The Economics of Collecting Recyclables

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The Economics of Collecting Recyclables Powered By Docstoc
					                                                                                                    by Kelly Philipp

                                                                                                             hat are the costs
                                                                                                              and benefits of
                                                                                                    drop-off recycling versus
                                                                                                    curbside recycling

For two decades, communities throughout          would be a problem if not for market alter-            developed relative to capital constraints and
North America have been praised for imple-       natives .                                              anticipated program life cycles.
menting curbside recycling programs and             By examining the economics of curbside
applauded for achieving unprecedented mate-      and depot recycling and mapping the mar-                Calgary pilot study
rial diversion rates. But in 1996, the market    ginal benefit over the marginal cost for each          I n December of 1990. the City of Calgary.
for recyclable commodities rolled into a         ton diverted, municipalities can determine the         Alberta initiated a pilot project to evaluate
downward cycle. This created a sizable gap       most efficient level of recycling for each             both curbside and depot collection in paral-
between recovery revenue and collection          method. Lsing this general frame\vork. pol-            lel. The materials collected excluded those
costs, forcing proponents to understand the      icy makers then can decide how to improve              recovered through a comprehensive bottle
viability of their award-winning programs in     local recycling practices kvhile managing eco-         deposit system equivalent to 125 pounds per
relation to a volatile market fo: recyclables.   nomic resources and maximizins communi-                household per year.
    To exacerbate the problem, subsidy pro-      ty bene tits.                                              Curbside collection was achieved using a
grams for recycling projects in many cases                                                              Labrie mick and an operator who was instruct-
were eliminated or reduced substantially.        Curbside versus drop-off                               ed to leave poor quality materials in the bin.
Original subsidy programs were intended to       comparison                                             Depot storage was achieved using Haul-All’s
help curbside recycling get off the ground;      For a municipal recyclin,v p r o p i n . collect-      Hyd-A-Way containers. ranging in size from
once rolling, it was anticipated that market     ing at the curb is an obvious solution since it        four to six cubic yards. Customized open-
inertia would take over. making programs         mirrors the techniques used to collect waste           ings encouraged the correct separation of
sustainable through revenue generation from      in most urban and suburban centtrs in North            material. and collection was achieved using
commodities collected. No one expected the       America.                                               a Haul-All side-loading collection vehicle.
market downturn to be so extreme.                   By contrast, depot collection requires indi-            The pilot project lasted 17 months, after
    While support for recycling remains strong   viduals to drop off recyclables at a central           which the final report was filed with some
in terms of natural resource benefits, ques-     location. Much variety has developrd in terms          interesting results (see Table 1).
tions are surfacing about the economic efti-     of site design. but the concept is basically the           Results from the pilot project established
ciency of curbside collection as subsidies       same: when containers are f u l l or during            a benchmark for material quality, participa-
evaporate. the market for recyclubles remains    scheduled pickups. a collection \,chicle serv-         tion rates versus diversion levels, and the cost
lower than peak historical levels. and light-    ices the site and transfers material to a proc-        per ton for each program. Although curbside
weight. low-revenue plastics replace other       essing center or directly to market. Differ-           collection had a higher participation rate, the
packaging forms. This is difficult for many      ences in site design and sophistic:ition have          depot program achieved ;I high aggregate lev-
communities to accept when curbside col-
lection has been hailed as the only method       This article is a revision of research undertaken by Kelly Philipp us an environinentd economics stu-
that can meet diversion expectations. This       dent at the Universit!. of letlibridge \.Alberta). He c m be reached at (e-muill.
< I of ili\ ersion due to the contrih~tion the          of
~nulti-t"iinil~       \cgment ;ind goocl uublic acccp-                                    Summar! of pilot project rcsults. Calgar?. .-llherta
  ;,rice, The f i n d repot-t concluded that [ h i \

,>:llt~ciil;ir ;7ot program coulc! xhieve ccpiL -                                           Curhside           Depot
                                                                     Households              I I. I X P       34.67j:k:::        '!'Single-family dwellings only.
,,lrni <ti\ ervon t o curbside at a traction of the                                                                               ._ ,.
co\t. U L i s ~ i0l1 1 thebe I - c s u ~ ~C. : i l g ~ yelect-
                                          \                                                                                      +--Allsingle- and multi-family
cci to implement a fiill-~calt.         t!epot program.                                                                                 dwellings.
      - r h p i l o t not onl> pro\ ided Calgary ith
            ~                                                        Diversion
 its jite and equipment requirements. i t iliw                        Avg. monthly tonnes         120               295          Alberta has a comprehensive bottle
 h u h been valuable for htudying the ectmom-                                                                                      deposit program.
ics of curbside and depot recycling.                                 costs
                                                                      Total ($Cn)          $454.865         $349,106
The marginal benefit of recycling                                     Per tonne ($Cn)          $380             $118             Based on collection totals.
111tertii5 of   economics, the most efficient lev-
~1 of recycling is the point at which the mar-
.. benefit of recycling the next ton equals
the marginal cost. In terms ofrecycling. mar-
:in31 benefits include:
                                                                     Public acceptance             88%          -   85%          Based on participants surveyed.
                                                                     Source: Pilot Residential Recycling Program, Final Report. Ciw of Calgary, 1992.                      I
5 extended landfill life as mexured by tip-                      1      Other economic costs. borne by individ-           will net the most benefits. it is helpful to pro-
     ping fees saved                                                 ual participants of a recycling program include      duce a graph (see Figure I ). The cost curves
a the diminished use of non-renewable                                the cost of sorting and cleaning recyclables.        are based on data from the Calgary pilot that
     resources as measured by the market val-                        as well as walking to the curb or driving to         show depot cost being lower than curbside
      :,: d diverted material.                                       the depot to drop off recyclables. Although          cost o n ; per-ton basis. Therefore. the mar-

   : A gna1 costs include:                                           tangible in terms of economics. measuring            ginal cost curve for depot recycling will be
     ihe increase in operating costs for every                       these other costs is challenging and may not         lower.
     activity associated with collecting addi-                       change the relative shape o f a cost curve.             Also. a typical marginal cost curve will          ,

     tional tonnage as measured by the cost of                          Clearly. if the marginal cost of recycling        slope down before sloping up ( 'U'      shaped).
     labor and operating overhead (fuel, main-                       the next ton is greater than the benefit. the        This represents a decrease in costs (before
     tenance:e tc.)                                                  costs outweigh the benefits. and a communi-          increasing) from economies of scale on labor
     the increased cost of capital (containers,                      ty will be worse off by recycling additional         and equipment. However. the curbside cost
     bins. \chicles. etc.) required to divert addi-                  volumes.                                             curve will slope up at ;I faster rate relative to
     iioll;ll tonnage.                                                  To determine which method of recycling            the depot curve due to:

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   the increased labor component inherent from labor-inten-
   sive operations in curbside collection                                                            Conceptual illustration of cost-benefit analysis ( 1)
   efficiencies from compacting collection vehicles serv-
   ing depots.
   Since depot collection does not require as much labor or                               *Marginal cost = marginal benefit. This i.; the level
capital for every additional ton collected (Le., the drop-off                               of recycling that maximizes community benefits.
containers do not cost more with higher rates of utilization,
and the added cost of fuel to run the trucks is minimal), the
marginal cost curve of the depot systems will slope up at a
slower rate than that for curbside collection. Furthermore,
depots can gain efficiencies from on-board compaction
which further increases the gap between curbside and depot
costs. As a result, the marginal cost of curbside collection
increases at a faster rate than depot collection.

Economic summary
Figure 1 shows that for any initial and every additional ton
diverted, the depot system used in Calgary costs less than                                           Additional tons         1
curbside. Since the depot curve is lower than the curbside                                           diverted at depot       I

curve, the marginal benefit line of recycling will intersect                          ~    ~~~
                                                                                                          !-------I                ~~~~

the curbside curve before the depot curve. In other words,                                        Tons diverted
depot collection will allow higher levels of recycling before         [ 1) Based on data from the Calgary pilot, 1992.
the activity becomes a net drain to community coffers.                Source: Philipp, Kelly, The Economic Costs arid BerieJirs o Curbside LIS. Depot
   This simple applicationof economics shows that whether                      Recvclbiq. 1997.
vour obiective is maximizing diversion or running a cost-
kfectivi recycling program,a well implemented drop-off program                  uses curbside recycling collection, whereas Calgary uses a depot recy-
can yield the best economic results.                                            cling system, as described above. (Edmonton currently is phasing
                                                                                out the bin program in favor of a bag program. to be enforced Janu-
A tale of two cities                                                            ary 2000.) With all of their similarities, including a comprehensive
To verify these results, I've extended this analysis to full-scale recy-        beverage container deposit system, it is an ideal setting for compar-
cling programs. Alberta is home to two cities, each similar in size             ing the advantages of curbside and drop-off methods.
and demographics, with one very noticeable difference: Edmonton                    Results from Edmonton's mature curbside program versus Cal-

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                                                                   Circle 64 on RR service card
     Resoiirce Recycling November 1999
    .ar!,‘\ depot prc’grani (still in ;in irnpletnen-

           .     ,
    r;1[!i>n/<?rot%\ qt:igc~iii I W S ;ire shown in
      r.!l+ 3.
           TI:i<~     <oitip;u-i\on \ c.rifie\ :hat ckpot wl-
    i < c t i o i i c x i ;ichie\:e ~ u b ~ t : i t i t i ; i diversion.
                                                                                                       ’                 Edmonton
                                                                                                           Curhside Staffed deuots
       1,itiioii;ti :hc Edmonton iiiiiture u u r b d e and                  Population served              4 ? 0 . 4 ~1~
                                                                                                                     ( J 7 15.600
    i:qx)t ccr1lclc:ion proyxn di\rsrted I6 pcrient                         Program recovery (2)
    more iiiate:lal on ;I per-housclliold hahis. this                        Tons                   21.381                     5,356             26.737             30.560 ( 3J
    bericfit n i a y not justif) the 286 percent                             Lbs./person/year       10 1.72                    49.68              s4. 13              71.60
    incre:ist. in cost.                                                      Lbs./hh/year (4)       258.37                    126.19             2 1-7.69           1 s4.40
           Consider that Calgary currently invests a                        Program costs (5)
    nlcp: Z.5 percent o f its budset in community                             Annual cost ($Cn) $3,689,400 (6)             $990.000 (7) $4,673.000               $934,000 (8)
    ~ ~ W : I I T : I A S programs. Expanding Calgary‘s                       Cost per ton ($Cn)   $172.56                  $ I 84.84      $174.78                 $45.24
    & p : i :-,rogramvia increased locations. pro-
    moticrti. awareness and education. could                                ( I ) All single-familyand 10,oOO multi-family residents.
                                                                            (2) Only materials common to both cities’ programs, including newspapers, magazines, corrugated
    L1chic.w better diversion results than the curb-
                                                                                  boxes, mixed paper, glass bottles and metals. Both programs have low contamination levels.
    side example without the same increase in                               (3) Includes recovery of 9,900 tons from a privately run newspaper depot system.
    costs.                                                                  (4) With 2.54 persons per household ( h . Excludes bottle deposit system recovery of 125 Ibs./hh/year,
           These results are not unique to areas with                            including aluminum.
    ;I beveruse container deposit system. In 1998.                          (5) Program costs net of revenue.
    the Fundy Region Solid Waste Commission                                 (6) Excludes costs of materials not common to b t programs (5.4 percent by weight).
     i l l U.?wBrunswick ran a detailed pilot study                         (7) Excludes costs of materials not common to both programs (IO percent by weight).
     .I      xncluded that a depot program using                            (8) Excludes costs of private newspaper depots.
                                                                            Sources: “Cities on differentrecyclingpatlzs. ” Calgary Herald, February I, 1998: Wyn van der Schee,
     c p y ‘ s equipment system could achieve                                        City of Calgary Recycling Coordinator: Connie Boyce, City of Edmonton Recycling Coor-
     quivalent diversion to curbside at a fraction                                     dinator.
    of the cost, with good public acceptance. In
     fact, the general shape ofthe conceptual mar-
     ginal cost curves above were confirmed. as                            a regional depot pro,oram.                            ton provides more protection from market
     the study ched a lower labor cost per ton for                            For a community that is considering the            cycles. Higher levels of diversion are
    the depot program due to lower contamina-                              establishment o f a recycling program. using          achieved before the cost of rec! cling out-
    Lion rates and sorting requirements. As a                              a well-implemented depot collection pro-              weighs the benefits. Cost\ for in\ esrments
      - ~ \ ~ t lthe Regional Authority implemented
                   t.                                                      gram has its advantages. A lower cost per             in education and awareness prosrams are

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                             Circle 294 on RK service card                                                                     Circle 195 on RR service card
justified more easily. Higher aggregate lev-                   Customized openings encourage the cor-               ly have focused o n in-home awareness pro-
els of diversion come from a broader spec-                     rect separation of materials. Source sep-            grams ( i t . . curbside collection) to stimulate
trum of users. Depot collection provides                       aration is one of the keys to operating eff-         diversion levels. However. as markets cycle
service to most dwelling types, including                      ciency. Customized openings can opti-                and citizens become ever more em-minded.
high-density. It offers user flexibility and                   mize the associated benefits.                        other methods used to collect recyclables must
eliminates the limiting factors of curbside                    Modular design. Storage capacity is the              be given a second thought. Economic analy-
collection (size of bin. fixed collection sched-               largest capital constraint for a depot pro-          sis and practical experience make a strong
ule, and contamination from mixed materi-                      gram. A modular design allows optimal                case for depot recycling as a viable. and pos-
al and weather conditions).                                    utilization of storage capacity while min-           sibly preferred, alternative. Indeed. how we
   However, there is more to establishing a                    imizing host space utilization.                      choose to recycle is as important to eco-
successful depot program than placing con-                     Contracted service with control. Using               sustainability as recycling itself.          RFt
tainers. Many communitiesare giving depots                     city-owned containers, a municipality can
a second look, with special attention to the                   invite competitive bidding from the pri-
following:                                                     vate sector without yielding control of the
   Aesthetic containers that are distinctive                   program. This can provide the best blend
    from a trash can. Containers must be                       of service quality with cost-effective col-
    placed in high-profile/easy access loca-                   lection while maintaining a level of con-
    tions that serve as a constant reminder of                 sistency often lacking in 100 percent pri-
    the recycling program. Crude containers                    vately run programs.
    placed in high-profile locations are an eye-               Once the program is in place, results should
    sore that people prefer to ignore, or mis-             be monitored to determine if a community
    take for garbage containers. Also, mall                depot is over- or under-utilized. Over-                      Resource Recycling welcomes
    owners have a preference for aesthetic,                utilization implies that the collection fre-               your opinions. Send us a letter to
    well-maintained containers that have a pos-            quency needs to be increased, or additional                 the editor. Or, if you have more
    itive impact on traffic flows.                         containers/adjacent depots should be installed.              to say on a particular subject,
H A low loading height. Children are some                  Under-utilization requires additional educa-
                                                           tion and/or community awareness. Given the
                                                                                                                        how about writing an "In My
    of the mpst conscientious participants,
    and many communities demand handi-                     low operating cost of a depot program, addi-                        Opinion" article?
    cap access, requiring a maximum load-                  tional spending on promotion and education                      Editor, Resource Recjcliizg
    ing height of 42 inches. Recycling must                is justified easily.                                                  PO. Box 10540
   be fun for participants of all ages, and                                                                                 Portland, OR 97296-0540
    access holes that are out of reach dis-                Conclusion                                                    (503) 227- 1319; 227-6 135 (fax)
   courage use.                                            Historically, residential recycling efforts right-

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