Commentary

Minimum Content: Minimum Sense

America’s recycling revolution, now a decade old, was built upon three fundamental premises. First, it was believed that we were slowly running out of valuable resources and we should reuse what we could to ensure the sustainability of the present. Second, the materials that our “throw-away society” so cavalierly discards are indeed valuable, and that if various market failures and poorly-designed municipal collection programs were corrected, communities would actually save money by recycling. Finally, it was alleged that the alternatives to recycling — landfilling and incineration — were so environmentally destructive that, if their true costs were accounted for, recycling would be a run-away success for both the environment and the economy as a whole. The power of those three arguments swept virtually all opposition aside and America embarked on an environmental program — residential curbside recycling — with something akin to the fervor of a religious convert.

But ten years into America’s holy war against garbage, the case for residential curbside recycling has run smack into the harsh realities of economics. If resources are indeed becoming more scarce, they have a funny way of showing it. Prices for energy, minerals, and paper have continued to fall as they have over the entire course of the century (indeed, as they have over the entire course of recorded human history). Post-consumer material is less competitive with virgin material than ever before.

Regardless, recycling still promised a windfall for communities. But the campaign for minimum post consumer content regulations for packaging and other goods betrays the lie of that promise. If recycling really did make good economic sense, we wouldn’t have to force people to realize those savings. Doing so would not only needlessly drive up consumer prices, but would also actually waste, not conserve, scarce resources.

The reason is relatively simple once you think about it. Prices are not completely arbitrary; they are reflections of relative scarcity. Things that have high prices are relatively scarce and things that have low prices are relatively abundant. If it costs x to deliver virgin plastic to the market, for example, but it costs 10x to deliver post-consumer plastic to the market, then we can reasonably conclude that the resources required recycled plastic are ten times more scarce than the resources required to make plastic from scratch. And since recycling is supposed to be about the conservation of resources, mandating recycling under those circumstances would be counterproductive.

“Ah,” you might say, “what about all those subsidies the virgin material markets receive? Don’t they distort the market and render your price data useless?” Well, not really. The General Accounting Office examined the timber industry and concluded that public subsidies are generally inconsequential and certainly don’t effect timber-product prices very much. Similarly, the Energy Information Administration examined the energy industry and found that federal subsidies can only account for about 4 percent of total energy expenditures. The only consequential public subsidy available to the mineral industry is the below-cost leasing terms available to publicly owned mineral stocks (via the 1872 Mining Law), but since there is an active secondary market for access to mining lands, the “subsidy” allegedly present is generally capitalized in the marketplace.

“But,” you might point out, “what about the environmental externalities of the mining, timber, and paper, and energy industries? If you accounted for that, wouldn’t recycling be competitive?” Again, not necessarily. First, we have no reliable means by which we can “price” those externalities. Second, those industries do spend tens of billions of dollars annually to comply with federal and state environmental regulations. Are the environmental externalities they impose greater than, less than, or equal to the regulatory costs they pay to do business? No one knows for sure, but a number of respected economists, such as Robert Crandall of the Brookings Institution, strongly suspect the environmental externalities of those industries are more than paid for through the cost of regulatory compliance.

Nor are the externalities of recycling’s alternative all that impressive. EPA regulations now ensure than solid waste landfills cause only one additional cancer risk every 13 years, and that’s assuming we use such worst-case scenarios and assumptions that even that figure, according to most risk assessment specialists, probably overestimates the actual risk by 100 to 1,000 times the actual risk. Likewise, municipal waste incinerators, according to those same worst-case assumptions, pose less than a 1 in 1 million risk to neighboring communities (by means of comparison, less than the risk posed by eating a peanut butter sandwich once per month).

Finally, recycling has its own environmental externalities that must be put into the equation. After all, the actual process of extracting usable raw material from a product is an industrial activity every bit as involved as the process of combining various raw materials to make a product. Both are industrial activities. And both create waste. For example, recycling 100 tons of old newsprint generates 40 tons of toxic waste. Is this consequential? Sure. EPA has reported that 13 of the 50 worst Superfund sites are/were recycling facilities.

If recycling makes economic sense, we don’t need to mandate it. And if it doesn’t, we shouldn’t. You can make a silk purse out of a sow’s ear … but it’s usually cheaper to use silk.

Jerry Taylor is director of natural resources studies at the Cato Institute and is senior editor of Regulation magazine.