There are several approaches which governments can use to manage hazardous wastes. Currently, the approach used in Taiwan is the command and control approach which includes facility standards, operation permit system, and many others as promulgated by the Waste Disposal Act. Nevertheless, this management approach has not been able to ensure that the hazardous wastes are properly treated due to the lack of incentives for firms to do it well and the problem of asymmetric information. This paper proposes using the performance bond system for the management of hazardous wastes because it can provide firms with needed incentives to treat the hazardous wastes properly. Furthermore, the performance bond system would also provide the environmental authorities with incentives to inspect and monitor more aggressively. Also, it is important to include both the firm participatory mechanism and the information disclosure mechanism in the operation of the performance bond system. Those two mechanisms would encourage the firms and the environmental authorities to perform their duties effectively and efficiently.