Markets Better than Mandates at Determining Recycling Levels

Markets Better than Mandates at Determining Recycling Levels
August 1, 1997



The popular debate over whether "trash is treasure" or "recycling is garbage" misses the point, according to a new study by the Reason Public Policy Institute.

"We think the debate misses the fundamental issue," says Lynn Scarlett, principal author of Packaging, Recycling, and Solid Waste and executive director of the Reason Public Policy Institute, which issued the report. "The question is not whether recycling is beneficial (it can be) or wasteful (it sometimes is). The question is whether government mandates are a good way to distinguish the one from the other."

As the price paid for recyclables has fallen, many legislators and recycling advocates have begun pushing for new recycling legislation. Scarlett warns against such an approach. "The evidence suggests that where recycling makes sense, the market is fostering recycling," says Scarlett.

The Reason study finds that recycling can often produce benefits for society. For example, under best-case conditions, making glass packaging with 30 percent recycled content can yield average benefits of $4/ton over making glass packaging with virgin material. Making paper packaging with 30 percent recycled content can yield benefits of $50/ton. "These benefits are not surprising," say report coauthors Richard McCann and Robert Anex, who developed the mathematical model used in the study. "Many packaging manufacturers have used recycled-content materials at these levels without government intervention."

But as conditions become less favorable to the use of recycled materials, the cost of doing so rises, resulting in net social losses. For instance, under worst-case conditions, requiring 30 percent recycled content in all glass packaging can cost, on average, $119/ton more than using virgin material. Mandating 30 percent recycled content in all paper packaging can increase costs by an average of $80/ton. The point, says Scarlett, is that "Inflexible, one-size-fits-all government mandates are unlikely to reflect the complexity of the real world."

The study also examines the real-world implementation of two programs designed to stimulate recycling. The first is Germany's manufacturer "take-back" system, which required industry to establish a special collection-and-recycling system for consumer packaging. The second is Florida's "advance disposal fee" program, a tax on consumer packaging designed to increase recycling and pay disposal costs. "Mandates or markets?" observes co-author and Reason policy analyst Alexander Volokh, is the fundamental question behind recycling debates. "The real-world track record of take-back systems and advanced disposal fees is that mandates are costly, inflexible, and just don't work as well as markets."

The study concludes that efforts to force specific recycling levels--whether through recycled-content mandates, taxes on virgin materials, advance disposal fees, or manufacturer take-back programs--will be arbitrary and counterproductive. "We hope that this report is not used to claim that recycling is 'good' or 'bad,' a line of debate that we believe is misleading," says Scarlett.

The Reason Public Policy Institute is a national think tank headquartered in Los Angeles. Packaging, Recycling, and Solid Waste is available for $30 (plus $1.50 shipping and handling). Call 310/391-2245 or visit the Reason web site at http://www.reason.org.