Recyclable Resources: Minerals, Paper, Glass

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Recyclable Resources Minerals, Paper, Glass
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• Man is creative. But he has not been able to use
  his powers to increase multiply the endowments,
  as yet. He has only destroyed.

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• Once used energy resources dissipate into heat
  energy cannot be recycled
• Other resources retain their physical chemical
  properties during use can be recycled/reused
• How much recycling is efficient?
• Will market mechanism decide it?
• How is efficient allocation different over time
  between recyclable non-recyclable resources?
• What impact does product durability has on
  allocation of virgin recyclable materials?

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• Lets find how efficient markets work for
  depletable recyclable resources then use this
  as benchmark. Assume finite resources.
• Efficient allocation of recyclable resources
  initially reliance on virgin resources as they
  are cheaper later ?ingly difficult to extract
  then to lower grade then import
• Technological progress - ? lower grade ore ?
  ?cost - difficult to extract ? price rises
• Same time cost of disposing product - migration
  to urban areas

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• Slowly, land scarce - burial of waste ? expensive
  concerns over evn effects on water supplies
  eco effects on value of surrounding land -
  buried waste acceptable
• ? Cost of virgin material ? in waste disposal ?
  recycling attractive its also an alternative to
  both
• Virgin ore - products costly - ? demand for
  recycled goods composition of demand effect
  additional incentive to return used product
• Purity of recycled goods plays key role

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Recycling

• Will ? as virgin ore disposable costs ?
• Costs many mainly transport processing -
  significant labour cost collecting, sorting
  processing scrap is labour intensive
• Scrap as input has evn consequences
  compliance with rules adds to cost
• Design products to facilitate recycling - stamp
• Recycling is adding more to resource depend on
  it longer than on non-recyclable -

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• If recycling rate is 100, resource flow is
  infinite
• If 100 units of resource are in a product with
  one year of useful life. After one year 90 of
  resource is recovered reused next year 90 of
  that i.e. 81 units can be recovered reused
• If stock is A recovery rate is a total amount
  used would be AAa Aa2 Aa3 .. This is A/
  (1- a)
• For non-recyclable resources a 0
• Efficient economy strikes balance between
  consumption of depletable recycled material

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The Strategic Material problem

• US oil imports that of strategic importance a
  few suppliers true social cost gt market price
• Policy tariff on imports use proceeds for
  stockpile
• Vulnerability of nation (importing) depends on
  (1) severity of shortfall (2) its ability to cope
  with shortfall (by substituting or suffering)
  Larger disruptions (gt 35) can have serious
  impact
• Tilton 1985 examined substitution effects of
  rapid rise of tin prices during 1970s

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Waste disposal pollution damage

• Treatment of waste by producers consumers
  biases in market balance between recycling use
  of virgin ores disposal cost is a key in
  determining efficient amount of recycling
• Failure to bear full cost of disposal shows bias
  towards virgin material away from recycling
• Method of financing disposal of potentially
  recyclable waste affects the level of recycling

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• Disposal cost efficiency
• cost of recycling gt price of recycled material
  sold. Loss?
• Must understand relationship of marginal
  disposal cost to efficient level of recycling.
• Example cost of recycling 20 p t , sold for 10
  per ton inefficient?
• Town is avoiding cost of disposal 20 p t . ?
  benefits 20 for avoiding disposal10 resale
  30 p t cost 20 ? efficient recycling venture

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Recyclable Waste

• Old scrap New scrap
• Old scrap recovered from consumers -transport
  cost very imp - market works efficiently -
  doesnt count marginal social cost of disposing
  ? market away from recycling old scrap towards
  the use of virgin materials
• New scrap generated during production requires
  no transport cost - under control of producer -
  design a product for scrap - minimum processing -
  guarantee of homogeneity - works efficiently

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• No direct relation between size of trash fee
• MC to homeowners of throwing one more unit of
  trash is negligible, but to society it is not.

/unit
MCR
/unit
MCs
MCp
Qp Qs
0
100
recycled disposal
0
100
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Disposal Cost Scrap Market

• How will market respond if all are to bear the
  true marginal disposal cost?
• Effect on supply of materials to be recycled
  consumers paid for discarded products material
  to recycling centres ? supply ? - economies of
  scale - ? AC of processing more recycled
  materials
• C ? due to price fall Use of virgin ore ?
• ? Correct inclusion of disposal cost would tend
  to ? amount of recycling extend life of
  depletable- recyclable resources

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Subsidies on Raw Materials

• Are troubling source of inefficiencies they
  take bias away from recycled inputs - raw
  materials are artificially cheap can
  inefficiently undermine the market for recycled
  inputs
• Public lands prices are low as compared to
  market people dont receive true value for
  mining services provided by public lands
  subsidy is lowering the cost of extracting the
  raw materials

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Corrective Public Policies

• Such inappropriate pricing creates improper
  incentives ? misallocation ?
• Volume pricing
• Refund system
• Deposit refund
• Disposal recycling charges at the time of sale
• Tax for using virgin material

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Pollution Damage

• If environmental costs are added to virgin
  material Price rise leftward shift of supply
  curve - ? use more of recycled material
• Disposal cost external environmental costs
  odours, pests, contamination of water
• Govt. regulates landfills for public safety
  locating the facility is difficult
• Impose host fees
• Sometimes package is bigger than the product

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Tax Treatment of Minerals

• Some minerals get subsidy
• Severance tax
• Durability of the product
• Three ways of obsolescence
• Functional
• Fashion
• Durability
• Market mechanism automatically creates pressures
  for recycling reuse in right direction ?
  disposal cost ? scarcity ? ? demand for
  recycling