancing approach to structure and understand complex management problems in
the environment sector. It is the analysis of rational behaviour in situations involving interdependence of outcomes. The interest of stakeholders is a function of resulting payoffs.
Mathematical formulation In order to simplify the problem, consider the recycling of an old inverter battery that includes four key stakeholders, namely, the regulatory body, manufacturing company, recycler, and consumer. Each of these four players has two strategies, as shown in Table 1. The regulatory body, who ensures that no damage is caused to the environment and living organisms owing to hazardous conventional lead–acid battery, may impose some penalty on the manufacturing company for producing lead-acid batteries. The regulatory body can also choose a subsidy option in order to encourage efficient recycling of batteries by giving a subsidy to the recycler and thus increase resource utilisation. Hence, imposing a penalty on to the manufacturer is positive payoff for the regulatory body and giving a subsidy to the recycler will be negative payoff. According to the “Batteries Management and Handling Rules 2010” manufacturer is solely responsible for all kinds of hazards associated with batteries and have two strategies – either adopt DRS or follow EPR. EPR system is followed when there is strict regulation from government (any Law making body). When there is no strict regulation from government in terms of hazardous waste, the DRS system is generally followed. The EPR fee in the form of a green tax can be taken from the consumer at the time of purchase of the battery, as per governmental norms for environmental concerns. The green tax and resale price of the recycled battery are the positive payoffs; whereas a penalty charged by the regulatory body, cost of collection of old inverter batteries, incentive to return to the consumer in the take back scheme, and recycling fee, are negative payoffs to the manufacturer. Recyclers who ensure the recycling of obsolete, discarded batteries may have two options of collection of old batteries, either they get old batteries from the producer or they may collect it directly from the consumer. When the recycler selects the strategy of collection through the manufacturer, then a recycling fee, which is given by manufacturer to recycler, is a positive payoff for the recycler. Recyclers who ensure the recycling of obsolete, discarded batteries may have two options of collection of old batteries, either they get old batteries from the producer or they may collect it directly from the consumer. When the recycler selects the strategy of collection through the manufacturer, then a recycling fee, which is given by manufacturer to recycler, is a positive payoff for the recycler. If the recycler chooses collection by the recycler itself, the collection fee,
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Table 2. Assumed values for the example problem. Items
Lead-acid inverter battery (INR) (US$1 = 61 INR)
Actual cost (IC) Green Tax or EPR (GT) Transportation cost (TC) Incentive return to consumer (ICR) Recycling fee (RF) Penalty charged by regulatory body (RP) Assistance from regulatory body to recycler (RA ) Resale price of recycled battery (SR) Collection charges (CC)
12,000 INR 3% of IC = 360 INR 200 INR 25% of IC = 3000 INR 2.0% of IC = 240 INR 10% of IC = 1200 INR 8% of IC = 960 INR 40% of IC = 4800 INR 250 INR
EPR: extended producer responsibility; INR: lead-acid inverter battery.
recycling fee, and incentive given to consumer are a negative payoff for the recycler, and the resale price of the recycled product, a subsidy from government, is a positive payoff to the recycler. The consumer can have two strategies, either to choose land disposal as the ultimate fate of old batteries or they may return back the old batteries either to the manufacturer via retailer or sold to the recycler. If the consumer selects the land disposal strategy, the extra fee paid by the consumer at the time of purchase as green tax will be a negative payoff to the consumer. However, if the consumer selects the recycling strategy, the transportation cost will be negative payoff and incentives will be positive payoff for the consumer. In order to achieve an optimum solution it is necessary to find an equilibrium strategy that is equally beneficial for involved stakeholders in battery recycling. The following values are assumed for the example problem.
Assumptions 1. The manufacturer of lead-acid batteries will be liable to pay the dues or penalty charged by government. 2. The collector of old batteries (either manufacturer or recycler) will afford the cost of recycling of old, discarded batteries. 3. The selling price of the recycled battery is only gained by the collector of the old batteries. 4. A penalty will be charged by government from the manufacturer only in the case when the consumer selects the land disposal option. 5. A subsidy will be received by the recycler from government only when the consumer’s dominant strategy is land disposal. 6. An incentive will be given to the consumer only when the consumer prefers recycling of the battery (Table 2). Formulation of payoffs •• Payoff of regulatory body
Π G = R Pjklm − R Ajklm (1)
•• Payoff of manufacturer
Π M = G Tjklm − CCjklm − R Fjklm − ICRjklm − R Pjklm + SRjklm
(2)
•• Payoff of recycler
Π R = SRjklm − CCjklm − R Fjklm − ICRjklm + R Ajklm (3)
•• Payoff of consumer
Π C = ICRjklm − TCjklm − G Tjklm (4)
where j, k, and l, m are strategies of players 1, 2, 3, and 4, respectively; j = 1 or 2, k = 1 or 2, l = 1 or 2, and m = 1 or 2, because each player adopts a single strategy at a time. For example, in a fourplayer non-cooperative game, if player 1 (regulatory body) selects strategy 1 (penalty), player 2 (manufacturer) select strategy 1 (DRS), player 3 (recycler) choose strategy 1 (collection by recycler), and player 4 (consumer) select strategy 1 (land disposal), then the payoff for player 1 (regulatory body) = gain of penalty = INR 1200, the payoff for player 2 (manufacturer) = INR –1200, the payoff for player 3 (recycler) = resale price – collection charges – recycling fee = INR 4310, and the payoff for player 4 (consumer) = 0. Table 3 gives the individual payoff values for each player when they select different strategies by using equations (1) to (4). These outcomes are used in calculating the Nash-equilibrium strategies for four players in a non-cooperative game. Non-cooperative game. Game trees, as shown in Figures 2 and 3, for non-cooperative games for four players are can be generated by using the software GAMBIT (Version 13, 1994–2013). Payoffs for each player, as according to their different strategies, are shown at terminal nodes. The chances of selecting each strategy are also given at each branch of the game tree. Starting from the left, the first payoff shown is of regulatory body followed by manufacturer, recycler, and then of consumer. The game tree with payoffs from Table 3 suggests that the government is free to select any of the two strategies, either penalty or assistance, with equal probability of 0.5. The manufacturer prefers to take an extra fee in the form of the green tax from the consumer at the
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Kaushal et al. Table 3. Payoffs in four player non-cooperative game. Four players Regulatory body
Manufacturer
Recycler
Consumer
Strategy
Payoff (INR)
Strategy
Payoff (INR)
Strategy
Payoff (INR)
Strategy
Payoff (1200)
1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2
1200 0 1200 0 1200 0 1200 0 −960 0 −960 0 −960 0 −960 0
1 1 1 1 2 2 2 2 1 1 1 1 2 2 2 2
−1200 0 3110 1560 −840 360 3470 1920 0 0 4310 1560 360 360 4670 1920
1 1 2 2 1 1 2 2 1 1 2 2 1 1 2 2
4310 1310 240 240 4310 1310 240 240 5270 1310 1200 240 5270 1310 1200 240
1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2
0 3000 0 2950 −360 2640 −360 2590 0 3000 0 950 −360 2640 −360 2390
INR: lead-acid inverter battery.
time of purchase of goods, and the dominant strategy for the recycler is collection by the recycler. The consumer selects recycle as their dominant strategy. The solution is a Nash equilibrium, such that neither player could reduce their payoffs with a different strategy. According to Equations (1)–(4), the payoff of the stakeholder involved in battery waste management depends on factors, such as the incentive to the consumer, penalty on the manufacturer, subsidy to the recycler from regulatory body, EPR fee, collection charges, and selling price of the recycled battery. Now, the values of payoffs get changed because of changes in the values of these factors for different stakeholders, the strategic Nash equilibrium gets shifted. Further, the changes of the values of these factors are considered one-by-one, while keeping the values of the other factors the same, to find their effects on the strategy of the Nash equilibrium. The values, in which the stakeholders would prefer to change their strategies, were found by drawing a non-cooperative game tree for each case, and hence the optimum values for these factors can be predicted.
Results and discussion The example problem is solved by the non-cooperative game theory approach. The strategic Nash equilibrium of game tree for example, the problem suggests that if the incentives have some positive values then player 1 (regulatory body) is free to select any strategy either to impose penalty on the manufacturer or give assistance to the recycler so as to ensure sustainable development via efficient recycling of hazardous, discarded batteries with an equal probability of 0.5 and a payoff of INR 0, and player 2 (manufacturer) would prefer green tax with payoff of INR 360. The recycler selects collection by the recycler itself with a payoff
of INR 1310. The consumer selects recycle instead of land disposal because it has a payoff of INR 2640. However, if the incentive = 0, the regulatory body shifts it’s Nash-equilibrium strategy to penalty because it is more profitable. The strategies of the manufacturer and recycler remain the same as the green tax and collection by the recycler, respectively. The consumer can either select land disposal or recycle with a probability of 0.5 and payoff of INR –360. It suggests that returning back some of the incentive to the consumer in a take-back scheme will cause the consumer to deposit their batteries either to the producer/manufacturer/vendor or directly to the recycler instead of disposing it in the land, as suggested by Callan and Thomas (2000) for the case of beverage containers and Kahhat et al. (2008) and Yu et al. (2010) for e-markets. The optimum value of the incentive can be achieved by finding the equilibrium point at which the affected stakeholders change their strategies in a non-cooperative game. Results (Figure 4) suggest that while the other stakeholders are not much affected by the values of incentive, the recycler would prefer to collect the obsolete, discarded batteries directly from the consumer only if the incentive is less than 33.92% of (IC). If the incentive is more than 33.92% of (IC), the recycler changes the strategy and prefers collection of discarded batteries through the manufacturer, because the recycler would not be able to afford the expense of the incentive. A regulatory-based mechanism was applied by banning computer monitors, televisions, and several consumer electronic devices from landfills in California and Massachusetts (Davis and Smith, 2003). However, the approach in the present study gives the market-based mechanism, by suggesting imposing the penalty on the land disposal of e-waste. Results for the optimum recycling fee (Figure 5), when all other values are kept the same, suggest that while the other
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Figure 2. Game tree for four player non-cooperative game.
stakeholders keep their strategies the same, the recycler would like to collect the old batteries from the consumer only if the recycling fee is less than 6.46% of (IC). When the recycling fee is more than 6.46% of (IC), the recycler would prefer to collect old batteries from the manufacturer. The economic success of the battery recycling sector is directly influenced by the resale price of the recycled battery material (Smith et al., 1996). The results (Figure 6) for the optimum selling price of the recycled battery shows that, although the regulatory body, manufacturer, and consumer keep their Nash-equilibrium strategy the same, the recycler would prefer to collect old batteries directly from the consumer if the selling price of the recycled material is greater than 31.08% of ( IC). If
the selling price of the recycled material is less than 31.08% of IC, the recycler would prefer to collect obsolete batteries from the manufacturer and manufacturer sticks to the green tax system. In the non-cooperative game, the selection of strategies will be governed by the payoffs of the players. Results suggest that not only the strategies, but also the Nash-equilibrium points, of the factors govern the strategies of the key stakeholders. However, the strategies can be location specific, because the parameters that govern the payoffs, such as penalty, subsidy, extra fee, transportation cost, recycling fee, or price of the batteries, can vary from place to place. Strategies are applicable to any values of these parameters, but the Nash equilibrium for strategies will shift, and the payoff of the players will be changed when the
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Figure 3. Non-cooperative game tree for incentive = 0.
values of these parameters change. However, this methodology still can be used to identify the best strategies among the available options for the stakeholders.
Conclusions The proposed model can help the decision-makers in selecting the initiatives to be implemented to prevent/minimise the land disposal of e-waste. The discussions on the findings help in interpreting the results and thus help in formulating the better policies for battery waste management. The approach presented here is analysed and defined by an example problem that includes a general lead-acid battery. Noncooperative game theory is applied to the designed problem considering four key stakeholders involved in the recycling of batteries. The study analyses the economic cost, benefits, and stakeholder’s respective choices for the available options. The results from the
strategic Nash equilibrium recommend some initiatives that may discourage the land disposal of obsolete, discarded batteries, as and when the following implementations are followed. 1. The producer/manufacturer can develop a new fee mechanism, such as green tax or an EPR system, and incentives to the consumer, for improperly disposed battery wastes. 2. The regulatory body can produce some returns by imposing a penalty on those who do not follow the prescribed method or procedure for discarding the obsolete batteries. The penalty charged by regulatory body may also help to discourage land disposal. 3. There is a need to upgrade the available ill-equipped recycling facilities by providing financial assistance to recyclers from the government to act against the millions of obsolete battery collectors and processors in the unorganised sector.
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Waste Management & Research 33(7) or producer/manufacturer, and the producer/manufacturer should give it them to the recycler. The Nash equilibrium factors governing the strategies of the key stakeholders were determined. The resulting Nash equilibrium suggests that the manufacturer prefers the green tax or EPR system in order to gain maximum benefit. This system encourages the keeping of hazardous batteries in the recycling chain and thus ensures reduced damage to the environment. The strategic Nash equilibrium also suggests that the recycler would prefer to collect the discarded batteries directly from the consumer only if the incentive return to the consumer is less than 33.92% of (Ic), the recycling fee is less than 6.46% of (Ic), and the price of the recycled material is more than 31.08% of (Ic).
Figure 4. Recycler’s strategies for incentive = 0.
Declaration of conflicting interests The authors declare that there is no conflict of interest.
Funding This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.
References
Figure 5. Recycler’s strategies for the recycling fee.
Figure 6. Recycler’s strategies for the selling price of recycled batteries.
4. Recycler should develop a proper collection mechanism of obsolete batteries for recycling. It can be directly collected by recyclers or their agents, and also through the manufacturer or producer. 5. To get more profits consumer should give back their batteries, when they becomes obsolete or old, directly to the recycler
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research-article2015
WMR0010.1177/0734242X15587932Waste Management & ResearchKaushal et al.
Original Article
Strategic exploration of battery waste management: A game-theoretic approach
Waste Management & Research 2015, Vol. 33(7) 681–689 © The Author(s) 2015 Reprints and permissions: sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/0734242X15587932 wmr.sagepub.com
Rajendra Kumar Kaushal1, Arvind K Nema2 and Jyoti Chaudhary1
Abstract Electronic waste or e-waste is the fastest growing stream of solid waste today. It contains both toxic substances as well as valuable resources. The present study uses a non-cooperative game-theoretic approach for efficient management of e-waste, particularly batteries that contribute a major portion of any e-waste stream and further analyses the economic consequences of recycling of these obsolete, discarded batteries. Results suggest that the recycler would prefer to collect the obsolete batteries directly from the consumer rather than from the manufacturer, only if, the incentive return to the consumer is less than 33.92% of the price of the battery, the recycling fee is less than 6.46% of the price of the battery, and the price of the recycled material is more than 31.08% of the price of the battery. The manufacturer’s preferred choice of charging a green tax from the consumer can be fruitful for the battery recycling chain. Keywords Game theory, green tax, lead-poisoning, inverter-battery recycling
Introduction The increased use of household appliances, cell phones, and computers leads to larger amounts of e-waste generation. This development is fostered by the fast economic growth in industrialising countries, but also developed countries contribute to this development owing to ever shorter life spans of electronic consumer goods. India generates about 1250,000 tonnes (The Hindu, 22 April 2014) of waste annually, which is increasing at the rate of 10%–15%, 70% of which comes from government institutions and business. A total of 65 cities in India generate more than 60% of the total e-waste generated in India. Ten states generate 70% of the total e-waste generated in India (T.O.I., Sept 2013). Kolkata figures among top electronic waste-generating cities in India, with a ‘garbage output’ of 35,000 t annually (The Hindu, 22 April 2014). Developing countries are facing enormous challenges related to the generation and management of e-waste, which are either internally generated or imported illegally; India is no exception to it (Borthakur and Singh, 2012). E-waste contains valuable materials, such as aluminium, copper, gold, palladium, and silver; it also contains harmful substances like cadmium, lead, and mercury. These electronic gadgets changed the look of world at one side, but on another side the waste of various types generated from them creates serious circumstances for the environment. In the absence of suitable techniques and protective measures, recycling e-waste can result in toxic emissions to the air, water, and soil and pose serious health and environmental hazards (Kaushal and Nema, 2013a).
Of these e-waste hazards, batteries account for a larger section. Used oil, battery wastes, and other non-ferrous wastes like zinc and lead are commonly recycled in India (Dutta Shantanu et al., 2006). Used lead-acid batteries are classified as hazardous waste and should not be disposed of with the regular garbage (Ministry of Environment and Forests, 1989). Each lead-acid battery contains about 2–3 L of sulphuric acid, as well as lead, both of which are toxic. Lead accumulates in the environment and has high acute and chronic toxic effects on plants, animals, and microorganisms. Lead is known to cause damage to the central and peripheral nervous systems, blood system, and kidneys in humans. Consumer electronics constitute 40% of lead found in landfills. The Batteries Management and Handling Rules was enacted in 2001 (Ministry of Environment and Forests, 2001) with the primary objective of ensuring safe disposal of discarded lead-acid batteries involving all stakeholders. In the Batteries Rules, responsibilities have been fixed for manufacturers, importers, re-conditioners, and assemblers to ensure that used batteries are collected back and routed to registered recyclers. 1BIET
Jhansi (UP), India Institute of Technology Delhi, New Delhi, India
2Indian
Corresponding author: Rajendra Kumar Kaushal, BIET Jhansi (UP), Kanpur Road, Jhansi, Uttar Pradesh, Jhansi 284128, India. Email: [email protected]
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Eliminating solid and electronic waste is a top priority today, since they are creating an imbalance in the ecosystem that is almost irreparable (Suganya, 2013). Effective battery waste management requires a systematic decision-making procedure and an environmentally sound recycling facility so as to prevent hazardous material from entering landfills. There are some key stakeholders, such as regulatory bodies, manufacturers, recyclers, and consumers, playing major roles in this regard whose actions reflect a good or bad battery waste management system. They may act either independently or show their interest in cooperation as per the resulting payoffs. The regulatory body may charge some penalty from the manufacturer for improper battery disposal by the consumer and thus encouraging the system of recycling of obsolete, discarded batteries. The manufacturer may either stick on the conventional deposit refund system (DRS) or follow the extended producer responsibility (EPR) system. The producer responsibility principle has been recently reinforced in the new Directive for waste with the introduction of the EPR principle, comprising waste management obligation and efficient use of resources during the whole life-cycle of products, including design and production, use and re-use, disassembly, and recycling (Cabugueira and Felisberto, 2012). The battery scraper (or recycler) may gain a recycling fee from manufacturer when companies have their own collection system or he may obtain benefits from the selling price of recycled material through their own collection facilities. The incentive return is a good trend that motivates the consumer to return back their old batteries to the retailer and thus discouraging land disposal. It is suggested that a new incentive system is needed to encourage collection and the consolidation of used lead batteries that can facilitate investment in the recycling sector (OK International, 2010). Hence, it is the economy that alone governs the actions or strategies of the involved stakeholder. The interaction of the stakeholders, including regulatory body, manufacturer, dismantler (or recycler), and consumer in the battery recycling process are shown in Figure 1. Game theory studies multiple-person decision problems involving conflict, competition, and cooperation (Huyu Wu, 2012). Game theory is the formal study of decision-making where several players must make choices that potentially affect the interests of the other players (Turocy and von Stengel, 2001). Game theory was established as a field in its own right after the 1944 publication of the monumental volume Theory of Games and Economic Behavior by Von Neumann and the economist Oskar Morgenstern. Game theory as a solution to various complex management problems can be helpful in e-waste management scenarios. Based on the interest of the players, the game can be classified as cooperative and non-cooperative. The Nash equilibrium is the solution in non-cooperative game theory. The idea is that each player individually, and independently from each other maximises his or her utility (Stolwijk, 2010). In non-cooperative game theory, we focus on the individual player’s strategies and their influence on payoffs, and try to predict what strategies players will choose (equilibrium concept). In this study non-cooperative game theory is applied for decision
Figure 1. Material and financial flow in battery recycling.
support as a novel approach, which aids decision-making by selecting appropriate strategies for both key stakeholders involved in the battery recycling chain and policy makers to reduce environmental impacts. In this context, a game among four players, namely regulatory body, manufacturer, recycler, and consumer in the field of battery waste management, is generated with various game scenarios to reflect the variation in trend of strategic actions, and also identifying the points critical to the actions of stakeholders.
Literature review There are several studies based on decision-making process, conducted worldwide, giving best policies about e-waste management. Gupt (2012) suggested that the green tax can be considered as an alternate policy instrument for batteries that were coupled with a partial or complete refund when the manufacturer ensures environment-friendly recycling. The practices of reuse and recycle could be recognised as a best-suitable solution to hazardous batteries. Studies of some researchers and experts are presented here. Borocz and Foldesi (2008) analysed the decision theory of logistic packaging by the application of game theory and thus suggested that balance in all prospects is difficult to achieve if the customers or the suppliers are not motivated enough to return devices. Grimes-Casey et al. (2007) applied game theory to the lifecycle of bottle packaging and presented a framework for analysis of the choice between refillable and disposable bottles and showed how the prevalence of disposable bottles in the United States has attributed to changes in consumer behaviour which make it less likely that refillable bottles will be returned for deposit, and thus suggested that under this condition, the logical strategy for most bottlers is to switch to disposable, despite higher lifecycle packaging costs. Moretti and Patrone (2013) presented contributions from different areas of strategic behaviour analysis dealing with multi-agents decision problems
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Kaushal et al. Table 1. Stakeholders involved and their strategies. Strategy
Player 1 (regulatory body)
Player 2 (manufacturer)
Player 3 (recycler)
Player 4 (consumer)
Strategy 1 Strategy 2
Penalty (j = 1) Assistance (j = 2)
DRS (k = 1) Green tax(EPR) (k = 2)
Collection by recycler (l = 1) Collection through manufacturer (l = 2)
Land disposal (m = 1) Recycle (m = 2)
arising from the exploitation of environmental resources, and where information and communication technologies (ICTs) are crucial for the selection or the implementation of environmental policies. They suggested multi-criteria analysis requires the integration of environmental, social, economic aspects, and other multi-disciplinary issues, as well as stakeholder interests. Huyu Wu (2012) had explored the application of game theoretic models in the field of reverse logistic. They introduced game-theoretic applications in supply chain management (SCM) and addressed a retailer’s single-period inventory problem with a high rate of resalable customer returns. Karmperis et al. (2013) used a decision support model for solid waste management and showed how cooperative and non-cooperative game-theoretic approaches can be used for the purpose of modelling and analysing decision-making in situations with multiple stakeholders. They suggested that since a waste management model is sustainable when considering not only environmental and economic but also social aspects, the waste management bargaining game is introduced as a specific decision support framework. Kaushal and Nema (2013b) used game-theory and analysed the strategies by identification of the equilibrium points for various scenarios, which further help in deciding the incentives and penalties for deriving the self-propelling market-based mechanism for the efficient management of e-waste. Sakultung et al. (2007) suggested that valuable metals like cobalt and nickel can be recovered from spent mobile phone batteries by the acid-leaching process. The Chinese National Development and Reform Commission have launched four national pilot projects in four major cities, including Hangzhou, Qingdao, Beijing, and Tianjin, since 2004. The objectives of the pilot projects include: setting up a network for e-waste collection, supporting the development of standards and regulations for e-waste management, and developing key technologies, as well as equipment for waste electrical and electronic equipment (WEEE) recycling and also emphasize recycling models such as EPR, the online recycling system, and the DRS. Zhao (2012) developed a decision support system for engineers and policy makers that help to limit environmental burden by reducing the environmental risk from the perspective of hazardous materials in product design, through the application of game theory and grey theory (a carbon labelling technique). The above studies reveal that policy majors and/or decisionmakers are critical for e-waste management and create win–win situations for all involved stakeholders. Game theory is the study of conflicts and cooperation and it is a rapidly advancing approach to structure and understand complex management problems in
the environment sector. It is the analysis of rational behaviour in situations involving interdependence of outcomes. The interest of stakeholders is a function of resulting payoffs.
Mathematical formulation In order to simplify the problem, consider the recycling of an old inverter battery that includes four key stakeholders, namely, the regulatory body, manufacturing company, recycler, and consumer. Each of these four players has two strategies, as shown in Table 1. The regulatory body, who ensures that no damage is caused to the environment and living organisms owing to hazardous conventional lead–acid battery, may impose some penalty on the manufacturing company for producing lead-acid batteries. The regulatory body can also choose a subsidy option in order to encourage efficient recycling of batteries by giving a subsidy to the recycler and thus increase resource utilisation. Hence, imposing a penalty on to the manufacturer is positive payoff for the regulatory body and giving a subsidy to the recycler will be negative payoff. According to the “Batteries Management and Handling Rules 2010” manufacturer is solely responsible for all kinds of hazards associated with batteries and have two strategies – either adopt DRS or follow EPR. EPR system is followed when there is strict regulation from government (any Law making body). When there is no strict regulation from government in terms of hazardous waste, the DRS system is generally followed. The EPR fee in the form of a green tax can be taken from the consumer at the time of purchase of the battery, as per governmental norms for environmental concerns. The green tax and resale price of the recycled battery are the positive payoffs; whereas a penalty charged by the regulatory body, cost of collection of old inverter batteries, incentive to return to the consumer in the take back scheme, and recycling fee, are negative payoffs to the manufacturer. Recyclers who ensure the recycling of obsolete, discarded batteries may have two options of collection of old batteries, either they get old batteries from the producer or they may collect it directly from the consumer. When the recycler selects the strategy of collection through the manufacturer, then a recycling fee, which is given by manufacturer to recycler, is a positive payoff for the recycler. Recyclers who ensure the recycling of obsolete, discarded batteries may have two options of collection of old batteries, either they get old batteries from the producer or they may collect it directly from the consumer. When the recycler selects the strategy of collection through the manufacturer, then a recycling fee, which is given by manufacturer to recycler, is a positive payoff for the recycler. If the recycler chooses collection by the recycler itself, the collection fee,
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Table 2. Assumed values for the example problem. Items
Lead-acid inverter battery (INR) (US$1 = 61 INR)
Actual cost (IC) Green Tax or EPR (GT) Transportation cost (TC) Incentive return to consumer (ICR) Recycling fee (RF) Penalty charged by regulatory body (RP) Assistance from regulatory body to recycler (RA ) Resale price of recycled battery (SR) Collection charges (CC)
12,000 INR 3% of IC = 360 INR 200 INR 25% of IC = 3000 INR 2.0% of IC = 240 INR 10% of IC = 1200 INR 8% of IC = 960 INR 40% of IC = 4800 INR 250 INR
EPR: extended producer responsibility; INR: lead-acid inverter battery.
recycling fee, and incentive given to consumer are a negative payoff for the recycler, and the resale price of the recycled product, a subsidy from government, is a positive payoff to the recycler. The consumer can have two strategies, either to choose land disposal as the ultimate fate of old batteries or they may return back the old batteries either to the manufacturer via retailer or sold to the recycler. If the consumer selects the land disposal strategy, the extra fee paid by the consumer at the time of purchase as green tax will be a negative payoff to the consumer. However, if the consumer selects the recycling strategy, the transportation cost will be negative payoff and incentives will be positive payoff for the consumer. In order to achieve an optimum solution it is necessary to find an equilibrium strategy that is equally beneficial for involved stakeholders in battery recycling. The following values are assumed for the example problem.
Assumptions 1. The manufacturer of lead-acid batteries will be liable to pay the dues or penalty charged by government. 2. The collector of old batteries (either manufacturer or recycler) will afford the cost of recycling of old, discarded batteries. 3. The selling price of the recycled battery is only gained by the collector of the old batteries. 4. A penalty will be charged by government from the manufacturer only in the case when the consumer selects the land disposal option. 5. A subsidy will be received by the recycler from government only when the consumer’s dominant strategy is land disposal. 6. An incentive will be given to the consumer only when the consumer prefers recycling of the battery (Table 2). Formulation of payoffs •• Payoff of regulatory body
Π G = R Pjklm − R Ajklm (1)
•• Payoff of manufacturer
Π M = G Tjklm − CCjklm − R Fjklm − ICRjklm − R Pjklm + SRjklm
(2)
•• Payoff of recycler
Π R = SRjklm − CCjklm − R Fjklm − ICRjklm + R Ajklm (3)
•• Payoff of consumer
Π C = ICRjklm − TCjklm − G Tjklm (4)
where j, k, and l, m are strategies of players 1, 2, 3, and 4, respectively; j = 1 or 2, k = 1 or 2, l = 1 or 2, and m = 1 or 2, because each player adopts a single strategy at a time. For example, in a fourplayer non-cooperative game, if player 1 (regulatory body) selects strategy 1 (penalty), player 2 (manufacturer) select strategy 1 (DRS), player 3 (recycler) choose strategy 1 (collection by recycler), and player 4 (consumer) select strategy 1 (land disposal), then the payoff for player 1 (regulatory body) = gain of penalty = INR 1200, the payoff for player 2 (manufacturer) = INR –1200, the payoff for player 3 (recycler) = resale price – collection charges – recycling fee = INR 4310, and the payoff for player 4 (consumer) = 0. Table 3 gives the individual payoff values for each player when they select different strategies by using equations (1) to (4). These outcomes are used in calculating the Nash-equilibrium strategies for four players in a non-cooperative game. Non-cooperative game. Game trees, as shown in Figures 2 and 3, for non-cooperative games for four players are can be generated by using the software GAMBIT (Version 13, 1994–2013). Payoffs for each player, as according to their different strategies, are shown at terminal nodes. The chances of selecting each strategy are also given at each branch of the game tree. Starting from the left, the first payoff shown is of regulatory body followed by manufacturer, recycler, and then of consumer. The game tree with payoffs from Table 3 suggests that the government is free to select any of the two strategies, either penalty or assistance, with equal probability of 0.5. The manufacturer prefers to take an extra fee in the form of the green tax from the consumer at the
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Kaushal et al. Table 3. Payoffs in four player non-cooperative game. Four players Regulatory body
Manufacturer
Recycler
Consumer
Strategy
Payoff (INR)
Strategy
Payoff (INR)
Strategy
Payoff (INR)
Strategy
Payoff (1200)
1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2
1200 0 1200 0 1200 0 1200 0 −960 0 −960 0 −960 0 −960 0
1 1 1 1 2 2 2 2 1 1 1 1 2 2 2 2
−1200 0 3110 1560 −840 360 3470 1920 0 0 4310 1560 360 360 4670 1920
1 1 2 2 1 1 2 2 1 1 2 2 1 1 2 2
4310 1310 240 240 4310 1310 240 240 5270 1310 1200 240 5270 1310 1200 240
1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2
0 3000 0 2950 −360 2640 −360 2590 0 3000 0 950 −360 2640 −360 2390
INR: lead-acid inverter battery.
time of purchase of goods, and the dominant strategy for the recycler is collection by the recycler. The consumer selects recycle as their dominant strategy. The solution is a Nash equilibrium, such that neither player could reduce their payoffs with a different strategy. According to Equations (1)–(4), the payoff of the stakeholder involved in battery waste management depends on factors, such as the incentive to the consumer, penalty on the manufacturer, subsidy to the recycler from regulatory body, EPR fee, collection charges, and selling price of the recycled battery. Now, the values of payoffs get changed because of changes in the values of these factors for different stakeholders, the strategic Nash equilibrium gets shifted. Further, the changes of the values of these factors are considered one-by-one, while keeping the values of the other factors the same, to find their effects on the strategy of the Nash equilibrium. The values, in which the stakeholders would prefer to change their strategies, were found by drawing a non-cooperative game tree for each case, and hence the optimum values for these factors can be predicted.
Results and discussion The example problem is solved by the non-cooperative game theory approach. The strategic Nash equilibrium of game tree for example, the problem suggests that if the incentives have some positive values then player 1 (regulatory body) is free to select any strategy either to impose penalty on the manufacturer or give assistance to the recycler so as to ensure sustainable development via efficient recycling of hazardous, discarded batteries with an equal probability of 0.5 and a payoff of INR 0, and player 2 (manufacturer) would prefer green tax with payoff of INR 360. The recycler selects collection by the recycler itself with a payoff
of INR 1310. The consumer selects recycle instead of land disposal because it has a payoff of INR 2640. However, if the incentive = 0, the regulatory body shifts it’s Nash-equilibrium strategy to penalty because it is more profitable. The strategies of the manufacturer and recycler remain the same as the green tax and collection by the recycler, respectively. The consumer can either select land disposal or recycle with a probability of 0.5 and payoff of INR –360. It suggests that returning back some of the incentive to the consumer in a take-back scheme will cause the consumer to deposit their batteries either to the producer/manufacturer/vendor or directly to the recycler instead of disposing it in the land, as suggested by Callan and Thomas (2000) for the case of beverage containers and Kahhat et al. (2008) and Yu et al. (2010) for e-markets. The optimum value of the incentive can be achieved by finding the equilibrium point at which the affected stakeholders change their strategies in a non-cooperative game. Results (Figure 4) suggest that while the other stakeholders are not much affected by the values of incentive, the recycler would prefer to collect the obsolete, discarded batteries directly from the consumer only if the incentive is less than 33.92% of (IC). If the incentive is more than 33.92% of (IC), the recycler changes the strategy and prefers collection of discarded batteries through the manufacturer, because the recycler would not be able to afford the expense of the incentive. A regulatory-based mechanism was applied by banning computer monitors, televisions, and several consumer electronic devices from landfills in California and Massachusetts (Davis and Smith, 2003). However, the approach in the present study gives the market-based mechanism, by suggesting imposing the penalty on the land disposal of e-waste. Results for the optimum recycling fee (Figure 5), when all other values are kept the same, suggest that while the other
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Figure 2. Game tree for four player non-cooperative game.
stakeholders keep their strategies the same, the recycler would like to collect the old batteries from the consumer only if the recycling fee is less than 6.46% of (IC). When the recycling fee is more than 6.46% of (IC), the recycler would prefer to collect old batteries from the manufacturer. The economic success of the battery recycling sector is directly influenced by the resale price of the recycled battery material (Smith et al., 1996). The results (Figure 6) for the optimum selling price of the recycled battery shows that, although the regulatory body, manufacturer, and consumer keep their Nash-equilibrium strategy the same, the recycler would prefer to collect old batteries directly from the consumer if the selling price of the recycled material is greater than 31.08% of ( IC). If
the selling price of the recycled material is less than 31.08% of IC, the recycler would prefer to collect obsolete batteries from the manufacturer and manufacturer sticks to the green tax system. In the non-cooperative game, the selection of strategies will be governed by the payoffs of the players. Results suggest that not only the strategies, but also the Nash-equilibrium points, of the factors govern the strategies of the key stakeholders. However, the strategies can be location specific, because the parameters that govern the payoffs, such as penalty, subsidy, extra fee, transportation cost, recycling fee, or price of the batteries, can vary from place to place. Strategies are applicable to any values of these parameters, but the Nash equilibrium for strategies will shift, and the payoff of the players will be changed when the
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Figure 3. Non-cooperative game tree for incentive = 0.
values of these parameters change. However, this methodology still can be used to identify the best strategies among the available options for the stakeholders.
Conclusions The proposed model can help the decision-makers in selecting the initiatives to be implemented to prevent/minimise the land disposal of e-waste. The discussions on the findings help in interpreting the results and thus help in formulating the better policies for battery waste management. The approach presented here is analysed and defined by an example problem that includes a general lead-acid battery. Noncooperative game theory is applied to the designed problem considering four key stakeholders involved in the recycling of batteries. The study analyses the economic cost, benefits, and stakeholder’s respective choices for the available options. The results from the
strategic Nash equilibrium recommend some initiatives that may discourage the land disposal of obsolete, discarded batteries, as and when the following implementations are followed. 1. The producer/manufacturer can develop a new fee mechanism, such as green tax or an EPR system, and incentives to the consumer, for improperly disposed battery wastes. 2. The regulatory body can produce some returns by imposing a penalty on those who do not follow the prescribed method or procedure for discarding the obsolete batteries. The penalty charged by regulatory body may also help to discourage land disposal. 3. There is a need to upgrade the available ill-equipped recycling facilities by providing financial assistance to recyclers from the government to act against the millions of obsolete battery collectors and processors in the unorganised sector.
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Waste Management & Research 33(7) or producer/manufacturer, and the producer/manufacturer should give it them to the recycler. The Nash equilibrium factors governing the strategies of the key stakeholders were determined. The resulting Nash equilibrium suggests that the manufacturer prefers the green tax or EPR system in order to gain maximum benefit. This system encourages the keeping of hazardous batteries in the recycling chain and thus ensures reduced damage to the environment. The strategic Nash equilibrium also suggests that the recycler would prefer to collect the discarded batteries directly from the consumer only if the incentive return to the consumer is less than 33.92% of (Ic), the recycling fee is less than 6.46% of (Ic), and the price of the recycled material is more than 31.08% of (Ic).
Figure 4. Recycler’s strategies for incentive = 0.
Declaration of conflicting interests The authors declare that there is no conflict of interest.
Funding This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.
References
Figure 5. Recycler’s strategies for the recycling fee.
Figure 6. Recycler’s strategies for the selling price of recycled batteries.
4. Recycler should develop a proper collection mechanism of obsolete batteries for recycling. It can be directly collected by recyclers or their agents, and also through the manufacturer or producer. 5. To get more profits consumer should give back their batteries, when they becomes obsolete or old, directly to the recycler
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