Impact of China’s Recycling Subsidy Policy in the Product Life Cycle

This paper examines the impact of the Chinese recycling subsidy policy (CRS-policy) on the recycling and reuse industry across the whole product life cycle. We propose a closed-loop dynamic system to illustrate the production flow and interactions among various industry and market factors. A simulation analysis is conducted using data on gas auto engines in China to evaluate the effectiveness of the CRS-policy in encouraging product recycling and reuse. Specifically, we analyze the preventative and regenerative effects of the CRS-policy, and its impact on environmental pollution and social welfare. We further investigate how market factors, including the manufacturer’s innovation environment, consumer environmental awareness and sensitivity to the subsidy, and recycling and reuse industry profit, affect the effectiveness of the CRS-policy. The study provides strong evidence of the important role of the subsidy policy in the recycling and reuse industry and offers insightful recommendations for enhancing the effectiveness of the subsidy policy.