US Recycling Industry System - Assignment Example

THE AMERICAN RECYCLING INDUSTRY Introduction Cities and towns in the United s of America. have been facing the dilemma of rising municipal solid waste (MSW) generation and declining capacity of aging landfills. In response, public officials are implementing new policies aimed at encouraging source reduction and waste diversion through increased recycling activity. Because the Resource Conservation and Recovery Act (RCRA) gives states the responsibility for nonhazardous waste management, these efforts have not been the same across the nation. Nonetheless, certain trends have become apparent, including the increased use of curbside services and the adoption of unit pricing schemes such as payment for recyclable waste, in order to meet local objectives (Callan & Thomas, 2006). Thesis Statement: The purpose of this paper is to provide a business-cum-economic profile of the recycling industry. The benefits and progress of the recycling industry will be determined, the shifts and price elasticity of supply and demand will be identified; the effect of external forces will be examined, and the closed loop system advocated. Discussion Recycling is an economic development tool as well as a means for improving the environment. Through re-use, recycling and waste reduction, direct development opportunities are provided to communities. Discarded materials when collected with skill and care, and upgraded discarded materials are a local resource that can contribute to local revenue, creation of employment, business and local economy (Waste to Wealth, 2006). Specifically, job creation has been extensively impacted by recycling, in local and state economies. Thousands and millions of jobs are generated and sustained in the recycling industry, throughout all the states in America. In Iowa, the direct manufacturing jobs in the recycling industry supports high wages, on an average of $47,700 per job. Over 2.5% of manufacturing workers are engaged in recycling activities (Waste to Wealth, 2006). On the other hand, those who are in the recycling industry, but are doing other jobs such as collection of waste, sorting, dealing with the financial aspect of transactions, and other similar activities are not as highly paid as those employees in direct manufacturing jobs dealing in re-use of solid waste. Estimated on a scale encompassing the entire nation, recycling and remanufacturing activities employ approximately one million manufacturing jobs, and more than $100 billion in revenue. According to the United States Recycling Economic Information Study, 2000, the recycling and reuse industry supported approximately 56,000 operations that employed over one million people, produced an annual payroll of nearly $37 billion, and totalled over $236 billion in annual revenues. It was found that related industries that provided support such as accounting firms and office supply companies also benefited from the recycling industry (Waste to Wealth, 2006). Figure 1. reveals the increasing volume of United States’ solid waste since 1960. It is important to note that concurrently the capacity of American recycling programs has also been increasing. In 2008 the recycling rate was around 33%, whereas the rate was less than 10% in the 1980s. This indicates a significant progress in the waste management programs, on the basis of which the volume of waste going to landfills decreased from 89% in 1980 to 54% in 2008 (EPA, 2008). Figure 1. Recycling Rate from 1960-2008 (EPA, 2008, p.1) Shifts and Price Elasticity of Supply and Demand Municipal Solid Waste (MSW) disposal and recycling demand is based on a systems approach. The parameter estimates and associated demand elasticities have a practical application for state and local public officials who are undertaking the design and implementation of MSW management programs and policies. The benefits of MSW policy reforms as well as the expected benefits of policy to various constituencies are significant (Callan & Thomas, 2006). Unit pricing or variable rate pricing due to its market orientation is now an important focus of economic research. The system of unit pricing is simple: each unit of waste disposal has an explicit price, so that the total fee paid for MSW services increases with the quantity of waste discards. “Hence, the unit price acts as a disincentive to dispose excess waste and, in theory can be adjusted to achieve state or local disposal targets” (Callan & Thomas, 2006: 221). This is supported by Ackerman (1996) who adds that once unit pricing is established, an 8% price increase causes only 1% drop in garbage disposal. When such a pricing scheme is lacking, the municipalities normally charge a flat fee for disposal services which is unrelated to the amount of waste generated. This eventually means that the household has no economic incentive to lower generation of waste or to divert it through recycling. The flat fee approach ignores the true marginal costs of providing MSW services, and results in an inefficient solution, with greater stress on landfill capacity as the outcome. In the study conducted by Callan & Thomas (2006) two observations are of crucial interest: First, the model clearly acknowledges the significance of the unit price level and the provision of both disposal and recycling curbside services. This is supported by studies conducted by Hong (1999) and Kinnaman & Fullerton (2000). However, further research is needed on this since other studies have contradicted the above findings. Second, the model underlines the close link between decisions on supply and demand for recycling towards enhancing the efficiency of the system. The Effect of External Forces A research study conducted by Iyer & Kashyap (2007) indicated the significant value of intervention programs. Incentives as a form of positive externality are a beneficial way to motivate people to adopt a new behavior. However, information needs to be disseminated in order to help sustain the newly learned behavior. Thus, programs for the purpose of promoting recycling might have to include incentives and information, for which resources have to be allocated. The researchers believe that the optimal choice for a flexible policy would be one that initially favors incentives, but promotes information campaigns at the later stages. Using resources should be based on monitoring key outcomes, such as number of new recyclers, values, beliefs of recyclers, etc. A flexible integration of incentives and information may be the most effective and efficient way to introduce recycling and to sustain continued participation in the long run. Taxes and fees structured to encourage it are more efficient than regulations mandating participation or other approaches (Ackerman, 1996). Conclusion This paper has highlighted the business and economic profile of the recycling industry. The advantages and progress of the industry, the changes and price elasticity of supply and demand, the benefits of unit pricing of waste, enhancing the efficiency of the recycling sytem, and the effects of external forces were investigated. The evidence indicates that the economy should be in harmony with the earth’s ecosystem, reducing the use of fossil fuels and throwaway products. In the materials sector of the economy, the change is structural, from the linear economic model (Brown, 2002), to the closed loop model. That is, beginning with the resourcing of materials from the mine or forest, to the waste going to the landfill, and then finally to the reuse or recycle system. In this closed loop system which emulates nature, recycling industries will replace extraction industries. In the future, mature industrial economies with stable populations can operate largely by recycling the materials already in use. With the closed materials loop, no waste will be yielded for the landfills. References Ackerman, F. (1996). Why do we recycle? Market, values and public policy. Washington D.C.: Island Press. Brown, L.R. (2002). Eco-economy: building an economy for the earth. The United States of America: Orient Blackswan. Callan, S.J. & Thomas, J.M. (2006). Analyzing demand for disposal an recycling services: a systems approach. Eastern Economic Journal, 32(2): 221-240. EPA. (2008). Municipal Solid Generation, Recycling and Disposal in the United States: Facts and Figures for 2008. United States Environmental Protection Agency. (5306P) Washington, DC 20460. Retrieved from: http://www.epa.gov/osw/nonhaz/municipal/pubs/msw2008rpt.pdf Hong, S. (1999). The effects of unit pricing system upon household solid waste management: the Korean experience. Journal of Environmental Management, September 1999: 1-10. Iyer, E.S. & Kashyap, R.K. (2007). Consumer recycling: role of incentives, information, and social class. Journal of Consumer Behavior, 6: 32-47. Kinnaman, T.C. & Fullerton, D. (2000). Garbage and recycling with endogenous local policy. Journal of Urban Economics, November 2000: 419-442. Waste to Wealth. (2006). Recycling means business. Institute for Local Self-Reliance. Retrieved from: http://www.ilsr.org/recycling/recyclingmeansbusiness.html Read More