Policy Study

Packaging, Recycling, and Solid Waste

Executive Summary

During the past decade, over forty states quickly adopted waste-diversion or recycling laws, responding to public concern about resource conservation. On the other hand, early attempts to encourage recycling by increasing demand for recyclables received a more mixed reception: only two states–Oregon and California–passed recycled content mandates for products other than newsprint. One state–Florida– passed (and then allowed to sunset) an advance disposal fee on packaging. The federal government failed to pass any national “demand-side” policies in the early 1990s. But when scrap values for recyclables fell in the mid-1990s, the press for policies intended to stimulate demand for recyclables resurfaced.

Proponents of these “demand-side” laws typically want to accomplish one of four goals: waste diversion; reduction in pollution from producing goods; reduction in consumption of virgin materials; or revenue generation to pay for recycling or other waste-management programs. Recycling is basically a means for achieving one of the first three goals, not an end in itself.

Yet policies proposed to achieve these ends surfaced with little understanding of the effect these policies might have on waste-diversion, resource use, recycling, and product manufacturing. This study helps fill that knowledge gap by exploring the cost-effectiveness of these policies as a means to achieving specific levels of waste diversion and reduction in use of virgin materials. We look at four different policies:

  • recycled content mandates, which mandate that a proportion of recycled materials be used in packaging;
  • virgin materials taxes, which assess a tax on the use of material inputs based on the implied disposal costs for those materials;
  • advance disposal fees, which assess a charge on the final product based on the implied disposal cost for the associated packaging; and
  • manufacturers’ responsibility, which requires manufacturers to implement waste collection and material recovery systems for their packaging and generally combines required recovery rates with packaging fees.

Our study evaluated these policies at a national level, with cost estimates provided for glass, steel, three types of plastic, and paperboard. In each case, policies were evaluated in relationship to specified recycled content (or waste-reduction) levels in order to provide a metric for comparison.

Our analysis summarizes the direct production costs, if packaging manufacturers had to bear the entire waste and recycled material collection, processing, and production costs and the social costs, which include both the direct production costs and the savings in reduced waste-disposal costs. The analysis ignores implementation costs by government agencies and other information-gathering and reporting costs incurred by manufacturers to comply with these policies, which could be substantial. The study also necessarily provides only a snapshot picture; changing technologies and changing economic circumstances would alter the results of our analysis. Finally, we do not try to put a price tag on air emissions or other emissions associated with different product processes. However, our study does look at total energy use and total resource use, including “use” of landfill space.

What is the bottom line? Our analysis shows that, under best-case conditions, there are net benefits to society at low or modest levels of recycled content for almost all materials. However, as content rises and conditions become less favorable, costs rise, creating net societal losses. The wide variation in outcomes reflects the large variations in waste-disposal costs across locations and by program design, as well as the large variations in material-specific production processes. Net costs (and benefits) are for levels of recycled content, not for the policy mandates per se.

The benefits at lower content levels are not surprising–many packaging manufacturers have used recycled-content materials at these levels without government intervention. Our findings suggest that the marketplace likely is producing efficient levels of recycling and that attempts to force specific levels of recycling–either directly through recycled-content mandates or indirectly through various taxes and fees–will not uniformly generate hoped-for benefits.

Even where benefits are predicted, our results do not indicate that a given level of recycled content is achievable or beneficial for each manufacturer and every product, which suggests that mandates and fees tied to recycling levels are not likely to be environmentally beneficial. Some manufacturers will be able to achieve economic (and environmental) benefits at much higher levels of recycled content; others may experience net costs even at very low levels of recycled content. The benefits we estimate are total societal benefits, using average production and disposal costs at a high level of aggregation.

Our analysis also demonstrates that some mandated recycled content levels would simply not be achievable on a steady-state basis due to physical limits on recycled material use (especially in worstcase scenarios). These limits result from production losses, spoilage and breakage during collection and processing, constraints on “capturing” all postconsumer recyclables, and so on. In these cases, only a reduction in package use would achieve the intended standards. In worst-case scenarios sustainable content levels top out between 26 and 37 percent, with higher levels achievable under best-case circumstances.

In examining virgin materials taxes and advance disposal fees, we are not predicting that the fee levels identified will result in the associated recycled-content levels; rather, we are predicting that wastedisposal rates will fall to a level equivalent to that of the recycled-content policy. To achieve specified waste-diversion rates from 10 percent to over 50 percent (depending on the material), our analysis shows that virgin materials taxes would range from a low of $16 per ton for glass (under best-case conditions) and a high of $136 per ton (under worst-case conditions) for containerboard (see Table 1).

Advance disposal fees (ADFs) intended to incorporate disposal costs of individual packages “up front” at the point of packaging purchase would range from fractions of a cent to two cents per package (see Table 2). On the other hand, ADFs designed actually to increase consumption of recycled materials would need to be set at substantially higher levels, especially in instances where the price of the package is only a very small percentage of total product price.

Policies that establish manufacturers’ responsibility typically require that product manufacturers achieve particular recycling rates and impose packaging fees pegged to recycling costs. The cost (or benefit) of manufacturers’ responsibility is the difference between the cost of production using virgin materials and the cost of producing at the target recycled content level, plus the waste-handling cost. Our analysis shows these costs ranging from almost zero (for containerboard under best-case conditions) to over $440 per ton (for PET under worst-case conditions). (See Table 3).

We supplement our quantitative analysis with two brief case studies: one of Germany’s experience with its Green Dot program; the other of Florida’s experiment with advance disposal fees on packaging. One key finding from this case-study analysis sheds some doubt on the effectiveness of Germany’s program in promoting packaging source reduction.

Though Germany’s program was accompanied by declines in packaging per product unit, overall reductions in Germany were not very different from the United States, which had no up front packaging fees. A basket of typical U.S. goods went from over 2,750 pounds per gross production unit in 1989 to approximately 2,100 pounds in 1993-94. In Europe, including Germany, packaging materials use went from just over 2,500 pounds per gross production unit to just under 2,100–only marginally better than U.S. material efficiencies.

Experience to date with packaging take-back policies suggests that the low-value, high-volume, decentralized, heterogeneous nature of consumer packaging transactions are ill-suited to establishment of efficient and effective product stewardship programs. These attributes especially characterize the U.S. packaging marketplace in which billions of products change hands annually, products move across large geographical distances, and waste-disposal systems (and needs) vary substantially.

Our study attempts to shed some light on the complexity of decisions about resource use and packaging. Our quantitative analysis shows net social benefits from some recycled content for most materials under best-case scenarios. The levels at which net benefits occur appear to be fairly consistent with levels being achieved in the aggregate through market transactions. As technologies change, opportunities for resource-conserving recycling may increase, but our study suggests that there is no one-size-fits-all formula in the resource-conservation process.