11 March 2010

Does Recycling Make Economic and/or Environmental Sense?

Does Recycling Make Economic and/or Environmental Sense?

Trash disposal is a service that people need. It is usually provided by governments or at least under government regulation. It costs money to collect and dispose of the garbage, and this is either paid through taxes or charged back to the public in fees. Overall, the costs of separating, collecting, and processing "recyclable" materials from trash is not covered by the income from the sale of the recovered materials plus the savings on landfill tipping fees. (This varies locally depending on local costs and markets.) However, people in developed countries are generally willing to pay the additional cost because of perceived environmental and psychic benefits of recycling.

Recycling is primarily a political decision, rather than an economic or technical one.

Background Facts and Figures

I will use the U.S. for my examples in this discussion. Other developed countries are similar. Americans generated 229 million tons of municipal solid waste in 2001. Of that amount, 51.4 million tons (22.4%) was recovered for reuse. Some was recycled (e.g. old glass bottles used in production of new glass) and some found other uses. (Tables showing the breakdown of trash and recycling are here.)

Environmental Benefits

There are several potential areas of positive environmental impact from recycling:
  • Extend the life of landfills
  • Reduce pollution associated with extraction of virgin materials, e.g. pulpwood
  • Spare resources for future use
One of the principal reasons Americans recycle is because they heard in the 70s and 80s that America's landfills were filling up, and soon they might have no place to put their trash. This turned out to be a false alarm. Of course landfills are filling up, at the rate of about 100 million tons per year. But most of the large modern ones have many years of capacity left, and there are plenty of suitable sites for new landfills. Diverting trash from land disposal does prolong the use of landfills and delay the opening of new ones, but the economic and environmental benefits of such delay are slight.

One way of estimating the environmental benefits of recycling is to calculate the reduction in energy required to manufacture products using recycled feedstock compared to virgin feedstock. Since energy production has significant environmental impacts, reduction in energy needed translates into environmental benefits, including reduced pollution. As a report from the Natural Resources Defense Council points out:
Since energy use causes a large part of the total environmental impact engendered by virgin material based-production, the lower energy use of production facilities employing recycled materials suggests that they emit fewer pollutants, including greenhouse gases. In the case of virgin glass production, for example, the pollution from energy production causes 97 percent of the total environmental effects. Since glass produced from secondary material uses about 40 percent less energy, there is a corresponding reduction in pollution from the glass recycling process compared with glass manufacturing processes that use only virgin materials.
According to NRDC, here are some of the reductions potentially available by using recycled materials to make things:

Product Reduction in Energy Needed
Aluminum 94%
Plastic (3 grades) 70-80%
Steel 60%
Newsprint 40%
Glass 40%
Linerboard 20%

According to these figures, recycling plastics would have significant environmental impact (on a per pound basis—I don't know if these calculations include the energy content of the hydrocarbons that are the raw materials for most plastics). But remember that plastics make up only 11% of America's trash, and there are significant quality issues—usually recovered plastics aren't pure enough for new plastic applications.

In some cases more material is recovered than can be used in similar new materials. For example, about 9 million tons of newspapers are recovered annually. Only 30% of this is used in the manufacture of new newsprint in the U.S. The rest is used to make other products, such as corrugated cardboard or linerboard, at much lower energy savings, or exported for recycling overseas. The environmental impact of newsprint recycling is mixed. Less pulpwood needs to be harvested and pulped, decreasing the demand for this semi-agricultural product. But the process of de-inking the used newsprint creates costs and environmental impacts of its own.

Although sparing natural resources, such as forest habitats or oil deposits, for the use of future generations is laudable, recycling actually won't make a big impact on resource use in most cases. For example, the U.S. used 8.5 million tons of aluminum in 2002. The 800,000 tons of recycled aluminum that was available in 2001 could only displace about 9% of the virgin aluminum needed.

Recovered Material as % of Annual Production, USA
Material Total Production million tons Recovered million tons Recovered as %
Raw steel 110 4.6 4%
Plastics 40 1.4 3.5%
Glass 20 2.4 12%
Newsprint 13 9 70%
Aluminum 8.5 0.8 9%

Although these percentages are small, they are potentially significant in reducing drains on natural resources. However, they should be compared with other ways of sparing such resources, such as just using less.

A secondary benefit of recycling programs is reduction of litter. Where there is adequate value to discarded material (usually created by deposit programs) those materials will be collected and sold to recycling centers. The inherent market value of the material (e.g. used aluminum beverage cans, currently worth $0.23 per pound in the U.S.—about 1 cent per can) is not enough to encourage people to collect litter (in developed countries).

The Economic Side

Some recycling obviously makes economic sense, since markets exist and materials are recycled based on the mutual interests of market participants. A good example is aluminum.

New aluminum is expensive to manufacture. Mining and electricity generation have negative environmental effects, which are increasingly imposed as costs on aluminum manufacturers through tighter regulation. Getting aluminum out of its ore requires a lot of electricity. It is much cheaper to melt down old aluminum and use it to make new things. In the U.S. about 35% of aluminum production is from recycled material.

Less bauxite needs to be mined to meet today's requirements for aluminum, and less electricity is used, saving fuel or making electricity cheaper for other uses. Basically, recycling makes aluminum cheaper than it would be without recycling.

The glass for bottles and jars is made from silica sand, the most abundant mineral on earth. It does take a lot of energy to melt it to make glass, but even recovered glass has to be remelted, so energy savings are not as great as with aluminum.

Recovered container glass is a mixture of clear, green, and amber glass. For most uses these colors have to be separated to be reused, and that is expensive. (For example, mixed container glass currently sells for $6 per ton, while recovered clear glass goes for $24 per ton.) (Current prices of recovered materials can be found here.) Recovered mixed glass can be used for many other purposes, such as sandblasting grit, but this does not reduce demand for new glass for containers, and thus has less positive environmental impact.

About two-thirds of newsprint used in America is recovered, about 9 million tons. About 30% of that is used in the manufacture of new newsprint. The rest is used to make other products, such as corrugated cardboard or animal bedding, or is exported to make newsprint elsewhere. Generally, paper with significant recycled fiber content is more expensive than paper from virgin fiber.

To create domestic demand for paper with recycled content government must attempt to manipulate the market, for example by requiring use of paper with a certain content of recycled fiber. The additional cost of this paper is passed on to consumers and taxpayers.

Waste plastic is not economical to recycle for most applications. Because there are many types of plastics which cannot be mixed in making new resin, the materials must be separated, which is labor-intensive and costly. No U.S. market for used plastic can cover the cost of collecting and classifying plastic consumer waste. Most plastic collected in curbside recycling in America is either sent to landfills or sold to Asian manufacturers. It may be used there in some applications which reduce demand for virgin plastic resin, thus sparing hydrocarbons for other uses. But its reprocessing is not necessarily much more environmentally benign than the production of virgin resin.

Savings

It costs money to dump trash in landfills. The charges are called "tipping fees". In California these currently run around $40 per ton.

Trucking trash to the dump also costs money, and creates pollution.

In addition to saving some of these costs, sale of recyclable materials extracted from the waste stream helps defray the cost of refuse collection and disposal. However, even with such savings and the sale of the recovered materials, recycling programs generally don't pay for themselves, and have to be subsidized. That is, they actually increase the cost of trash disposal.

Changing Markets

Recovered materials are commodities, and their prices fluctuate with economic cycles, changing government programs, and technological innovations. Supply and demand decide the price. Of course the prices of the virgin raw materials with which recycled materials compete also fluctuate. And the demand for the final products, e.g. newspapers, in which both types of raw materials are used, changes over time.

Ironically, the success of the environmental movement has reduced demand for recycled materials in some cases. For example, the success of manufacturers in reducing the volume of packaging material used, partly driven by environmental activism, has reduced the market for recycled paper. Purely economic forces have driven the shift from glass to PET plastic beverage containers. This reduces waste, since PET bottles are much lighter than glass, but substitutes a difficult-to-recycle material for an easy-to-recycle one.

Government programs, incentives, quotas, mandates, regulations, and subsidies tend to be out of step with the specific market situation in each recovered material, creating gluts and shortages.

Refuse collection and disposal is usually a monopoly business. Either a single public entity handles it, or a single private company contracts with the municipality to take care of it for a fee. If a multi-year contract specifies a fixed fee, the private contractor accepts the risk associated with price volatility in the markets for recyclables. Presumably the contractor has planned for this and negotiated the fees accordingly.

With a fixed fee, the contractor has an incentive to seek improved efficiency in trash collection, processing, and transportation, for instance by adoption of new technology. A penny shaved from costs is a penny more in profits. Finding a market for another stream of recyclable material can also create additional profit. All of this takes place in the environment of dynamic markets and changing government regulation.

Recycling may create jobs. Separations and classification plants employ people who would not be needed if everything just went to a landfill. Recycling probably doesn't create many other jobs, since the things manufactured with recycled materials would be manufactured anyway, probably with similar labor content. Any jobs gained on the recycled materials side would presumably displace jobs associated with competing non-recycled materials. (The figures on the number of jobs sustained by recycling seem very suspect to me. One report figures that "the recycling sector includes long-established sectors like paper and steel making . . . ." So this report counts the entire quarter-million-person payrolls of the nation's steel mills and iron and steel foundries as part of the "recycling manufacturing sector".)

If you are interested in the economics of recycling, you could explore the "Environmental Benefits Calculator" available at this site. Explore its assumptions and results under different cost/price scenarios. Remember, the assumptions you put in regarding prices and costs determine the output of the model. Where do those assumptions come from?

The Connection Between Environment and Economics

Whether recycling makes economic sense for most products depends on analysis of externalities. (What are "externalities"?)

How can externalities be incorporated into markets so that it will make economic sense to do things which reduce harmful environmental impacts? Impacts have to be converted into costs which have to affect prices. Governments get involved, usually imposing fairly crude methods which may or may not approximate the desired result while achieving the political goals for which the governments were elected. The political goals, however, come first. (More comments from me on science and politics—use "back" button to return to this post.) Face it, most government decisions are based on gut feel, ideology or political expediency, not on dispassionate technical or economic analysis.

[This article is reposted from Science In Action, originally posted 8 April 2005.]

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