The Economics of Recycling

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Waste paper and plastic have always been poor stepsisters to cardboard and cans in the recycling arena. Times are so tough today that all four go begging. Extra efforts are needed to make them marketable, with no guarantees that there will be buyers.

Leigh Jacobson’s enthusiasm about recycling flies in the face of her task. When the markets crashed last year, Auburn University’s waste disposal needs fell on hard times. The company out of Atlanta that had been taking co-mingled trash for no charge said, "No longer."

No, this was no Georgia-Alabama feud. Simple economics prevailed. China’s demand slumped. The entire market for recycled materials dropped nearly to zero. When the market disappears, companies can no longer provide dumpsters, take waste at no charge, and carry that waste to a transfer center in Opelika, saving the University $20 per ton for landfill fees.

So, six months ago Leigh Jacobson and others representing the City of Auburn, Opelika and Lee County secured an annual Alabama Recycling Grant for $120,139. AU got $40,829 of that. The funds have come from an imposed extra $1 per ton on the landfill dumping fees in the state.

Sixty buildings have gotten new bins, labels, signs and posters. Single collections of paper/cardboard and plastic bottles/metal cans are underway. Residential areas have been the first to come on line with the project.

But, everything collected in these new bins still needs to be separated if the enterprise hopes to get paid for having collected it. Look out our windows. Across Magnolia, located on the east side of Donahue is Leigh’s workspace. Peek into the parking lot at the bins. Watch people manually setting paper aside from cardboard and cans aside from bottles. It is a small staff with a big goal.

Bundled cardboard fetched $17.50 per ton in September. Steel and aluminum cans generally get ten cents a pound. Plastic bottles earn one penny per pound. A great deal of human labor is going into this recycling project with a price tag of its own. Leigh optimistically thinks this can work.

Economically, the University should stop these recycling efforts and let the waste be hauled to the landfill. Those landfills can always be mined when there are actual markets for such materials.

The company that holds the University’s contract for hauling waste away is Waste Management. They do not recycle. They own their own landfill in Salem. The charge for dumping waste there ("tipping") is $21.75 per ton. AU does already landfill a large quantity of waste. They should landfill all of it.

Ten years ago, when open dumps were closed in the state, private companies began filling that need. Waste Management is today the largest landfill operator in the U.S., with 281 landfills.

Now, if they’re the largest with just 281 landfills, does that sound like enough landfills in the whole country to you?

Is it?

Isn’t that one of the three things everybody knows when we talk trash? 1) We know we’re running out of landfill space, 2) we know we’re saving resources by recycling and protecting the environment by doing so, and 3) we know no one would recycle if they weren’t forced to.

Let’s look at these three things we think we know. Are they real or are they rubbish?

1) Are we running out of landfill space?

Two events created the perfect garbage storm in the late 1980s. One barge and one bureaucrat created this one over-hyped myth. The garbage barge was the Mobro 4000. The bureaucrat was J. Winston Porter. Mobro 4000 gained infamous celebrity status by spending two months and 6,000 miles seeming to scour the Atlantic coastline and the Gulf of Mexico looking for a home for its load, as if no landfills existed. The physical availability of landfill space was not the issue, but you would not have guessed that from the hysteria the media whipped up.

J. Winston Porter became a star that season at the Environmental Protection Agency (EPA) by writing Agenda for Action, in which Porter proclaimed that recycling is absolutely vital because America is running out of landfill space.

What Porter thought he knew simply was not so. The EPA had noticed that the number of landfills was dropping. They failed to notice that the size of landfills was getting much bigger much faster. Total landfill capacity was actually rising. The EPA also underestimated the prospects for creating additional capacity. Obviously, and as usual, the real landfill problem is not a landfill problem at all but a political problem. "Fears about the effects of landfills on the local environment have led to the rise of the not-in-my-back-yard (NIMBY) syndrome, which has made permitting facilities difficult. Actual landfill capacity is not running out."

Today, 1654 landfills in 48 states take care of 54% of all the solid waste in the country. One-third of them are privately owned. The largest landfill, in Las Vegas, received 3.8 M tons during 2007 at fees within the national range of $24 to $70 per ton. Landfills are no longer a threat to the environment or public health. State-of-the-art landfills, with redundant clay and plastic liners and leachate collection systems, have now replaced all of our previously unsafe dumps.

More and more landfills are producing pipeline quality natural gas. Waste Management plans to turn 60 of their waste sites into energy facilities by 2012. The new plants will capture methane gas from decomposing landfill waste, generating more than 700 megawatts of electricity, enough to power 700,000 homes. The end use of most landfills is parkland.

Holding all of America’s garbage for the next one hundred years would require a space 255 feet high or deep and only 10 miles on a side. Landfills welcome the business. Forty percent of what we recycle ends up there anyway. We are not running out of landfill space.

2) Are we saving resources and protecting the environment by recycling?

What are the costs in energy and material resources to recycling as opposed to landfill disposal which we’ve just looked at? Which method of handling solid waste uses the least amount of resources as valued by the market?

As government budgets tighten and the cost of being "green" rubs against the reality of rising taxes, recycling coordinators like Leigh Jacobson increasingly will be under fire to justify their programs as cost-effective alternatives to waste disposal methods such as landfilling.

I don’t think she will be able to do it. But it should be easier for Leigh at the University than it will be for her counterpart in the City of Auburn, or in any city that funds curbside recycling like San Francisco or Seattle. Curbside recycling is substantially more costly — that is, it uses far more resources — than a program in which disposal is combined with a voluntary drop off/buy-back option. Overall, curbside recycling costs run between 35 percent and 55 percent higher than other recycling methods because it uses huge amounts of capital and labor per pound of material recycled. Recycling itself uses three times more resources than does landfilling.

The largest U.S. organization dedicated to recycling just found out how difficult this chosen path can be. The final death knell for the National Recycling Coalition (NRC) appeared to ring earlier this year when the organization announced it would be filing for Chapter 7 bankruptcy. The NRC ceased operations and terminated all staff members at the close of business on Sept. 4, shortly after an attempt to merge with Keep America Beautiful failed. NRC is now trying to avoid bankruptcy by reorganization. Even though they are a half million dollars in debt, NRC may legally continue to exist if they can raise funds, negotiate with their creditors and develop a business plan. What seems to be their business plan? They are counting on the Kerry-Boxer Bill on clean energy to include recycling language. In other words, they are counting on being bailed out and subsidized. The market knows this is a losing proposition, so these players are trying to get taxpayers to fund their enterprises.

The Solid Waste Association of North America found in the six communities involved in a particular study, all but one of the curbside recycling programs, and all the composting operations and waste-to-energy incinerators, increased the cost of waste disposal. Indeed, the price for recycling often tends to soar far higher than the combined costs of manufacturing of raw materials from virgin sources and dumping rubbish into landfills.

To recycle waste is to use twice the energy and to create twice the pollution from factories, trucks and byproducts.

Recycled newspapers must be de-inked, often with chemicals, creating sludge. Even if the sludge is harmless, it too must be disposed of. Second, recycling more newspapers will not necessarily preserve trees, because many trees are grown specifically to be made into paper. The amount of new growth that occurs each year in forests exceeds by a factor of twenty the amount of wood and paper that is consumed by the world each year. Wherever private property rights to forests are well-defined and enforced, forests are either stable or growing.

Glass is made from silica dioxide — that’s common beach sand — the most abundant mineral in the crust of the earth. Plastic is derived from petroleum by-products after fuel is harvested from the raw material. Recycling paper, glass or plastic is usually not justified compared to the virgin prices of these materials.

The best way to measure the scarcity of natural resources such as trees, sand or oil is to use the market prices of those resources. If the price of a resource is going up over time, and it’s not just inflation pushing those prices higher, the resource is getting scarcer. If the price is going down, it is becoming more plentiful. Indeed, since 1845, the average price of raw materials has fallen roughly 80 percent after adjusting for inflation.

This paradox of our having more by using more is explained by the use of the most important resource — man’s mind. Human ingenuity makes natural resources increasingly available through prices, innovation, and substitution.

Bureaucrats, however, appear to occupy a place at the far and opposite end from human ingenuity. Their interferences in markets do damage. Just two examples will illustrate what I mean by that. One is about a light that has a dark side. The other example requires that you either clean your plate or become a composter.

Our Congress in 2007 banned incandescent bulbs. Not exactly a market action. The phase-out of incandescent light is to begin with the 100-watt bulb in 2012 and end in 2014 with the 40-watt. By 2020, bulbs must be 70 percent more efficient than they are today. While a standard 100-watt bulb cost $1.24, the spiral compact fluorescent light (CFL) 100-watt sold for $4.97. Advocates argue, however, the CFL lasts longer and uses less energy. The packaging claims that after six years I will have saved $74 in energy.

Thereby, in the year 2007 alone, under this edict, some 397 million compact fluorescent light (CFL) bulbs were placed into the market. Their debut is counted as a success. However, the recycling of spent household CFLs has been an abject failure.

Already? That was 2007. Today is 2009. Doesn’t this suggest that several of those bulbs didn’t last any six years? Despite CFL disposal bans in states like Maine, despite continuing statewide education efforts and a free CFL recycling program there, households throw the used bulbs into the trash that ends up in the landfills.

What’s the problem with that? Landfills, as we’ve learned, have the space and the appetite for our waste. Well, the problem is the potential public and environmental health effects of the collective release of the small amount of mercury in each discarded CFL. For example, using the mean amount of 5 milligrams per CFL, the total amount of mercury contained in the 2007 shipments of CFLs alone is 4,376 pounds.

There is no mention on GE’s packaging of the bulb’s mercury component or any special precautions you must take when this bulb breaks.

Notice that "mercury free" is already a selling point to the producers of new LED technology Accent bulbs. Accent meaning you can’t actually get enough light from them to read by. But, you can tell the packager has obviously experienced how ugly the CFL-produced light is because the buyer is assured a warm white light, which is something you do not get with a CFL.

In June of this year, Maine adopted the nation’s first law that requires CFL bulb manufacturers to share the costs and responsibility for recycling mercury-containing CFLs through a producer-financed collection and recycling program, which must include an education component. This mandate will drive the CFL’s cost even higher. Additional specialized equipment will have to be created for handling light bulbs that will be seen to be hazardous waste. How can any savings ever result from such a boondoggle?

Then, bringing new depth and meaning to the word boondoggle, San Francisco’s newest mandatory recycling ordinance took effect last month. All residences, all restaurants and all commercial buildings must participate in the city’s recycling and composting programs. A recent study had unearthed the fact that 36 percent of the city’s landfilled waste is compostable. That happens to be the ingredient that makes the landfill valuable as an energy source.

Collecting your food scraps, plant trimmings, soiled paper, and other compostables is considered necessary by San Franciscans to fight global warming. Residents get both a green cart and a green report titled, Stop Trashing the Planet. Residents face $100 fines if they fail to separate their food scraps from their papers or cans. Businesses face fines of $500. Really bad actors could be fined $1000. The stated goal is to get to zero waste, meaning no garbage at all going into landfills, by the year 2020.

Obviously, San Francisco believes we have run out of landfill space. Obviously they do not have the vision to see the energy plants that landfills can become when waste is actually put there.

In light of these facts, how can San Franciscans and others think recycling conserves resources?

First, many states and local communities subsidize recycling programs, either out of tax receipts or out of fees collected for trash disposal. That’s the case with AU’s recycling grant. Thus the bookkeeping costs reported for such programs are far less than their true resource costs to society. Also, observers sometimes errantly compare relatively high-cost twice a week garbage pickup with relatively low-cost once or twice a month recycling pickups, which makes recycling appear more attractive.

Why do these same people think that recycling is protecting the environment by not polluting?

Recycling is a manufacturing process, and therefore it too has environmental impact. The U.S. Office of Technology Assessment says that it is "usually not clear whether secondary manufacturing such as recycling produces less pollution per ton of material processed than primary manufacturing processes."

Increased pollution by recycling is particularly apparent in the cases of curbside recycling. Los Angeles has estimated that its fleet of trucks is twice as large as it otherwise would be — 800 versus 400 trucks. This means more iron ore and coal mining, more steel and rubber manufacturing, more petroleum extracted and refined for fuel — and of course all that extra air pollution in the Los Angeles basin as the 400 added trucks cruise the curbs.

Manufacturing paper, glass, and plastic from recycled materials uses appreciably more energy and water and produces as much or more air pollution as manufacturing from raw materials. Resources are not saved and the environment is not protected.

3) Do people only recycle when they are forced to?

If all we knew about recycling was what we hear from environmental groups, recycling would seem to be the philosophy that everything is worth saving except your own time and your own money. Costs of recycling are so hidden. If we add in the weekly costs of sorting out items, it would make more sense to place everything in landfills.

But, private recycling is the world’s second, if not the world’s first, oldest profession. Recyclers were just called scavengers. Everything of value has always been recycled. You will automatically know that something is of value when someone offers to buy it from you, or you see people picking through your waste or diving into dumpsters.

Aluminum packaging has never been more than one small percent of solid waste, because metals have value. Ragpickers may not be in season now picking out cloth from waste, but cardboard, wood and metals have always been in some demand.

Scrapyards recycle iron and steel because making steel from virgin iron and coal is more expensive. Members of the Institute of Scrap Recycling Industries recycle 60 million tons of ferrous metals, 7 million tons of nonferrous metals, and 30 million tons of waste paper, glass, and plastic each year — an amount that dwarfs that of all government (city, county, and state) recycling programs.

Recycling is a long-practiced, productive, indeed essential, element of the market system. Informed voluntary recycling conserves resources and raises our wealth, enabling us to achieve valued ends that would otherwise be impossible. So, yes, people do recycle even when they are not forced to do so.

However, forcing people to recycle routinely makes society worse off. Mandated recycling exists mainly because there is plenty of money to be made by upselling products as "green" or "recycled" to get Municipal and Federal grants.

Henry Hazlitt and Ludwig von Mises speak to our recycling topic.

In Economics in One Lesson, Hazlitt teaches us that mandatory recycling considers only short-term benefits to a few groups — politicians, public relation consultants, environmental organizations, and waste-handling corporations — instead of looking at the longer-term effects of the policy for all groups. The negative consequence will be the squandering of human resources.

In conclusion, Mises also teaches us what to expect. Mises, in his great work, Human Action, does not tell us that recycling is a bad belief. He shows by example that mandatory recycling is an inappropriate means of caring about the environment. Waste is inescapable. Austrian economics leaves it to every person to decide whether your belief (what you think you know even if it isn’t so) is more important than the avoidance of the inevitable consequences of forced recycling policies: wasted natural resources and wasted human resources.

Floy Lilley [send her mail] is an adjunct faculty member at the Mises Institute. She was formerly with the University of Texas at Austin’s Chair of Free Enterprise, and an attorney-at-law in Texas and Florida.

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