[GRRN] Local Costs vs. Local benefits of Recycling

Thu, 1 Jul 1999 18:54:05 EDT

What a coincidence! I had just finished the first issue of Sound Resource=20
Management's new newsletter The Monthly UnEconomist when I saw the postings=20
to GreenYes regarding the very subject that is the topic for our newsletter'=
lead article. Here it is (without the extensive footnotes and references=20
which didn't copy into this email in a decently formatted way). I don't=20
think it's too long for a message on this mailing list. You can check out ou=
website at www.zerowaste.com if you are interested in further information on=20
this topic.

Dr. Jeffrey Morris
Sound Resource Management
1477 Elliott Avenue West
Seattle, WA 98119



A Tale of Two Realities

=09Now is the best of times for those blessed with access to the flow of=20
wealth created by channeling much of our planet's material and energy=20
resources through relatively few, large-scale production enterprises. Big=20
cars, big houses, big meals, big entertainment, big health care.=20
=09Of course big consumption means big work for trash and recycling=20
crews come garbage pickup day. That's where the UnEconomist picks up the=20
=09After ten years of steady increase in the portion of waste recycled,=20
and some success at leveling growth in per capita waste, recycling has=20
plateaued. Trash is again on the ascendancy - from big news megamergers suc=
that two companies will soon control collecting and dumping of more than hal=
the nation's municipal and industrial solid waste, to everyday cutbacks or=20
failures of local recycling programs and businesses.
=09Possible reasons for recycling's diffi-culties are not hard to find -=20
anemic export markets for recycled materials as a result of Asia's economic=20
collapse, increased waste generation by business and industry as the US=20
economy continues to expand, or even the relative decline in enthusiastic=20
support and publicity for recycling. But the UnEconomist wants to suggest=20
that the real problem is more systemic - the huge advantage in free rides an=
free disposal that virgin materials production has versus recycled materials=
=09The four Virgin vs. Recycled graphs available online at ZeroWaste.com=20
help to tell the story. Three of the graphs show historical prices for=20
recycled materials - aluminum cans, cardboard boxes, and PET bottles,=20
compared with the virgin material - aluminum ingot, Kraft woodpulp, and PET=20
pellets, respectively, with which each recycled material competes.
=09These three price comparisons illustrate the general rule: virgin=20
material prices set an upper bound for recycling prices. Absent non-market=20
constraints, such as recycled-content requirements, no manufacturer will pay=20
more for recycled materials than for virgin. The latter have more precise=20
specifications and tighter quality controls. =20
=09Recycled materials, on the other hand, often require additional=20
handling and purifying before they can be used as manufactur-ing feedstock.=20
Thus, recycled materials sell below virgin by enough to cover these extra=20
processing costs, as well as provide a hedge against potential difficulties=20
in the manufacturing operation that might result from using the=20
less-precisely-suitable recycled feedstock. =20
=09Furthermore, virgin materials are sold on international commodity=20
markets subject to cyclical price swings and other influences unrelated to,=20
and uncontrollable by, US recyclers. In fact, recycling, at least in terms o=
the marketing of recycled materials, is in many ways a quintessential exampl=
of perfect competition. No particular recycler has much influence on the=20
price at which they can sell recycled materials, and each usually can sell=20
all they can collect, as long as they accept the going market price. =20

Recycling Prices vs. Recycling Costs
=09As a result of virgin commodity price cycles, wide and sometimes wild=20
fluctua-tions in revenue are a fact of life for recyclers. For example, in=20
the Puget Sound re-gion of Washington state during the past ten years,=20
revenues from selling materials collected by residential curbside recycling=20
pro-grams and processed at a material recovery facility (MRF) to=20
manufacturers' specifications averaged $60 per ton. Revenues varied from an=20
annual low of $36 per ton during 1993 (with a monthly low of $31 in June) to=20
a high of $124 during 1995 (with a monthly peak of $169 in June)=20
=09Costs for collecting and processing recyclables also vary widely=20
depending on type of recycling program (e.g., curbside or drop-off), degree=20
of separation (commingled or sorted into categories), and local wages, as=20
well as other factors, such as frequency of collection in the case of=20
curbside recycling. Fortunately, recycling program managers do have greater=20
control over costs than for revenues. Yet no amount of managerial skill can=20
overcome a fundamental fact: recycling market revenues alone seldom cover=20
recycling program costs. =20
=09For example, the Puget Sound region has access to robust markets for=20
recycled materials. Yet weekly residential curbside recycling (including=20
collection, processing and marketing) costs about $150 per ton of material=20
recycled, give or take ten per-cent, compared with revenues that have=20
averaged $57 during the past three and a half years. What or who will make u=
the shortfall? =20
=09In parts of the country, such as the Puget Sound region, where solid=20
waste dis-posal costs are high enough, savings in disposal fees on material=20
that is diverted to recycling, as well as savings in garbage collection and=20
transfer costs, cover the recy-cling market revenue versus program cost=20
shortfall. In other places, however, garbage collection and disposal costs=20
avoided when material is recycled are not enough to make up the difference. =20
=09In the latter case, more recycling means higher total costs for the=20
community's garbage and recycling programs, regardless of whether property=20
taxes, tipping fees, garbage collection fees, recycling fees, or other fees=20
and taxes are used to collect funds from households and businesses to pay fo=
garbage and recycling. Therein lies the conundrum confronting local=20
governments, households, and businesses wanting to control costs and, at the=20
same time, do the right thing by recycling more waste.=20

Recycling: The Right Thing To Do
=09The fourth Virgin vs. Recycled graph available online at=20
ZeroWaste.com illustrates the additional energy required to manufacture=20
products from virgin instead of recycled materials. Except for the fact that=20
mixed paper is not included in the graph, the products depicted are the same=20
materials often targeted by residential curbside recycling programs. =20
=09The graph shows, in sum, that the typical mix of used products in a=20
curbside recycling bin requires 2.5 times as much energy when those products=20
are manufactured from virgin instead of recycled feedstock. The energy=20
increment associated with virgin materials amounts to more than 21 million=20
Btu's per ton of curbside recyclables, a kilowatt hour of electricity per=20
=09It is significant that every pound of curbside recyclables conserves=20
a kilowatt-hour of electricity. But energy conservation is just one of the=20
environmental benefits attained by manufacturing products from recycled=20
rather than virgin materials.=20
=09As noted in our recent study:
"Drilling, digging, or cutting and refining, smelting, or pulping create=20
virgin raw ma-terials to feed our industrial system and, at the same time:
=C2=A7 release chemical substances, carbon dioxide, waste heat and processin=
refuse into air and water and onto land;
=C2=A7 impair the health of people exposed to polluting chemical releases;
=C2=A7 dislocate and destroy habitat for a wide variety of non-human creatur=
es and=20
=C2=A7 diminish productivity in natural resource industries that depend on h=
species and ecosystems;
=C2=A7 impair ecological functions and biological diversity in ecosystems; a=
=C2=A7 alter the sights, sounds, smells and feelings humans enjoyed in many=20
previously pristine, natural places."=20

=09Recycling itself, of course, has negative public health and=20
environmental impacts. The energy comparison is useful precisely because it=20
exemplifies the fact that recycled- beats virgin-content manufacturing in=20
almost every category of environmental impact. As summarized in a review of=20
four major studies on recycling's energy and environmental impacts:=20
=09"Recycled production plus recycling results in the lowest air=20
emissions of the three material acquisition, production and waste management=20
systems in 9 of 10 major pollutant categories. Virgin production plus=20
incineration results in the lowest emissions in the remaining category. For=20
all 10 categories, virgin production plus land-filling results in greater=20
emissions than does recycled production plus recycling. Virgin production=20
plus incineration results in the highest emissions of carbon dioxide of the=20
three options=E2=80=A6..
=09"Recycled production plus recycling results in the lowest waterborne=20
waste releases of the three options in six of eight major pollutant=20
categories, while virgin production plus incineration results in the lowest=20
releases in the remaining two categories. For all eight categories, virgin=20
production plus landfilling results in greater releases than does recycled=20
production plus recycling or virgin production plus incineration." =20

Think Globally, Pay Locally
=09If recycling is so good for public health and the environment, why=20
are the economics of recycling often so poor? Recall that virgin material=20
prices set the limit for recycling revenues. Thus, costs of virgin materials=20
use that are not reflected in virgin commodity prices may depress recycling=20
=09As an example, consider releases of chemical pollutants into the=20
environment. EPA's Toxics Release Inventory (TRI) requires self-reporting by=20
certain mining oper-ations, industrial facilities, and oil- or coal-fired=20
utilities on large releases to air and water or onto land of just over 900=20
chemical substances, out of about 70,000 used in commerce. =20
=09Actual emissions of the majority of toxic substances covered by TRI,=20
however, are not regulated. Even emissions of regulated toxics that are not=20
prevented by best available control technology, or emissions below prescribe=
regulatory limits, occur without penalty. Thus, Earth's ecosystems (includin=
human populations) provide, at no cost to the polluter, disposal into air an=
water and onto land for all but a fraction of the toxic substances generated=20
from virgin materials use.
=09Recently, several scientific studies have illuminated the value of=20
some of these free disposal services. One study estimated the public health=20
and environmental cost for emissions of nearly 200 chemical substances=20
associated with the production of packaging materials, including emissions=20
from acquiring and processing virgin raw materials to manufacture packaging. =20
A second study estimated greenhouse gas emissions associated with virgin=20
materials use.=20
=09Using data from these studies, the UnEconomist calculates that each=20
ton of curb-side recyclables that replaces virgin materials in manufacturing=20
new products provides net public health and environmental benefits worth $53=
This is the value, primarily in human health terms, just for reduced=20
emissions of greenhouse gases and the less than 200 toxic substances whose=20
releases have been systematically studied.
=09Benefits from the reduction in emissions of all chemical substances=20
that are achieved by recycling would undoubtedly be worth far more then $53=20
per ton of recycling. Still, even an extra $53 per ton in recycling revenues=20
would make recycling cost effective virtually everywhere in the nation.=20
=09On the other hand, charging virgin materials users for all emissions=20
of all chemical substances might not increase virgin material prices enough=20
to raise recycling prices by an average of $53 per ton. Virgin commodity=20
prices are determined on international markets, so emissions charges would=20
have to be imposed worldwide. In addition, subsidies provided here and in=20
other countries for extraction of virgin raw materials might also need to be=20
reduced before virgin material prices would rise enough to substantially=20
boost recycling prices. =20
=09Such major changes in worldwide policies regarding virgin materials=20
use are un-likely to occur anytime soon. At the same time, US EPA regulatory=20
limits on sulfur dioxide emissions and the resultant establishment of a=20
market for sulfur dioxide emissions allowances does set a promising example.=20
If greenhouse gas emissions limits are established and recyclers somehow=20
acquire tradable credits based on the amount and types of recyclables they=20
collect, additional revenues may flow toward recycling. =09
=09For the present, recyclers need to continue informing the public=20
about recycling's costs and revenues, and the cost savings achieved by=20
reducing garbage disposal. In addition, recyclers must better educate=20
households and businesses about the public health and environmental benefits=20
of recycling. When most waste generators understand that recycling makes=20
sense globally, but may incur revenue versus cost shortfalls locally, they=20
might be more accepting of the modest increment in local taxes or user fees=20
that helps pay for their recycling programs. =20

About The UnEconomist
=09This monthly newsletter intends to pro-vide insight and analysis on=20
the economics of recycling and the unpriced or underpriced environmental=20
benefits of reducing waste disposal and replacing virgin-content pro-ducts=20
with products manufactured from re-cycled materials. Reader feedback is=20
encour-aged via email to info@ZeroWaste.com, and substantive comments will b=
published whenever they add to our understanding of recycling.
The UnEconomist will also comment on recycling market prices in the Northwes=
and Northeast for the eight or nine recyclables tracked by the graphs=20
available along with this newsletter online at ZeroWaste.com. In addition,=20
The UnEconomist will from time to time report on the accuracy of the=20
five-year recycling price forecasts that are pro-vided on each recycling=20
market price history graph.=20
Users of the price history graphs should be aware that the data depicted on=20
each graph represent average monthly prices, FOB loading dock, received at=20
large-scale MRF's in the Northwest and the Northeast for recycled materials=20
processed and pack-aged to end-use manufacturer specifications. Price=20
averages include both spot market and contract sales. =09=20
=09Subscribers will notice that price histor-ies on our website graphs=20
show more month-to-month price fluctuation than is often re-ported in trade=20
journal price data. At least one reason for this is that price data reported=20
on Sound Resource Management's website reflect a multitude of actual=20
transactions consummated throughout each month, rather than survey prices=20
obtained from relatively few buyers and/or sellers. Thus, our price data=20
mirror the small but incessant day-to-day changes in recycling market prices=