In this paper, we show the effects of deposits and refunds on product and waste product volumes in the economy. In particular, we analyze Taiwan’s recycling system. Taiwan has introduced the same recycling system as Japan in that it differentiates between various types of waste product. In this system, producers pay a recycling fee, recyclers of waste products receive a recycling subsidy, and the Recycling Fund Management manages the revenue and expenditure of the system. In other words, Taiwan’s recycling system can be interpreted as a kind of deposit refund system. Using the partial equilibrium model, we derive the positive aspects of the deposit refund policy
