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Does Recycling Pay? 2137

August 1, 1996

6 Min Read
Does Recycling Pay?

Jim Morris

In the early 1980s, New Jersey environmental officials adopted a slogan: "Recycling Pays." They now regret that choice of words.

Recycling managers in New Jersey and throughout the nation are in-creasingly under scrutiny to justify the costs and benefits of their operations. Many managers feel that they are fighting against the unrealistic expectations of residents and elected officials, who want to see profits from the sale of recycled materials.

As providers of public services, recycling managers should be able to quantify the costs and benefits of their programs, but the programs should not be judged against a profit goal. Because recycling is a solid waste management option, it should be judged against competing options such as source reduction, landfilling, incineration and composting.

The critical question is not, "Did your recycling program cost the residents money?" Cost is unavoidable and must be expected. Instead, ask, "Do the recycling costs reduce the total cost of disposing your community's solid waste?" Residents expect to pay for garbage disposal, and recycling is simply an alternative method for disposing of their household waste.

To answer these cost-benefit questions, first identify the community's or organization's total cost of recycling. Then, compare that figure to costs that would have been incurred without recycling. The calculation is built around the following formula: Net costs or savings of recycling is equal to total recycling collection and processing costs plus or minus recycling disposal costs minus avoided costs of garbage collection and disposal.

For managers at public agencies, some relevant costs may be difficult to quantify. For example, private firms must account for the cost of renting or acquiring property and facilities such as garages or administrative office space. Public operations often do not have comparable costs on their ledgers, but the costs can be estimated using average local rental rates for office and garage space. Total costs also must include direct and overhead costs of employees whose functions are not directly related to recycling programs, such as receptionists, lawyers, custodians and auditors.

Many publicly run programs have never had to consider such items, but they must be included to determine the full cost of providing a public service.

Next, add these costs to any additional charges required to dispose the recyclables. If you are able to sell your materials rather than pay to dispose them, sales revenue should be subtracted from program costs to determine the total cost of recycling. Regional price differences, transportation costs, quality factors and volatility in market prices may dictate that some operations receive money for their materials while others pay markets to accept them.

Finally, the total costs of recycling must be compared with any reduced garbage collection and disposal costs to determine the net costs or savings of recycling.

Figuring It Out To illustrate the point, consider an example in which a municipal recycling program identifies $147,810 in direct and overhead expenses to provide curbside commingled recycling to a community of 15,000 residents. The program collected 1,950 tons of recyclables, and it paid an average of $10 per ton to send its recyclables to a privately operated material recovery facility.

In one year, the community contracted with a private hauler to collect solid waste at a fixed cost of $357,000 for the year, paid a garbage tipping fee of $100 per ton at a transfer station and disposed 9,440 tons of garbage.

The calculations for net cost or savings of recycling are:

* The cost of recycling collection ($147,810) plus the cost of disposing recyclables (1,950 tons at $10 per ton) equals the total cost of recycling ($167,310).

* There are no avoided solid waste collection costs because the contract price is fixed regardless of tonnage.

* Avoided solid waste disposal costs equal 1,950 tons multiplied by $100 per ton, or $195,000.

* Net cost or savings of recycling equals $167,310 minus $195,000, or $27,690 net savings from recycling.

To calculate this figure another way, compare all relevant costs for solid waste management with and without recycling (see chart on page 56).

This simplified example shows that solid waste expenses would increase by $27,690 ($1,496,000 minus $1,468,310) without recycling, but it disregards many factors. For instance, how much recycling would continue if the publicly financed program were eliminated? Any increased recycling tonnage collected by nonprofit organizations or for-profit companies would reduce avoided cost savings by $100 per ton.

Also, collection costs probably would not remain fixed in the long run if the contractor saw a 20 percent increase in the amount of garbage being set out.

Conversely, could the community cut future collection costs by reducing frequency as waste is diverted from the garbage can to the recycling bin? As curbside programs mature and collect more material per household, reducing the frequency of garbage collections becomes more viable.

These and other environmental factors affect the long-term costs or savings of recycling. However, in this example, recycling is a viable option because the community is recovering the savings of $100 for each ton it does not throw away as garbage. Not all communities share in these savings.

Who Saves What? Now consider a recycling program with the same costs as above, but in a community in which the residents contract directly with a private hauler for their garbage collection and disposal. In this case, the community, which has 15,000 residents, has 5,600 households that each pay $360 a year for garbage collection and disposal. The hauler pays the $100 tipping fee.

The total cost of recycling remains unchanged at $167,310 for the 1,950 tons collected but, because residents contract with the hauler, the community has no direct mechanism to realize savings created by the publicly funded recycling program. In this example, the program is a net cost of $167,310 to the community:

* Without recycling, total solid waste costs equal $2,016,000 ($360 per household multiplied by 5,600 households).

* With recycling, add in recycling collection costs ($147,810) and recycling disposal costs ($19,500) and the total solid waste costs equal $2,183,310.

In this simplified example, the private hauler is realizing the savings generated by a publicly financed recycling program. In reality, the residents' annual fee should reflect some of the savings created by avoiding $195,000 in tipping fees (1,950 tons at $100 per ton) for the recyclables collected. On the other hand, if the hauler were allowed to pass these costs directly to residents, their annual garbage bill would rise to $395.

This example shows how intangible the avoided costs of recycling can be. Recycling costs are relatively easy to quantify, but the benefits may not directly accrue to the agency or residents who finance the recycling program.

For this reason, many communities have tried to establish a direct link between the cost and benefits of recycling. For example, per-bag or volume-based pricing of garbage collection allows residents to directly realize the savings of recycling and source reduction. By setting out few-er bags or cans, residents lower their garbage bills.

Other communities have decided to contract directly with one hauler for collection services rather than allowing residents to directly contract with haulers, which allows the community to benefit from increased recycling and reduces total fees paid for garbage disposal.

Without these recovery mechanisms, it may become more difficult to quantify the savings of recycling. An efficient recycling operation can make economic sense if it allows a community to reduce the frequency and volume of garbage collection and disposal.

Curbside recycling of household waste never should be expected to make money or break even. It should be a cost-competitive option to manage solid waste.

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