Monday, June 6, 2016

Market forces and recycling

Here is an interesting article from CBS News on the impact of low gas prices on recycling. It directly relates to the 'big picture' connections between extraction and recycling. Given that petroleum extraction and use imposes negative costs on society and recycling can be viewed as providing positive external benefits, is there a potential policy solution here? 

Here is a story from the Wall Street Journal on an unintended negative consequence of single-stream recycling (and an argument for deposit-refund systems for glass bottles).

Here is a thought-provoking article from the New York Times on the subject of recycling, which challenges much of the conventional wisdom that we take for granted. Read it all the way to the end for a policy suggestion ala Pigou. 


Austin McGrayne said...

Reading through the 1st and 3rd articles (the 2nd article was only available to subscribers) I must say the topic of recycling is much gloomier to me now. In terms of the first article, all of it makes sense why recycling companies would go bankrupt when the price of oil drops. It simply would not make sense for the companies to recycle material when they are paying more for the process of recycling then they are recieving for selling the recycled material back or reusing it themselves. So to answer the first question and segue into the 3rd article, yes there is a potential policy solution, but to me it could only be successful temporarily (until we finally do hit that natural resource wall, which could be very far in the future, or within the next 100 years).

I'd like to speak more thoroughly on the 3rd article by Tierney because he made a lot of good points. To me the article can be summed up with his comparison of recycling to religious practices.

"It is less an ethical activity than a religious ritual, like the ones performed by Catholics to obtain indulgences for their sins.
Religious rituals don’t need any practical justification for the believers who perform them voluntarily. But many recyclers want more than just the freedom to practice their religion. They want to make these rituals mandatory for everyone else, too, with stiff fines for sinners who don’t sort properly."

This section really hit home for me because he captures the blindness of recycling into a relatable analogy. Earlier in the article Tierney lists many facts as to why recycling (in the way we currently do, especially in the U.S.) is not necessarily beneficial to our environment or economies. And there are 2 main problems here;
our extreme reliance on oil (as the first article eluded to, when oil prices are to low, no money can be made on recycling)
human innovation is surpassing the need to recycle (at this point in time)
so when the choice to recycle comes up for Natural Resource extraction businesses, the material is still there so theres no need to recycle old material, they just extract more new material (and if oil's cheap its cheaper to extract). And for waste management business it's cheaper for them to just put old material into a landfill because theres still space out there.

I think the main problem here is that we are extracting to much, not using it efficiently and when we're finally done with it we don't know how to dispose of it efficiently. That's pretty easily said, and if all those things were done correctly our environment would be much better. However the solution to such a problem is much more complicated then saying "be more efficient"

I do think Dr. Kinnaman's policy solution has some merit to it; it lends a good starting spot for local municipalities so they can start paying attention to what their recycling and what their putting in the landfill. Hopefully over time the cities can find an amount of material to be recycled/landfilled as to create the largest net benefit to the environment and not just economy.

Hannah Imhoff said...

The third article about recycling really connected with me because I always thought that recycling was a complete waste of time and I always felt bad about it because people would say I was "killing the environment" and now reading that I might not be has made me feel like a better human being. The paragraph about it being more expensive to recycle versus not actually got me thinking. I never really noticed until that was mentioned just how expensive it is to recycle. If you go to Wal-Mart and look at all the organic products and the products that are made from recycled materials, they're always about double the price of another product that isn't made from these recycled materials. It makes me wonder if there is a correlation between the high charge of the product and the cost to recycle the materials to make the product. The solution to subsidize the recycling of metal and imposing the $15 tax on each ton of trash that goes to the landfill would be an excellent idea. If you want to recycle, then you pay for it to happen. I think this tax would help in a lot of different areas.

Nick Hendrix said...

I've never really heard of a resource or market that was negatively affected by oil such as the recycling business is. You would think that any commerical/industrial business such as WM or state-run dumps would make larger profits when they had to pay less for oil and gas. But it makes sense that low oil prices means plastic is created for cheaper as well. But still, I would never think that oil would get low enough to make it more profitable to just make new plastic versus recycle old plastic. One thing that I did not see in the article is what happens to excess plastic that is decided to be too costly to recycle? Is it burned? Buried? Shipped somewhere else? Also, at what ballpark dollar amount per barrel of oil is it considered by recycling companies to be unprofitable to recycle plastic?

Evan Schillmoller said...

Nick, I was thinking the same thing as I read through the article. It's interesting to hear about a company actually earning less when oil prices drop, other than the oil companies themselves, of course. I would think that considering the different types of plastics and the amount of materials that go into each (obviously it takes more plastic to make a gallon jug than a plastic bag) that it would be very difficult to determine how much is too much or too little when it comes to profitability, especially considering that waste management companies can't really predict when they're going to get enough plastic in turn a profit. Is it possible that they allow for the plastics to build up and once they have enough to turn a profit, they begin the recycling process? I'm not sure. I don't think it's burned, though, as that would release huge amounts of toxins into the air. Plastics that aren't recycled probably just end up sitting around for a couple thousand years until they finally break down.

While I think that recycling is largely a based on a person's concern for the environment and the desire to not be wasteful (at least in my personal experience) rather than concern for the fiscally efficient ways of handling waste. I do agree that a tax on trash would be a great strategy in forcing people to be more aware of what they throw away, as well as help curb some of the costs associated with recycling.

Nick Hendrix said...


Agreed. I'm also thinking about the mineral extraction lessons. When are you mining too slow? Too fast? What is the R-Percent? Similarly, I am sure that these waste management companies face the same questions. You mentioned it is difficult for WMC's to specifically know how much trash will come in on any given day or week. I am sure there are monthly and yearly cycles where less or more trash comes in (maybe lots of trash on holidays, for example). But do these companies let their trash build up, like you said, so they can create "artificial" scarcity before they process the plastics? I wonder if oil companies and WMC's ever work together in order to maximize profits?

Nathan Smith said...

When reading the article I was extremely surprised about how closely oil prices and recycling are related. I never realized it but it does seem surprising now on how recycling centers are able to stay in business if it costs them more to recycle than they even get for the material after it is recycled in something usable. A potential policy solution I think could go after what Hannah said about taxing material that is thrown away instead of recycled. This could help in subsidizing the recycling centers in order for them to continue to operate without a loss of money in the process.

Haley Larabee said...

Austin, I would have to agree that recycling does seem more dismal to me now after reading the first and third articles. I guess I had a slight idea that recycling materials is very costly, but to realize that in some cases it is cheaper to bury our trash versus recycle it was surprising. I also didn't realize that there was a connection between lower oil prices (meaning it is cheap to make plastics) and costly recycling.

Also, as Nick mentioned I would like to know more about what is happening to the materials that are too costly to recycle. There are a few companies that will take "donations" of certain recycable materials and use them for new projects; there is one that collects wrappers of granola bars (and similar) and turns them into park benches. I wonder if the "non-recycable" materials may be used for something as in this situation?

Marc Monace said...

I think the perfect policy position would be to simply mandate recycling by law. Our politicians don't seem to have the political will to do so but this is a tried and true way to get society on board of doing the right thing.