Saturday, December 3, 2011

Deposit-Refund Systems in Practice and Theory
Abstract: A deposit-refund system combines a tax on product consumption with a rebate when the product or its packaging is returned for recycling. Deposit-refunds are used for beverage containers, lead-acid batteries, motor oil, tires, various hazardous materials, electronics, and more. In addition, researchers have shown that the approach can be used to address many other environmental problems beyond waste disposal. By imposing an up-front fee on consumption and subsidizing "green" inputs and mitigation activities, a deposit-refund may be able to efficiently control pollution in much the same way as a Pigovian tax. Theoretical models have shown that alternative waste disposal policies, such as virgin materials taxes, advance disposal fees, recycled content standards, and recycling subsidies are inferior to a deposit-refund. These results have been corroborated in calibrated models of U.S. waste and recycling. And in theoretical models that consider joint environmental problems and product design considerations, the deposit-refund continues to have much to recommend it as a component of an overall socially optimal set of policies. More empirical research into deposit-refund systems is needed, particularly the upstream systems used for many products. In these systems, the processors or collectors of recyclables—rather than consumers—receive the refund. Upstream systems may have lower transaction costs and better environmental outcomes than traditional downstream systems.
Forty-four states in the United States have some kind of deposit-refund program for lead acid batteries. Many of the states have used model legislation developed by the Battery Council International (BCI), which recommends that retailers charge a $10 fee (deposit) on all batteries sold, with the fee waived or returned if the customer brings back a used battery for recycling within 30–45 days of purchase. The lead in batteries is valuable, and even without the deposit refund system, recycling was already high for this product—86 percent according to BCI. But illegal disposal of lead can cause serious environmental problems, thus providing the rationale for government intervention. With widespread adoption of the deposit- refund approach, the recycling rate for lead-acid batteries has climbed to 97 percent. Moreover, the plastic in batteries is also now recycled at fairly high rates—between 60 and 80 percent, according to BCI.
Illegal disposal of scrap tires can also pose a serious environmental problem, as can disposal of whole tires in landfills. Scrap tire piles have been known to catch fire and burn for lengthy periods—sometimes for years. The piles have also proven to be serious breeding grounds for mosquitoes and can leach toxic chemicals into groundwater. Furthermore, disposal of whole tires in landfills creates problems as the tires tend to rise to the surface.

To raise funds to address the stockpile problem and to prevent future problems by increasing recycling and proper disposal, almost all states in the United States now assess fees on tire purchases. The fees typically range from $0.50 to $2 for passenger vehicle tires and from $3 to $5 for heavy truck tires. These deposits are not generally refunded to consumers as in bottle bill and lead-acid battery programs. But a variation on the deposit-refund concept still applies in many states; the revenues collected through deposits are used to subsidize scrap tire processors or sales of products made from scrap tires. Instead of rebating deposits to consumers who return tires for recycling, the rebate goes to the actual recyclers. This upstream deposit-refund approach, mentioned briefly above, has some virtues over the traditional downstream, retail-based system. First, it avoids the transaction and administrative costs associated with collection and sorting of post-consumer recyclables. Second, paying refunds to processors rather than consumers means fewer transactions, which also reduces administrative costs. Third, incentivizing processing rather than collection may help avoid situations in which materials are collected for recycling but are not really recycled5 because processors are paid the subsidy (refund) only when they purchase materials to process and sell for use as an input to the manufacture of a new product.
Recycling of electronic products, such as computers, televisions, cell phones, and other electronic items, which make up a growing fraction of the waste stream, is difficult and costly. The approach adopted by many European countries to address the problem is product―takeback, or what has come to be known as extended producer responsibility (EPR). These programs mandate that manufacturers take back products from consumers at the end of the product’s life and ensure that a specific fraction of the material in the products is recycled. In the United States, the federal government and most states have balked at adopting the take-back approach and have failed to come up with alternative programs to deal with electronic waste.

California is an exception, however; in 2003, the state passed the Electronic Waste Recycling Act of 2003: Covered Electronic Waste Payment System (S.B. 20/S.B. 50), which authorized the assessment of a waste recycling fee on the retail sale of electronic devices. Subsequent regulations assessed the fees on televisions, computer monitors, and laptops; in 2011, the fees range from $6 to $10, depending on screen size. Revenues collected from the fees are used to provide recycling incentive payments to authorized collectors and reprocessors. This program is thus another example of an upstream deposit-refund system. The refunds in the program—in other words, the recycling incentive payments—cover a range of materials, well beyond the televisions and computers on which the fees are placed. The legislation set the refund payments at 28 cents per pound of total weight, though future regulations are permitted to establish an alternative refund structure.
by Margaret A. Walls
Resources For the Future (RFF)
RFF Discussion Paper 11-47; November, 2011

No comments:

Post a Comment