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Economics of Waste and

Recycling
Tietenberg, Ch. 9 on Recyclable
Resources (Ch.8 in older
editions)
Recyclable resources
Initially when the resource is plentiful, no
recycled material will be used
As the resource gets depleted and
extraction cost increase, recycled material
will increasingly be used
As disposal costs increase recycled
materials will be used
If consumers bear the disposal cost
recycled materials will be used
Questions
What is the efficient amount of recycling?
Will the market result in the efficient
amount of recycling in the absence of
government intervention?
What about (in-built) shelf life of a
product?
Divergence of private and social
costs
Marginal private cost of throwing a unit of
trash is small, smaller than the social
marginal cost
The level of recycling is inefficiently small
Marginal private cost and marginal social
cost of disposal diverge
If social costs of disposal are included in
the cost of disposal then level of recycling
will be efficient (diagram)
Life cycle analysis
Full environmental impact of a good from
birth as raw material till its death at landfill,
incinerator
Component of social cost benefit analysis
How to define impact boundary?
Example: disposable drink cup: paper
versus plastic
The private cost to consumer is about the
same
Towards measuring social cost
Paper cup
Made of renewable
resource, wood
Uses 36 times more
electricity
Generates 580 times
more waste water
Landfill: degrades,
emits methane, CO
2

Plastic cup
Made of non-renewable
resource, oil,
emission of pentane
Recycles easier

Landfill: Does not
degrade
Policies
littering
Taxes
Flat rate
Pay by volume
Aims to reflect social cost of disposal
Amount of garbage decreases
Deposit refund schemes: refund is given when the
product is returned
Aluminium cans (production cost much lower from recycled!)
Waste oil
Germanys take back principle
Product obsolescence
Functional Obsolescence (computers)
Fashion obsolescence (clothes)
Durability obsolescence: incentive to decrease
useful life of a product, in-built durability
Discount rates study: implied discounts rates from
purchases of consumer durables are higher for low
income consumers (higher than market interest rates)
Competition tends to increase durability
Cars in US
In Germany regulations were enacted requiring
products to be durable
Waste Trade
Developing countries
Waste recovery is a
market driven
phenomena occurring
without government
intervention
low per capita waste
Goods used longer
Developed countries
Waste recovery due to
environmental concerns and
government support
More waste separated at
source
High per capita waste
the amount of business waste
is greater than household
waste
the City of New York exports
25,000 tons of trash a day to
other cities and states

Informal recycling
In developing countries government-run
recycling programs are rare
Instead informal recycling
estimated 15 million people worldwide, trash
pickers are about 1 percent of the global urban
population (2% in Asian, LatAm cities)
Brazil claims 90% Al recycling rate due to
informal recycling; U.S. about 50% Al recycled
Need integration of informal recyclers into formal
municipal waste services
Recognized as legal profession only in Brazil
Informal recycling
Zabaleen garbage recyclers in Cairo
Individual or family groups
Micro-enterprises
City of Cairo decided to modernize waste collection
and privatized and sold waste collection to MNEs
MNEs are required to recycle 20% of the waste (while zabaleen
recycled 80%)
Gov encouraged MNEs to hire zabaleen
MNEs Offer much lower wages to the zabaleen
Relocation of recycling activities of zabaleen to out-of-town;
eviction from current homes that also had waste-processing on
site
Conflict between traditional recycling economy and
modern waste processing done by large corporations
Wilson et al, Role of informal sector
recycling in waste management in
developing countries, Habitat International,
vol. 30, Dec. 2006
Waste and Want: A Social History of Trash
by Susan Strasser, Metropolitan books
Please recycle!