Cashing in on trash: internalizing the external benefits from recycling

Abstract

Recent interest in increasing recycling rates has emerged in response to concerns over greenhouse gas emissions externalities from energy-intensive manufacturing processes. This dissertation evaluates recycling policies and how material life-cycle externalities considerations contribute to policy justification. The analysis provides new evidence on the social benefits from recycling and the policies that will maximize these benefits. First, we analyze how upstream production externalities affect least-cost policies for waste reduction. The effect of a deposit/refund, advance disposal fees, and recycling subsidies on upstream greenhouse gas emissions is examined. The analysis finds that the benefits of reducing greenhouse gas emissions are of the same order as or larger than the benefits of reducing solid waste disposal, implying larger optimal total waste reductions than previous studies. Furthermore, the least-cost intervention levels will be material-specific and vary substantially across materials. Finally, despite the reductions in emissions implied by increased recycling rates, direct recycling subsidies are more costly and generate less emissions reductions than a deposit/refund or advance disposal fee. Next, we examine how the existence of upstream production externalities and downstream disposal externalities will affect the optimal recycling rate of specific common consumer goods. We analyze whether recycling all common household items provides external benefits that justify policy intervention, or whether such benefits are only generated for specific materials. For materials with low quantities of greenhouse gas emissions from production activity - such as newspapers, paperboard, glass, and plastics - little change to the observed recycling rates is justified. By contrast, significant increases in recycling rates are justified for steel, aluminum and office papers, whose production process requirements are more energy, and thus emissions, intensive. The results indicate that policies which encourage recycling of the aggregate waste stream are significantly less justified than policies which focus on increasing recycling of key target materials. Lastly, we analyze whether single stream curbside recycling programs increase recycling of municipal solid waste. Such programs tend to encourage recycling by consumers, while also increasing contamination of material streams. High contamination rates contribute to larger quantities of uneconomic or unrecoverable material that is ultimately disposed of in landfills, negating the benefits of recycling. Thus, we use cross sectional data to empirically estimate the trade-offs of increasing diversion of materials at the expense of increased contamination with single stream programs. Ultimately, regression results suggest that conversion from multi to single stream curbside recycling programs does have a net positive effect on increasing recycling. This positive relationship, however, may be overstated significantly in instances when contamination is not accounted for. In particular, there are two mechanisms by which contamination reduces the amount of material recycled. Decomposing these effects shows that single stream implementation can lead to a reduction in the quantity of material recycled in communities with pre-existing high diversion rates.