Why
has it been harder to successfully recycle some materials extracted from MSW
than others? What may be some of the problems associated with full and
sustained recycling of some plastics extracted from MSW? While this has been
discussed at some length above in terms of the relative importance of any given
input in the overall costs of production, one more observation is in order – an
observation having to do with supply elasticity.
In
both the EPA and OTA reports noted in Chapter II, great attention was given to
the need for government to try, through tax incentives or other forms of fiscal
influence, to increase the demand for goods made from secondary materials. OTA
argued that if demand could be increased, the U.S. could achieve a 10 percent
recycling rate for plastic containers and packaging by the mid-1990s.
In
addition, if recycled plastic products could capture a significant share of the
treated lumber market, plastics could achieve a 25 to 40 percent recycling rate
over the next decade. Moreover, OTA boldly projected that PET recycling could
reach a level of 300,000 to 350,000 tons, or at least 50 percent of all PET
beverage bottles, by 1993. If this were accomplished, the report suggested,
fully recycled PET could replace up to 4 percent of virgin PET sales. Actions
to increase demand could take 330,000 tons of HDPE, almost 6 percent of virgin
HDPE sales.
[95]
The
assumption in the OTA report is that markets for paper, glass, and aluminum
would grow if special financial incentives were given to increasing the demand
for secondary materials products in general. Given the vast amounts of plastic
products in the economy, and given the current very low rate of plastics
recycling, the current conventional government view is that all that is
retarding a boom in plastics recycling is demand. What is virtually always
ignored in this argument is the fact that no matter how much plastic product
there may be in the economy, plastic does not represent anywhere near the share
of MSW that it does of consumer products in general.
Clearly
any thing which might increase the demand for secondary material would, other
things equal, increase the quantity of secondary material supplied. (Remember
that until the quantity of secondary material supplied rises, the quantity of
material sent to landfills or incinerators cannot fall.) But what increase in
demand might be required to substantially increase the quantity of secondary
material supplied?
The
answer is, demand for secondary materials would have to increase substantially
to pull such materials away from landfills and/or incinerators in volumes
sufficient to make a real dent in the amount of waste being landfilled or
burned.
Suppose
special financial incentives could increase the demand for secondary plastic to
make, say, "Plastic Lumber". In one of its reports focusing on plastics,
EPA noted that given the nature of plastics products most likely to be in MSW,
the system for collecting and shipping MSW plastics, and the prevailing
technologies for using this material, plastic lumber may initially have a sales
price 50 to 300 percent higher than for comparable wood items.
[96]
There
can be no doubt that plastic lumber would last longer than ordinary wood. But
with that price difference, it won't compete with wood. Why? Because all people have what
economists call a "positive rate of time discount", which is to say,
a dollar in hand is worth more than a dollar to be received later.
If
plastic lumber cost, say, 10 percent more than wood, it might sell. But not if
it cost 50 to 300 percent more. That is reality. Anyone who doubts that should
ask why people will pass up a long-life light bulb at $1.59 in favor of a
normal-life light bulb at 50 cents. They do so because the $1.09 difference has
immediate use now in other things which can be bought for money. Most people
act as if they would rather keep the $1.09 difference to spend on other things
now rather than enjoy not having to buy another light bulb for a year. With a
price difference in the range expected for plastic wood compared to ordinary
wood, the long-life advantage of the former will not be sufficient to make it a
viable competitive product.
The
economic lesson is this: so long as technologies for the whole recycling
process are such that capital outlays will have to be made to collect, store,
process, and ship materials; and so long as capital outlays for new
technologies which use secondary materials are still in their infancy in some
manufacturing procedures (current manufacturing technologies – including raw
materials shipping technologies – are fully geared for virgin material) both
the supply and demand curves for secondary materials may be expected to be
highly, though not completely, price inelastic.
Indeed,
the fact that every observer has noted the price volatility for secondary
materials is clear evidence of the price inelasticity of both quantity supplied
and quantity demanded in secondary materials markets. Price volatility is the
trade mark of highly price-inelastic markets.
With
inelasticity in the system, any increase in demand, even a significant demand
increase generated by preferential government subsidies, will put significant
upward pressure on secondary material prices, with very little increase in the
quantity offered in response to that rising price. It is simply the case that
the whole system of source-separating, collecting, processing, and shipping
recyclable materials from the MSW to the point where they might be used is
still far too costly relative to the cost of bringing specially produced virgin
material to industries which could, theoretically, use one or the other.
The
moral of the story from careful economic analysis is that the price inelastic
nature of the supply of secondary materials, if not also the short-run demand
function for such materials, will force prices for secondary materials into a
virtually non-competitive price range with virgin materials long before
technologies are adopted to use secondary materials.
One
very important reason for the huge price difference between "plastic
lumber" and lumber from conventional sources – a price difference noted
above – is the simple fact that the cost of getting plastic from primary users
and waste disposers is high. The kinds of plastics found in MSW must be
collected, separated, cleaned, baled, and shipped to some point where, after
further processing, it can stand side-by-side against virgin resins. In order
to cover these costs, the price obtained by those who conduct all these
operations must be as high, if not higher, than what virgin materials cost.
That is part of what is meant by price-inelastic supply – only a high offer
price from those who intend to manufacture new products from secondary material
will induce the measurable increases in quantity of secondary material supplied
to assure final manufacturing users the continuing volume of raw materials they
need.
Essentially
the same problem exists for virtually all other post-consumer articles in MSW,
including, surprisingly, aluminum. Aluminum companies, one should remember,
were sending their own trucks to collect cans and paying individuals and groups
for all the cans they could deliver long before state deposit laws began to add
to supply. What state deposit laws have done is make it possible for them to
access supplies at somewhat lower costs to themselves. Yet, even with this
boost to supply, they still have not been able to obtain all they would like to
have. Quantity supplied has not been sufficiently responsive to demand – even
when augmented by deposit laws.
Clearly,
passing laws to force households to engage in source separation is not going to
automatically result in more recycling when recycling is properly understood.
Indeed, the evidence from both New Jersey's statewide mandatory system, and
from Seattle, Washington's mandatory curb-side collection system – a system
which has not yet yielded cost savings sufficient to compete with
landfilling
[97] – strongly suggests that laws which ignore markets cannot yield
true recycling on the scale envisioned by those who seem to believe that all
that's needed is the right set of laws.
There's
got to be a lesson here. Certainly laws can change behavior. After all, no
household which is not source separating either at the curb or at the recycling
center wants to pay a fine and no manufacturer wants to pass-up government
subsidies for using secondary materials if he thinks his competitor is going to
take one. Pass a law and behavior will change.
But
it is not only behavior which will change once laws are passed. The cost of
handling solid waste will also change. All government programs have their own
"overhead" costs and those costs must, if we are going to do honest
accounting, be counted as part of the cost of handling MSW through government
mandate. However, the lesson from laws already on the books is that all the
laws in the world will not pull MSW into the secondary materials markets so
that real recycling can occur if the market is not yet ready to use secondary
materials in place of virgin materials.