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Recycling— righteous or rubbish?

Critics say recycling is garbage. Supporters say it will save the world. The truth lies somewhere in between.

March 1, 2005


Douglas Clement Editor, The Region
Recycling— righteous or rubbish?

Two years ago, supermarkets in the Twin Cities politely informed their shoppers they would no longer be accepting plastic bags for recycling.

Customers nearly rioted.

For years, Twin Cities shoppers had carefully collected the ubiquitous bags that tote everything from shoes to lettuce to newspapers and then dutifully deposited great bunches of them at the grocer. A hauler sorted, baled and shipped them off to a composite lumber manufacturer. Recycling made the "paper or plastic?" decision easier for shoppers, who felt they could have the convenience of plastic but still do right by the environment, which they assumed was harmed more by plastic bags than by the paper variety.

But when the bag baler broke early in 2003 and the hauler couldn't afford to fix it, supermarkets no longer had anywhere to send the bins full of good intentions. They stopped collecting used bags and started feeling the wrath of consumers: Angry letters flowed; cashier confrontations soared. The local Association of Recycling Managers said it got more calls on this issue than any other over its 16 years in business.

After eight months of irate customer feedback, a consortium of grocery corporations, county officials and plastics companies chipped in for a new bag baler and—with much fanfare—resurrected plastic bag recycling. In its first year back, the new initiative collected about 278 tons of bags, enough for 150 outdoor decks made of plastic lumber.

An American standard

Discarded Computer MonitorsThe plastic bag fiasco was a vivid display of the dilemmas faced by consumers, retailers and governments that struggle with the daily realities of recycling and the deep-seated emotions that surround it. Recycling has become an American norm. It's an expectation, a civic duty, almost an amenity. No one wants to take out the trash, but if we lose the opportunity or responsibility to sort through our discarded cans and newspapers, we feel deprived.

Public recycling programs have increased dramatically in recent decades. In 2002, there were 8,875 residential curbside recycling programs in the United States, according to BioCycle magazine, up from 1,042 in 1988. Those programs provide recycling service to nearly half the U.S. population, triple the coverage in the early 1990s; many other people recycle by dropping off their cans, bottles and paper at municipal recycling centers. Nearly a third of all municipal solid waste is now recycled, up from just 8 percent in 1990, the earliest year available from BioCycle surveys.

Recycling is deeply popular in many Ninth District communities. A 1998 survey of Wisconsin residents, for instance, found that 75 percent were strongly in support of recycling, up from 57 percent in 1992. A full 98 percent said they recycled at least some of their waste and 96 percent said they believe their recycling efforts are worthwhile. High school kids in the Upper Peninsula's Dickinson County organized an "Adopt A Tire" campaign last year, with an 11-page project outline that set forth everything from turning a used tire into a school swing to developing recycling options for tires found in the local dump.

But regardless of its popularity, recycling may not always be justifiable on economic grounds, and many communities are finding that it's difficult to continue their recycling programs, especially in tough economic times, when the costs of doing so seem to eclipse the benefits. A 2002 Minnesota legislative audit of state recycling efforts put it bluntly: "Progress may be limited ... because it is often cheaper to throw away rather than recycle some materials."

Reaching a plateau

Moreover, recycling rates seem to have leveled off or even dipped. Over 60 percent of all beverage containers were recycled in 1994, but that figure had dropped to just 47 percent in 2002. Even aluminum cans, the most lucrative recyclable in the waste stream, are missing the recycling bin, with rates down from 65 percent in 1992 to 44 percent in 2003, according to the Container Recycling Institute. BioCycle surveys show that overall U.S. recycling rates—the percentage of total municipal solid waste that is recycled—have been flat since 1998, with recycling rates hovering in the low 30 percent range, according to its December 2001 report.

Similar trends appear in the district. "Recycling rates have plateaued in recent years," said the January 2004 report of the Minnesota Office of Environmental Assistance. And while recyclable volumes have increased an average of 4 percent a year over the past decade, there have been "slight declines in the last two years," said the report. In Wisconsin, a December 2004 Department of Natural Resources press release trumpeted a 2 percent rise from 2002 to 2003 in pounds recycled per capita, but the figure was still 13 percent below the 1998 peak of 302 pounds per person.

Critics say such drops are a vindication of their claim that recycling is garbage—a wasteful hobby for impractical, feel-good environmentalists. But supporters claim the slowdown is just a hiccup in the continued trend toward better resource utilization. And they argue that if recycling seems more expensive than the alternatives, it's only because landfilling is artificially cheap and the use of virgin materials continues to be subsidized.

The economics suggest a middle road. Careful cost-benefit analysis shows that recycling often isn't cost-effective: Many programs try too hard, in a sense, by recycling products that cost more to reprocess than is warranted by the associated environmental and economic benefits—essentially going too far in the cause of environmental protection.

But economists also suggest that some level of recycling is entirely sensible from an economic standpoint. Moreover, they say, it's a relatively young business whose systems and technologies are still developing. Costs are dropping and markets are firming up, making it an increasingly viable alternative to landfilling. Nonetheless, because the costs and benefits of recycling and other methods of waste disposal vary greatly from one area to another, blanket policies that mandate certain national or even state-level quotas make little sense.

The high cost of recycling

Recycling is pretty popular in South Dakota, according to Steven Kropp at the state's Department of Environment and Natural Resources. That popularity might be more nominal than actual if BioCycle's figure of 3 percent is closer to the mark than the state's 37 percent estimate. Whatever the rate may be, virtually all towns in the state have to subsidize their recycling programs. Aberdeen 's solid waste program, for instance, ran a $105,000 deficit in 2003 because the city commission decided not to charge citizens the full rate for recycling, a practice that may change in 2005.

"I know some communities have started looking at it and going 'well, how much is too much?'" said Kropp. "'How much money do we realistically need to put into this for a subsidy? How much does it really cost per ton to recycle vs. disposal?'"

Sioux Falls has a mandatory recycling program, he said, but still only 15 percent of solid waste is recycled. Other communities might do better, said Kropp, but many opted out when the state gave them the option in the mid-1990s. "And a lot of them opted out because the economics just did not pencil out."

Watertown, S.D., hasn't opted out, but it has begun to look more carefully at the costs of recycling. Mike Boerger, the city's superintendent of wastewater and solid waste, runs the curbside collection program for recyclables and oversees the local landfill as well. "I just put this little spreadsheet together," he said, to analyze the costs and revenue associated with Watertown 's annual recycling average of about 700 tons.

Boerger's recycling costs include the expense of sending a collection truck around to pick up recyclables ("probably 500 stops a day, 4 days a week") plus his payment to the local firm that processes and markets the recyclables. On the revenue side: the money made when the recyclables are sold and the avoided costs saved by not putting the 700 tons in the landfill (calculated at his landfill tipping fee of about $31 a ton). "Now, you could argue with my methodology here," he said, but "when it gets down to it, it's a heck of a lot cheaper just to landfill solid waste than it is to recycle it."

Other district communities face the same problem. Early last year, Lake County, Minn., officials were debating what to do about their recycling program—mandated by the state—because they couldn't afford to pay the $57,000 bid for a hauler to pick up recyclables at county recycling drop-off sheds. In St. Cloud, Minn., city officials estimated in 2002 that they could save about $200,000 a year by not recycling the 2,800 tons collected. A 2001 Wisconsin legislative audit of the state's recycling program calculated that it cost $95 a ton to recycle (net of the revenue from selling recyclables) but just $85 to collect and dump in a landfill.

The costs of recycling programs depend on a number of factors. Collection costs are key, and there are economies of scale that make recycling a difficult proposition in sparsely populated areas like Lake County . Also, it's usually cheaper to collect trash than recyclables because it can be crushed more compactly than materials that have to be processed before sale. Glass bottles, for example, need to be sorted by color; crushing them makes that next to impossible. "The collection of recyclables fills trucks more quickly and requires more trips," noted the Wisconsin analysis.

But revenue generated by selling recyclables is often critical to the cost-benefit outcome. "That market price is really what makes or breaks recycling," said Boerger, from Watertown, and markets for recyclables are notoriously volatile. "The revenue we receive averages around $9,600 or $9,700 a year [after paying the recycling contractor], but the range has swung from $3,700 to $13,700. And that's just from 1998 to 2003." The Wisconsin study reported that prices for recycled mixed paper varied in August 2000 from a high of $50 a ton to a low of -$10 (meaning sellers had to pay buyers to take the paper). Aluminum prices jumped between $532 and $1,160 a ton.

If the costs of recycling were low, revenue volatility wouldn't be a problem. But local governments are increasingly under fire for continuation of recycling programs that have dependably high costs and revenues that are unpredictable.

Arguments for recycling

In the face of such pressure, recycling proponents muster several defenses. Recycling protects the environment, they argue, by saving resources—energy and raw materials—that are scarce and underpriced; it creates jobs and builds the economy; and it reduces the problem of rapidly diminishing landfill capacity, a problem exacerbated because people don't pay the full costs of landfill disposal. To an economist, some of these arguments have real merit while others hold no water.

The idea that recycling is good because it "creates jobs" is often voiced. "Recycling accounts for 8,700 manufacturing jobs in Minnesota, with paychecks totaling something over $1 billion," said a November 2004 Minneapolis StarTribune editorial. A July 2004 study from the Montana Department of Environmental Quality reported employment of 300 full-time workers with above-average wages and gross revenues for the industry of $90 million.

But to an economist, this is a red herring. After all, jobs would also be created if governments allowed citizens to throw garbage in the street and then hired people to pick it up. If tax revenue weren't paying someone to sort cans and bottles in a recycling processing facility, that money could be used in some other way—perhaps paying teachers to educate children, or never collected as a tax in the first place—both of which might have a greater social benefit.

"The fact that lots of people are needed to carry out recycling programs is basically evidence that recycling is expensive, requiring lots of labor (as well as capital) that could have been used to fulfill other goals of public policy," wrote Richard Porter, a University of Michigan economist, in his recent book The Economics of Waste.

Like a virgin

Then there's the argument that recycling should be encouraged because raw materials are nonrenewable resources whose use is unwisely subsidized by misguided government policies. Moreover, goes this argument, creating new products out of recycled materials is less polluting than creating them from virgin materials.

Resource economists generally agree that resource extraction has long been subsidized by government policies—tax depletion allowances, and the like. One academic study estimated, for example, that aluminum production in the United States receives a subsidy of roughly 5 percent to 12 percent because much of it is produced with low-cost, government-run hydroelectric power. But subsidizing recycling to redress this would be a second-best policy, trying to right one wrong by committing another. The better policy would be simply to eliminate unjustified subsidies.

As for growing shortages of raw materials, economists would argue that accurate pricing and unfettered markets are the only efficient way to address whatever scarcity might really exist. If raw wood pulp prices double, you can be sure that paper makers will create a market for recycled paper, develop a technique that uses less pulp or plant more trees.

And if production processes with virgin materials cause pollution, that externality should be taxed directly. Supporting production out of recycled goods is an indirect means of addressing the pollution. Moreover, recycling itself is not perfectly "green." Washing out peanut butter jars uses lots of water. Trucks that collect recyclables pollute the atmosphere. And while few materials are as recyclable as aluminum, that too causes pollution. In November 2004, for instance, the Environmental Protection Agency proposed a $247,578 penalty against a Minnesota aluminum recycling plant for emitting "excessive amounts of dioxins and furans and hydrochloric acid." Nasty stuff, that recycling.

Pay as you throw

But another point has much greater credibility. The time-consuming process of recycling faces an unfair fight if the alternative—tossing something in a trash can—is virtually free. And in the United States, that's often been the case. In most American municipalities, the standard practice has been for households to pay for trash collection through taxes assessed on the market value of their homes and/or with a monthly garbage bill unrelated to the amount of trash put out for disposal. As a result, an individual homeowner (or business, in many cases) faces essentially no marginal cost for throwing away another bag or three of trash each week. That's an obvious disincentive to recycle. Why go to the effort of sorting recyclables when you can just toss them in the garbage can for free?

In the last 20 years or so, however, many municipalities—over 4,000 according to the EPA—have instituted volume-based pricing for waste disposal, otherwise known as pay-as-you-throw programs. The idea of PAYT is that people should be charged for garbage disposal the same way they're charged for gasoline or bananas: by the amount they consume. Some communities sell colored tags that residents attach to standard-size garbage bags, usually about 33 gallons. The purchase price of the tag is the unit price they pay for having that garbage hauled to the landfill. Others send residents garbage bills that vary by the size of their trash container. The bigger the can, the higher the bill.

The city of Bozeman, Mont., implemented its PAYT program in 1991, initially using a tag-and-bag system, then switching to garbage cans of different sizes. And it would be hard to find anyone more enthusiastic about the plan than Mark Kottwitz, the city's solid waste superintendent.

"Our philosophy behind the pay-as-you-throw or volume-based system would be whoever generates the most pays the most," he said. "The whole incentive behind going to a smaller container is our recycling program. The more you recycle the smaller container you can go to." A 35-gallon trash can emptied once a week costs a resident $8.77; a 100-gallon can costs $14.35. "The program's really working well," said Kottwitz. "The community is just doing a fabulous job."

Trash thy neighbor

To an economist, pay-as-you-throw makes perfect sense. In a competitive economy, people should be charged for the goods and services they consume, and the price should equal the marginal cost. But there can be unintended consequences.

Terry Barnes, former chairman of the Upper Peninsula Recycling Coalition, likes PAYT programs. "If a city doesn't have a bag fee, there's no incentive to recycle," he observed. And when nearby Florence, Wis., started its recycling plan together with a PAYT trash program in the early 1990s, "garbage volume dropped by 50 percent." But diversion to recycling "only represented about 14 percent of the loss," he recalled. "The other part of it went to cities across the river like Iron Mountain" where Florence citizens dropped off their trash bags next to Iron Mountain homes.

"It was kind of like theft," said Barnes. "Someone else was paying for it. Or a lot of people put it in the back 40 or some people started burning barrels." Eventually, he said, better enforcement reduced the problem, but it was clear that charging for trash disposal created an incentive for illegal dumping.

Economists Thomas Kinnaman and Don Fullerton studied similar programs elsewhere in the country and found exactly the same problem. "One of the things you learn in graduate school is the wonderfulness of user fees and unit-based pricing," said Kinnaman, in an interview. "If garbage is indeed damaging to the environment, then the people who are generating the pollution should be those who pay for it. ... As people are required to bear these costs, you'd still have pollution, but you'd have efficient pollution, pollution where the benefits exceed all the costs."

But when the economists studied the effects of a PAYT program implemented in Charlottesville, Va., they found that the $.80 per bag fee did decrease the weight of garbage slightly, by about 14 percent, and increased recycling by 16 percent. But illegal dumping may account for 28 percent to 43 percent of the reduction in garbage.

Price insensitive

This study and others have convinced Kinnaman that "these programs are not as desirable as the textbooks might indicate," especially because administering them can be cumbersome and expensive. Local governments tend to like them because the fee generates revenue. But the bottom line, he said, is that the elasticity of demand for garbage disposal "is very, very small."

Perhaps because people are fairly price insensitive when it comes to waste disposal, state and community efforts don't always pay off. Minnesota, which has required volume-based pricing of solid waste collection since 1992, has found that at least as implemented, it seems to have had little impact. Despite a statutory goal of reducing per capita municipal solid waste generation by 10 percent between 1993 and 2000, it actually increased by 32 percent, according to the Minnesota Office of Environmental Assistance 2004 report, which concluded: "Current policies and tools have not been effective in reducing the growth of waste generation."

Economists have proposed other initiatives to promote diversion of solid waste into recycling, or to reduce waste generation in the first place. Advanced disposal fees (ADFs) are essentially a tax levied on a product to cover its cost of disposal, with the revenue devoted to landfill or recycling programs. Many states have specific ADFs for car batteries or tires, and a few have experimented with them, with varying results, for cans, bottles and newspapers. Minnesota is likely to adopt one this spring for televisions and computers, with a $10 fee paid at time of purchase. Another idea, deposit-refund plans, requires that consumers pay a small fee when they purchase a product; that fee is reimbursed when they return the container it came in. Michigan 's popular bottle bill is an example.

For Barnes, though, PAYT is still the way to go. "That's the way to do it. You got to have a bag fee. You just got to know that [illegal dumping is] coming and watch for it." And Barnes points out that for most, recycling is an article of faith, a moral act. "People generally feel it's a good thing to do," he said, "especially if they have family that is going to be living on this planet after them."

Doing the math

Still, for an economist, whether or not recycling is "a good thing to do" comes down to cost-benefit analysis. Are the benefits of recycling greater or lesser than the costs? If the costs of recycling exceed its benefits, it makes more sense to stop our wasteful recycling programs, dump our trash in landfills and use the money we've saved by not recycling to do something more beneficial for the environment.

In The Economics of Waste, Porter surveyed the numerous cost-benefit analyses that economists have done and concluded, "in short, recycling probably does not now pay off in a social benefit-cost sense for the average municipality in the United States ... empirical studies agree that the bottom line on the average city's recycling was negative in the 1990s."

Only if avoided landfill costs are very high can recycling pass the cost-benefit test. And in much of the United States, landfill tipping fees remain fairly low—in part, because they don't reflect their full social costs (see "Not in my back 40").

Porter says two other factors could tip the balance in favor of recycling: If unjustifiable subsidies to virgin material extraction can't be addressed directly, the second-best solution—promoting recycling—might provide indirect benefit. And if the analysis gives a monetary value to the psychological benefit households derive from recycling (minus the time costs of doing so)—essentially considering recycling an amenity, like public parks—that too would add to the benefit side of the scale. Even so, he says, under current conditions, recycling doesn't pass the cost-benefit test in many U.S. communities.

Despite such skepticism, Porter believes that "over time the benefits of recycling will grow, and its costs will fall. Recycling will probably pass benefit-cost tests with regularity in the not-too-distant future." As cities learn how to operate their recycling programs more efficiently, as technology for sorting and processing improves and as markets for recyclables mature, costs should decline and benefits rise.

Evidence of the former is being seen in Wisconsin, where communities have begun to consolidate their recycling programs, hoping to find economies of scale. In St. Paul, a nonprofit firm, Eureka Recycling, has introduced competition into the local recycling market and experimented with collection techniques that have increased participation and cut costs.

And markets for many recyclables have never been stronger, fueled by climbing demand from abroad. "Best they've been in years: aluminum is good; newspaper, cardboard, mixed are all good," reported Barnes. "China is sucking a lot of the stuff out. It's supplying demand. A major export going to China out of California is recycled materials."

Think local

Still, recycling isn't an all or nothing proposition. It may not make much sense to push recycling in sparsely populated eastern Montana or northern North Dakota where landfills are near and markets distant. Sioux Falls and Minneapolis, on the other hand, might benefit from accelerated recycling efforts. And programs may be wiser to focus on increased collection of some materials—aluminum and paper, for instance—but drop others, like some types of plastic (and maybe even plastic bags) that are expensive to collect and process, and have little market value.

But efforts to impose uniform recycling targets over broad geographic areas or to mandate collection of an extensive range of materials are doomed to inefficiency. As noted in the 2002 Minnesota legislative audit of that state's recycling efforts, "each county has a unique political, social and geographic environment that might require a unique solution to waste management." Recycling, when it comes down to it, is a geographically narrow activity, and its costs and benefits vary accordingly. Like politics, all garbage is local.


Douglas Clement
Editor, The Region

Douglas Clement was a managing editor at the Minneapolis Fed, where he wrote about research conducted by economists and other scholars associated with the Minneapolis Fed and interviewed prominent economists.