THE IMPACT OF INTEGRATING ECONOMIC INCENTIVES TO PROMOTE RECYCLING IN WASTE MANAGEMENT


THE IMPACT OF INTEGRATING ECONOMIC INCENTIVES TO PROMOTE RECYCLING IN WASTE MANAGEMENT

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TABLE OF CONTENT
Title page
Certification i
Dedication ii
Acknowledgement iii
Abstract iv
Chapter One:
1.0 Introduction 1
1.1 Background Information 1
1.2 Problem Statement 6
1.3 Research Objectives 7
1.4 Hypothesis 8
1.5 Significance of the Study 9
1.6 Scope of the Study 10
Chapter Two:
2.0 Literature Review

Chapter Three:
3.0 Research Methodology 30
3.1 Description of the Study Area 30
3.2 Research Design 30
3.3 Method of Data Collection 31
3.4 Data Limitation 31
3.5 Method of Data Analysis 32
3.5.1 Summative Approaches 32
3.5.2 Simple Percentage 33
3.5.3 Incremental Averages 34

3.6 Test of Hypothesis 34
Chapter Four
4.0 Presentation of Data, Analysis of Data and Discussion of Findings 36
4.1 Data Presentation 37
4.2 Data Analysis 39
4.3 Discussion of Findings 41
4.4 Test of Hypothesis 45
Chapter Five:
5.0 Summary of Findings Conclusion and
Recommendation human health 47
5.1 Summary of Findings 47
5.2 Conclusion human health 48
5.3 Recommendation 48
References human health
Strategic Recycling

In her landmark book, Strategic Recycling, Kay Martin highlights the difference between past “linear systems” and the opportunity for local governments to move toward “cyclical systems” of managing solid waste and fostering recycling and waste prevention.

Major characteristics of linear systems are:

Government rules by command and control systems.
Major budget items for government are for waste collection and disposal (either directly provided or indirectly contracted through franchise agreements).
Prohibits diversity and competition and requires all generators of waste to use system provided by government.
Recycling costs are added on top of existing waste collection and disposal system; materials are pushed into an uncertain marketplace.
Little funding for public education or waste prevention.

By contrast, a cyclical system “redefines the role of local government as the system regulator, manager, educator, intervener and facilitator” working to develop a locally sustainable recycling economy. In a cyclical system:

Government accomplishes its purposes through its leadership in adopting policies and incentives to reward those who are achieving its goals.
Government helps to structure the marketplace and set minimum standards for operations and reporting.
Government influences pricing of services to reflect public policy goals.
Government encourages diversity, competition, and innovation.
The private sector assumes actual investments, debt service, and risk.

In fact, the IWMA recognized that local governments could accomplish their responsibilities under that law in a wide variety of ways:

“. . .programs funded or operated by a jurisdiction as franchise or contract conditions, rate or fee schedules, zoning or land use decisions, disposal facility permit conditions, or activities by a waste hauler, recycler, or disposal facility operator acting on behalf of a city, county, regional agency or local governing body, or other action by the local governing body.”

An incentive-based approach to meeting the challenges of the IWMA would include the adoption of policies and the structuring of the marketplace for residential and commercial generators, waste and recycling haulers, transfer station and MRF operators, landfill owners and operators, manufacturers, and retailers.

Local governments can adopt policies in a wide variety of instruments, including:

Contracts or franchises.
Land use permits.
Solid waste facility permits.
Zoning regulations.
General plans.
Financing agreements.

Local governments can also influence the economics of the marketplace by the way they structure their:

Garbage collection rates.
Franchise fees.
IWMA fees.
Permit fees.
Facility taxes.

One of the most powerful incentives is tax, fee, or cost avoidance. Local governments at little or no cost may adopt many of these tools. The primary cost may be in the preparation and adoption of these tools and subsequent monitoring of their outcomes. Monitoring costs can be minimized if proper reporting and evaluation requirements are included in the design and adoption of the particular tool.

The greatest difficulty in adopting these tools may be in gaining support from the existing waste collection and disposal industry. Problems with these industries can be resolved through early and continuous dialogue with all parties of affected interests. By outlining the city’s goals and keeping an open mind about the details, local governments can usually solve most of the specific concerns identified by existing waste haulers and other interested parties.

Generator Incentives

Residential: Pay-As-You-Throw. One of the best examples of an incentive that has proven its tremendous value over the past decade is the restructuring of residential garbage rates. The U.S. Environmental Protection Agency (U.S. EPA), the California Integrated Waste Management Board, and many others have documented that “pay-as-you-throw” programs can have a major impact on decreasing wastes. In a comprehensive study for the Solid Waste Association of North America, Skumatz Economic Research Associates found that such “variable rate” programs can lead to an additional 8 to 13 percentage points of diversion, even if communities already have mandatory curbside recycling and diversion programs.

Commercial Incentives. The larger the costs for waste collection and disposal, the higher the interest level for businesses in waste prevention, reuse, recycling, and composting. This is particularly true if the businesses can benefit from recycling by decreasing their waste collection and disposal services, both in number and size of bins and decreasing the frequency of pickups.

Many communities now offer “free” collection of recyclable materials from small businesses, if the amount of materials collected is comparable to that from residents. Other communities require their franchised haulers to provide discounts for recycling services. Haulers may be required to charge businesses for recycling services offered at rates that are at least 50 to 80 percent of the costs of disposing of those materials to provide an incentive to the businesses to reduce their wastes at the source or recycle.

Haulers may also be creative in their encourage-ment of recycling. One hauler requires that a recycling bin of equal size and frequency of pickup accompany every commercial waste bin requested for service. This clearly communicates to the generators that they should be able to reduce their wastes by 50 percent if they use the companion recycling bins.

For construction and demolition (C&D) debris, some cities are now requiring deposits when residents, businesses, or contractors seek permits for C&D activities. The City of Atherton, California, requires a $50 per ton deposit for all waste estimated to be produced by that project. Contractors must show that they have recycled at least 50 percent of the waste generated, or the town keeps $50 for each ton below their 50 percent goal that was not recycled.

The City of Cotati requires posting of a $200 deposit that is refunded after proof of reuse, recycling, or attempts thereof. In a model ordinance prepared by the Alameda County Waste Management Authority, a deposit is required that is the smaller of three percent of the total project cost or $10,000.

The City of San Jose is working on adopting a C&D deposit for diversion. The city proposes to collect a deposit when a building permit is issued for construction, demolition, and remodeling projects. These deposits will be set at a level sufficient to pay for the gate fees at certified recycling facilities. To have their deposits returned, contractors will have to provide receipts showing that the project’s C&D waste has been accepted by a city-certified recycling facility.

Franchise Hauler Incentives

Franchise Contractor Payments. Some garbage companies say they make more money in garbage collection and disposal, instead of recycling, because that’s how cities pay them. The basis of paying contractors has not changed much over the past 50 years.

Residential payments to contractors are often made on the basis of the number of households serviced. This does not provide any incentive to recycle more and dispose less. Payments per household value the speed at which garbage can be collected per household, over all other factors. This led to the compactor truck and the elimination of a well-established recycling infrastructure after World War II.

For residential payments to contractors, other ways to structure those could include payments for every ton recycled or for every ton landfilled.

By paying contractors solely on the basis of the tons they recycled, they would make more money with increases in recycling tonnage. If contractors were paid inversely to the amount they landfilled wastes, they would have an incentive to maximize both waste prevention and recycling.

In considering how to pay contractors, cities must weigh the benefits of new incentives, such as the above, versus the increased costs that will result from increasing uncertainty and risks to the contractors. Since most contractors have no experience with a garbage collection system based on these new incentives, they will need to inflate their estimates of how much they would like to be paid in order to assure that they have a sufficient cushion to account for unknowns and contingencies.

San Jose, Calif., has pioneered these types of incentive programs (see profile below). Seattle, Wash., also has explored these concepts in some depth.

In Seattle, the new integrated garbage and recycling contracts that started April 1, 2000, pay their contractors on a per-household and a per-ton recycled basis. Promote Recycling

This is a good transition from past practices, as the contractors have the comfort of estimating the amount of revenue they can expect from payments per household. They can also reasonably project the amount of revenue they can expect from recycling tonnage. Because Seattle also changed the design of its citywide recycling program at the same time, there is some risk to the contractor about how much recycling tonnage is to be expected. Overall, the city estimates that it saved $2 million per year through the competitive bidding process it used and by integrating a variety of garbage and recycling contracts into full-service contracts for the city. Promote Recycling

Commercial payments to contractors have historically been based on the number and size of bins serviced and the frequency of service. This provides generators with a strong incentive to recycle. However, it is in the hauler’s interest to recommend the largest number of small bins to service most frequently. The more garbage service specified (whether needed or not), the more money the hauler makes. Promote Recycling

One of the common results of this approach is that haulers encourage generators to design their system for peak loads. Haulers will often “haul air” because they dump whatever is in a bin, even if the bins are usually half empty. This is usually only mitigated by competition. If there is little or no competition in an area (e.g., if there is an exclusive franchise or an oligopoly situation), generators will usually pay more without
knowing it.

In any comprehensive waste audit of a system (see related CIWMB model study in this series on solid waste assessments), an auditor will usually reduce the amount of garbage service regularly scheduled. This can provide significant savings to the generator.

However, commercial rates based (at least in part) on tons recycled or landfilled would be an improvement over the current system. By introducing payments for recycled tonnage or landfilled tonnage, commercial haulers would find they could make more money by reducing garbage service and increasing recycling service.

Some municipalities are exploring changing their franchise fee structures as initiatives for haulers who increase recycling. None appear to be experimenting with commercial rate structures in the way San Jose and Seattle have done with residential rates. Promote Recycling

Avoided Disposal Costs. In structuring payments for landfill disposal, one of the incentives for increased recycling is the responsibility for disposal payments. If contractors are responsible for paying disposal fees out of their contract prices, they will be motivated to find ways to avoid paying those disposal fees. Promote Recycling

Avoided Collection Costs. When tipping fees for waste disposal are less than $30 per ton (as they are in most of California today), avoided disposal costs need to be enhanced by avoided collection costs. The average costs of collection in most solid waste and recycling systems is 80 percent; usually 10 to 20 percent is the cost of processing and marketing recyclables or disposing of wastes in a landfill. With higher recycling and reuse rates, municipalities need fewer garbage collection trucks. The cost savings for each garbage truck—about $150,000—can help offset the costs of recycling services. Promote Recycling

Revenue Sharing. One of the more popular incentives curbside programs offer to their haulers is a share in the revenue from the sale of materials (usually 50/50). Promote Recycling

The theory behind this is that such revenue sharing provides an incentive to both the city and the contractor to improve the system. The contractors get more revenue if they:

Collect more materials.
Keep the materials cleaner on route.
Process materials to higher quality standards.

The city gets more revenue if it promotes public participation in the program and increases the value of materials recycled through market development initiatives. Promote Recycling

In practice, some haulers have viewed the 50/50 revenue sharing proposition as a penalty to the hauler. They viewed it as having to share 50 percent of the benefit with the city without the city being required to split 50 percent of the costs of achieving that benefit. Promote Recycling

Consequently, revenue sharing is most appro-priately considered at the local level, where the city and the hauler can agree in advance on the goals of such a structure. Promote Recycling

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