A deposit-refund system (DRS), also known as deposit-return system, advance deposit fee or deposit-return scheme, is a surcharge on a product when purchased and a rebate when it is returned. A well-known example is when container deposit legislation mandates that a refund is given when reusable packaging is returned. A DRS is a market-based instrument to address externalities, similar to a pigovian tax, with the key difference that a DRS refunds the fee after the product is returned.[1] This provides an incentive to consumers to properly dispose of a product.
While most commonly used with beverage containers, DRS can be used on other materials including liquid and gaseous wastes.[2] A DRS is used on products such as batteries, tyres, automotive oil, consumer electronics and shipping pallets.
There are three potential advantages of a DRS: it reduces illegal dumping by giving a financial incentive, it makes monitoring and enforcement easier, and evading the costs is difficult.[1]
DRS is said to be based on the principles of Extended Producer Responsibility.[3]
DRS can be either voluntary or mandated by legislation.