Restoring the incentives for eco-design in extended producer responsibility: The challenges for eco-modulation.

• Eco-modulation is intended to restore incentives for eco-design that are muted or missing in extended producer responsibility (EPR). • Eco-modulation operates through changes in fees paid by producers to producer responsibility organizations (PROs) to meet obligations under EPR. • Eco-modulation faces challenges related to linkage to environmental outcomes, fee size, data, online sales, cross-jurisdictional harmonization, and ex post evaluation. • Prospects for eco-modulation can be improved through the use of life cycle assessment (LCA), increased fees, mandated provision of data, and more sophisticated policy evaluation. • As various challenges must be overcome in its implementation, eco-modulation might be currently best viewed as a policy experiment on improving EPR and the drivers of eco-design more broadly. Extended producer responsibility (EPR) is an environmental policy strategy that makes producers responsible for the waste management of their products and packages. A key goal of EPR is to incentivize producers to (re)design their products and packages to improve their environmental performance, especially at end of life. However, because of the way in which the financial structure of EPR has evolved, those incentives have largely been muted or undetectable. Eco-modulation has emerged as an additional component in EPR to restore the missing incentives for eco-design. Eco-modulation operates through changes in the fees that producers pay to meet their EPR obligations. Eco-modulation includes both increased differentiation of types of products and associated fees, and additional bonuses and penalties—environmentally targeted discounts and penalties on the fees that each producer pays. Based on primary, secondary, and grey literature, this article characterizes challenges faced by eco-modulation if it is to restore the incentives for eco-design. These include weak linkages to environmental outcomes, fees too low to induce changes in materials or design, lack of adequate data and ex post policy evaluation, and implementation that differs across jurisdictions. Opportunities to address these challenges include use of life cycle assessment (LCA) to inform eco-modulation, increased eco-modulation fees, strategies to increase harmonization of eco-modulation implementation, mandated provision of data, and policy evaluation tools that establish the efficacy of different eco-modulation schemes. Considering the scope of the challenges and the complexity of establishing eco-modulation programs, we suggest treating eco-modulation at this stage as an experiment in promoting eco-design. [ABSTRACT FROM AUTHOR]