A critical look at the economics of the 3 R's; Reduce,Reuse,Recycle
By Bernard Wainaina For the purpose of putting matters into the right perspective,I must disclose at the earliest opportunity in this article that I'm very passionate about environmental conservation. But I don't support blind environmental "activism". It is an unquestioned mantra, these days: recycling is good for the environment, and it is good for the economy to boot. It's like scripture: "And now these three remain: reduce, re-use, recycle. But the greatest of these is recycling." You'll get thrashed by environmental activists, nowadays,if you go against recycling programmes. At home, I get free rubbish bags for my recyclables, and if I can be bothered to fill them with some category of refuse, this bag will get picked up separately. It's all paid for by Local government rates and taxes. My local municipality tells me: "Each year [in our town] we throw away tonnes of waste a lot of it is hazardous." "Between 2000 and 2013, the amount of waste generated in [our] area increased by …% Most of what we throw away is either burnt in incinerators, or dumped into landfill sites. Both of these methods create environmental damage." Well, well. That sounds ominous, indeed. Would it not be informative to have an actual number there instead of a percentage? Or would any percentage sound sufficiently scary? "Land filling not only takes up more and more valuable land space, it also causes air, water and soil pollution, discharging carbon dioxide (CO 2) and methane (CH4) into the atmosphere and chemicals and pesticides into the earth and groundwater. This, in turn, is harmful to human health, as well as to plants and animals." Perhaps our municipality might prefer to construct a tip that isn't so harmful, by following the norms and standards for waste disposal by landfill set by the terms of the National Environmental Waste Management. These standards, updated from much older regulations, are explicitly designed to prevent environmental damage such as the leaching of harmful substances into groundwater. "We have to reverse this trend [of dumping refuse in landfills] if we are to avoid being submerged in rubbish(sic)." We wouldn't want to be "submerged in rubbish". But would we be,technically ? Suffice to say that this public relations guff by my Municipality offers the community exactly no hard information on this question. Not how much waste we produce, how much of it is hazardous, what the annual growth rate is, what kind of landfills we use, or what the cost of landfill disposal is. If you don't give me any data to work with, no amount of platitudes and assertions will convince me,or my neighbours to go to any trouble of changing behaviour in waste management. But that is not the only reason why I don't bother to go wholesale on recycle. It also isn't just because I like to take contrary positions on public opinion in as far as waste and environmental protection is concerned. I do, but never just for the sake of being controversial. I don't recycle,because I disbelieve many of the claims made for recycling when all the economics involved is taken into consideration. I think any undue effort I invest in recycling will ultimately make everyone, and even the environment, worse off. If you want me to recycle, pay me for it. Pay my neighbourhood residents for it. Even then, my own refuse is a pretty small source of recyclables because I believe more on the mantra of "reduce",rather than recycling. It makes a lot of sense to leave recycling to people who are prepared to spend their time on collecting recyclables in volume. The African Waste Pickers Association claims 600,000 people are employed, mostly in the informal sector, to do exactly that. Other estimates say the number may be far more. I'm quite happy to leave the separation of my refuse to people who can make an honest living out of it. My cynicism about recycling is not quite a blanket refusal, either. I appreciate that it makes sense to recycle aluminium and steel cans, and indeed, most other metals. Recycling may be worth it for some paper, and it is well established that the glass industry can re-use some bottles, and can use a modest amount of recycled glass. However, by the time we get to plastics, there is reason to get pretty sceptical about the value of recycling. So, where does the difference lie? There is an easy rule of thumb. If recycling something does not provide you with a net gain, it is not worth doing. By "net gain", I mean either paying a lower price than ordinary refuse collection and disposal costs,or earning money for it. However, go to any waste dump, or pass many a rubbish bin, and you'll see people who make a living collecting cans to return for recycling. Even on a fairly small scale, it can generate a modest income for an otherwise unemployed person. Many small companies have been established to consolidate these efforts and feed these cans back to manufacturers. For other metals, the same argument holds. There is an entire private industry dedicated to collecting, sorting, re-processing and re-supplying industry with scrap metal. For most metals, it makes great economic sense for manufacturers to melt down used metals, rather than pay for newly-mined materials. It makes so much sense, in fact, that it not only supports a profitable private industry, but also a thriving network of copper wire thieves and vandals who steal rail guards off our highways. They couldn't exist if recyclable metal did not attract a good price. I often get people nosing about my yard, asking if they can take away scrap wood or other refuse. Many will do so for free, because they can recycle it. If it costs me nothing, and provides me with the benefit of not having to haul it away myself, it makes perfect sense to recycle. Generally, you'll find that worthwhile forms of recycling will happen spontaneously, without any need for government regulations or subsidies. Conversely, if recovery rates are low, it is probable that the value of recycling over landfill dumping is questionable. The recovery rate for each category, therefore, is an indicator of the relative value of recycled materials: According to Engineering News, 80% of metals, 57% of paper, 32% of glass, 44% of waste oils, 18% of plastics, 11% of electronic waste, and 4% of tyres are recycled in Africa. Working out exactly what does and doesn't work isn't easy. If your recyclables are collected separately at the road side, for example, there is much more to consider than just the tariff paid for the collection service. Add the costs (if any) of water you use to rinse recyclables, the pollution generated by heating this water, and any detergents you might use. Add the not inconsiderable floor space taken up by multiple separate bins, the time it takes to separate trash rather than just bin it all, and the effort it takes to impose these rules on the rest of your household. Consider also that collecting recyclables requires a second refuse truck to do the rounds, which doubles the energy use of, and pollution caused by, the regular refuse collection service. Many recycling programmes don't collect, however. If you are expected to deliver recyclables to community collection points for glass, paper, plastic or metal, you should add to your cost estimate the fuel you expend driving to and from the collection point, the pollution that this generates, the wear and tear on your car, and the time taken for the trip. The glass manufacturing industry, for example, gains a benefit by using some percentage of recycled glass. It should be willing to pay for this,for example by offering to pay deposits for returned bottles. An excellent example is beer quart bottles, of which 99% are returned to retail outlets for re-use (and eventual recycling), thanks to a return deposit. In many cases, however, the industry does not pay for other glass bottle returns. This means they're either trying to exploit you by making you meet the collection costs, or they're admitting that it isn't worth the cost of collection to them. Either way, saving and separating bottles to drop off at collection points is wasteful if it is done at your own expense. It is not surprising that countries with high rates of recycling have had to resort to laws that enforce the practice on people. Nobody in their right mind would accept all such costs voluntarily. The true cost of recycling is often masked by government interventions, such as subsidies paid to recycling companies, regulations imposed on waste management companies, or rules enforced upon the general public. Conversely, it is worth noting the fact that landfill costs are probably under-priced. Many dump sites are badly managed and unimproved. This can have significant environmental consequences, if they are sited in sensitive areas. The latest regulations will raise the cost of landfill by about 50%, making recycling comparatively more attractive. This seems a reasonable price to pay for better environmental landfill management. None of these factors, for and against recycling, are ever included in simplistic promotional calculations about recycling initiatives, however. All they do is awe you with large, context-free numbers, or thumb-sucks about how much recycling saves. The extent to which this ignores costs, or depends on circumstances, is a complication the promoters of recycling would rather ignore. It is always just assumed, for example, that shifting the costs of sorting, collecting and transporting recyclables onto consumers just makes those costs disappear. All numbers I've seen about glass, metal or paper recycling, include only the economic value from the point of collection onwards. Take paper, for example. The Paper Recycling Associations claim among the reasons to recycle paper the fact that it will save local authorities many millions per year in collection and landfill costs. It will indeed do so, but these costs don't just vanish. Instead of the fairly efficient system of centralised collection and disposal, the cost of collection and transport is now shifted to millions of consumers, and the cost of landfill is replaced by commercial reprocessing. In total, the cost probably becomes higher, since a collection system that bypasses local dumps to reach a handful of paper factories is longer, more complex and more expensive. Cleaning and sorting used paper, pulping it, de-inking it, bleaching it, and reprocessing it into something low-grade like toilet paper, cardboard, insulation or newsprint, is not cheap. It uses toxic chemicals and a lot of energy, just like making new paper. There is considerable dispute over whether or not paper recycling produces a net gain. Is the lower demand for fresh wood, or the savings in water or energy, offset by the cost of collecting, transporting and cleaning used paper, for example? To some extent, probably yes, but that is almost certainly not true for all recyclable paper. Such questions are hard to answer, because the answer depends on a great number of factors, such as the type of paper mill, the cost of labour, and the price of industrial power and transportation fuel in the region we're interested in. A quick scan of a guidelines brochure for setting up a waste buy-back business, produced by the Institute of Waste Management,shows just how complex these issues really are. Luckily, a free market is much better at answering complex questions than activists with no economic stake in the game, or a centrally planned National Waste Management Strategy that seeks to impose the "reduce, re-use, recycle" mantra. Wouldn't it be wise to encourage reafforestation and sustainable tree harvests where private farms economically and sustainably grow more live trees that will also help to clean up the air,control soil erosion and earn carbon credits? The market's answer reflects all the complexities of a large optimisation problem with many variables. The market's collective knowledge is distilled into a price. No price is perfect, but it implicitly contains more information than any one person or organisation can know. Better yet, it is self- correcting, as new information becomes available. In the case of paper, paper companies will pay for waste paper when it is worth recycling, rather than to creating new paper from raw materials. More particularly, paper companies will voluntarily pay only for as much paper as they can economically collect and reprocess, rather than turning to raw materials. Aiming for higher and more expensive waste paper recovery rates ultimately has no value. In the absence of government mandates, relying on modern, sustainable forestry to produce raw paper can be quite competitive with recycling, both in terms of price and environmental costs and benefits. One often hears the argument that recycling creates jobs. Of course it does. According to the aforementioned Paper Recycling Association, recycling work employs some 100,000 people. However, while job creation is a welcome side- effect of economic activity, it is not a justification. If it were, one could improve the economy simply by setting people to work digging holes and filling them back up again and paying them for it. And if that didn't work well enough, one could issue them with tablespoons instead of spades. Perhaps make them tend lawns with nail clippers instead of petrol-driven grass trimmers. That would reduce pollution and create more jobs! In other words,paying people to work is only good for the economy if that work actually has value. In the recycling industry, that value is too often blindly assumed. The same argument is true for profits. That the waste management industry is worth $1 trillion globally, is all very well, but revenue to companies implies a commensurate cost to the public. How much of that cost is justifiable in terms of the service that is delivered? Is the service provided in the most efficient way possible? Producer revenue is justifiable on its own merits if customers voluntarily spend that money. When there is a significant degree of government interference in the market, or customers are required by law to pay for the service, corporate revenue can never be its own justification. What about landfills? Is it true, as my municipality warns me, that we'll soon be buried under refuse? Globally, about 1.6 billion tonnes of waste is generated every year. At current growth rates (which is a generous assumption, given modern trends in waste processing technology), that means the world will produce a total of 75 billion tonnes of waste between now and 2100. Given that my country,Kenya, produced about 86 million tonnes of waste in 2011, and assuming that we match global growth rates, about 2.5 billion tonnes of that waste will be produced in Kenya. (This seems a bit high to me, but let's keep erring on the conservative side.) At the moment, about 90% of all waste in Kenya gets disposed of in landfills. Let's assume this rate also remains constant until the end of the century. Refuse weighs between 0.15 t/m3 and 0.6 t/m3, depending on what's in it. Let's average, round up, and use a value of 0.4 t/m3. That means we'll produce 52.5 billion cubic metres of waste by 2100. Divide by 1,000 three times, and we get 52.5 cubic kilometres. At a depth of 100m, this gives us a landfill of just under 23km to a side. This sounds like a lot, and if we dump it all in one spot it sure would look large, but that accounts for only 0.04% of Kenya's surface area. Is 0.04%, distributed among suitable, environmentally safe and socially acceptable locations, really an unacceptably high price to pay for the rest of this century's waste? I think not. (Credit for this argument goes to Bjørn Lomborg, who did a similar calculation for the US in his 2001 book, The Sceptical Environmentalist.) We're not running out of landfill space, and we're not running out of resources either. But the gist of the matter is that we are laying out the wrong and expensive approach to managing our environment and other natural resources. Better yet, the scarcity or availability of both is an important factor in what consumers ultimately see: a price. If there is value in recycling a particular material, manufacturers will pay for it. If the price for recycling is right, entrepreneurs will create an industry around it. If, conversely, we need laws to make recycling happen, then it implicitly is a losing proposition, and a well-managed landfill would be preferable. Otherwise, society pays more for the service than it's worth. Doing so appears to create jobs and profits, but since the jobs are unproductive, and the profits do not reflect a positive contribution to the economy, it ultimately leaves everyone poorer. Crunching the numbers is more than most people will do, when it comes to recycling. Besides,useful data is surprisingly contradictory,incomplete and hard to find. This is why I used hard data only occasionally in this post, and relied instead on a mechanism that doesn't require perfect information: the price mechanism. It performs magic in the absence of complete information. It tells us the best estimate of many experts of the true value of a product or service. It isn't always right, but it is in principle better at making such an estimate than any single, centralised analysis could do. This is why we don't really have to crunch any numbers. A rule of thumb is quite enough: if you want people to recycle, pay them. If you do, without any regulatory enforcement, subsidies or other market-distorting interventions, what you're doing probably has value. If you can't pay people, or worse, you expect them to cough up for a so- called recycling service, what you're doing makes everyone worse off. The mantra of "reduce, re-use, recycle" sounds cute, but it is far from universally true. On the contrary: it often turns out to be better to simply dump refuse in a landfill. Bernard Wainaina is an Independent Agribusiness Advisor and CEO at Profarms Consultants®,Nairobi,Kenya. He mainly works with Agribusiness Youth Groups in Eastern African Region.