During the last decade waste management has been characterized by two main trends: the growth of international trade of waste materials and the introduction of Extended Producer Responsibility (EPR) as a policy instrument. In this paper a two-country stylized model with imperfect competition in the recycling market is used to address two research questions. First, how do EPR recycling targets interact with other policy instruments such as taxes on recycling residues and excise duties? Second, how does strategic behavior of national policy makers influences the use of policy instruments? The model demonstrates that a combination of EPR with other instruments is needed to achieve the first-best outcome if market power applies. When governments do not coordinate policies across borders, strategic behavior may lead to a ‘race to the bottom’ for taxes on recycling residues. Conversely, strategic behavior may lead to a counter-intuitive ‘race to the top’ for excise duties. It is shown that excise duties are not only used to stimulate waste prevention but also to extract profits from foreign recyclers.