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The Economics of Recycling

The largest aluminum/copper AC core I ever baled!

The largest aluminum/copper AC core I ever baled!

John Tierney has an interesting op-ed piece in the New York Times on recycling:

Despite decades of exhortations and mandates, it’s still typically more expensive for municipalities to recycle household waste than to send it to a landfill.

Much of what Mr. Tierney says is spot on. It makes far more sense–both for the environment and economically–to recycle metals and paper than yard trimmings, plastic bottles and food waste.

Take glass bottles, for example. They are, essentially, sand that is rock-hard and in the shape of a container. To bury a glass bottle in a landfill isn’t much different than burying a rock in the earth. But recycling glass is costly. Just hauling the heavy material to recycling plants burns lots of fuel, as does crushing it to make it easier to transport. So, two cheers to Mr. Tierney for pointing out that recycling isn’t always a matter of “more is better for the environment.”

However, I take issue with two points, one from the perspective of an economics teacher, and one from the perspective of someone who worked in the recycling industry.

First:

The environmental benefits of recycling come chiefly from reducing the need to manufacture new products — less mining, drilling and logging. But that’s not so appealing to the workers in those industries and to the communities that have accepted the environmental trade-offs that come with those jobs. (emphasis mine)

Economically, this shouldn’t matter. Recycling aluminum cans, for example, is economically viable–it will happen in a free market economy without government mandates or subsidies. That being true, it’s better for some jobs of bauxite miners to go away. Those miners can be put to more productive use in other industries. “More mining jobs” is a terrible economic justification for less recycling.*

Second:

As a business, recycling is on the wrong side of two long-term global economic trends….Recyclers have tried to improve the economics by automating the sorting process, but they’ve been frustrated by politicians eager to increase recycling rates by adding new materials of little value.

As a business, recyclers know very well how to substitute capital for labor to maximize profits. They don’t take low value materials because they are foisted on them by politicians. Rather, local governments, knowing some materials are much less valuable than others, give financial incentives to recycling companies to accept these low value materials. Recycling companies that only want to accept metal or paper are free to do so–and in the absence of government subsidy–will usually do just that.

So, blame the politicians, but plenty of recyclers are happy to take government subsidies to accept the less valuable stuff.

Lastly, if you want to know more about this fascinating industry, check out Adam Minter’s always interesting Shanghai Scrap. (I just saw that he also posted in response to Tierney’s article. Haven’t read it yet.)

*That said, it’s true that if government mandates and subsidies are causing people to recycle despite it being economically more efficient to make new products or extract additional raw materials, then job losses in those industries are part of the hidden costs of government interference in recycling markets.

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