Developing Recycling Markets and Industries

by Christian Thurner

and Dayna Ashley

Economic Development Program

National Conference of State Legislatures William T. Pound, Executive Director

1050 Seventeenth Street, Suite 2100 Denver, Colorado 80265

444 North Capitol Street, N.W., Suite 500 Washington, D.C. 20001

July 1990

This project was funded by Waste Management, Inc. Views expressed in this report are those of the authors and do not necessarily represent the views of either NCSL or Waste Management, Inc.

Copyright 1990 by the National Conference of State Legislatures. All rights reserved ISBN 1-55516-977-5

Table of Contents

Acknowledgments ......................................................................................................... v

Executive Summary ...................................................................................................... vi1 ..

I . I1 .

I11 .

IV . V .

VI . Appendix A

Appendix B

Appendix C

Appendix D

Appendix E

Appendix F

Appendix G

Glossary .......................................................................................................................... 3~

Recycling: Understanding the Current Context ........................ 1

Recycling as an Economic Development Issue ......................... 9

Economic Development Programs: ............................................. 13 Methods to Assist the Recycling Industry

State Market Development Initiatives ....................................... 19

State Recycling Policy ................................................................... 25

Conclusion ....................................................................................... 29

State Responses to NCSL's Recycling ....................................... 31 Industries and Market Development Survey

Business Development Tools to Encourage Recycling ............ 32

SPI Plastic Container Code System ............................................. 34

1990 State Legislation Regarding ............................................... 36

State Action Regarding Recycling R&D .................................... 37

State Tools for Market Development ......................................... 33

State Recycling Policy ................................................................... 35

Procurement of Recycled Goods

A ,.

iii

Acknowledgments

The authors wish to thank all those people who contributed to this publication. We

would especially like to thank Dan Pilcher and Barbara PUIS for their guidance

throughout the project; Sharon Schwoch, Karen Hansen, and Julie Lays for their

careful editing and proofreading; Rena Roybal for her technical assistance and crisis

management; John Stolzenberg and Preston Horne-Brine for reviewing the

manuscript; and Keith Jackson, William Moore, and Charles Bayley at Waste

Management, Inc. for supporting the project and its authors by providing resources,

offering assistance, and reviewing the report.

V

Executive Summary

Because of the growing waste management crisis, the need to conserve increasingly scarce resources, heightened environmental consciousness, and public support for tougher environmental policies, recycling has recently become an important public policy and economic development issue at the state level. Recycling can play a critical role in a state’s integrated solid waste management plan by significantly reducing the volume of solid waste, while also conserving valuable energy and resources.

States have looked at recycling as a way to alleviate some of their solid waste management problems. In the last two years, recycling has become a top issue on state legislative agendas. Early efforts to promote recycling were unfocused and in some cases burdened existing markets. States are beginning to realize, however, that recycling is not only an environmental and solid waste management issue, but that it is also an economic development one.

This report addresses market development as a critical approach that many states can use to help recycling succeed. States are adapting traditional economic development efforts as well as using innovations such as strategic planning and comprehensive market research to match quality supplies with the demand for recycled materials. Of the 48 states and territories responding to NCSL‘s survey, 21 indicated that they have coordinated recycling with their economic development programs.

States that are using these innovative strategies are achieving greater success in their recycling efforts. For example, Washington’s marketing programs and policies, combined with heightened consumer consciousness, have yielded the nation’s highest recycling rate-- 22 percent of the munici a1 solid waste (MSW) stream. New Jersey is another state that is

approach is gaining acceptance among other states. NCSL‘s survey indicates that 31 states have undertaken studies on developing recycling markets.

successfully using such e F forts to promote its recycling programs. This comprehensive

States are more actively involved in developing recycling markets and industries than ever before. Thirty-six states, representing both urban and rural areas, provide some type of business incentive to encourage the development of recycling industries. (See Appendix B.) These incentives include incubators, venture capital, grants and loans, tax incentives, enterprise zones, and training programs. Thirty-eight states provide incentives to develop recycling markets. These incentives include bans, mandates, taxes, and tax incentives. (See Appendm C.)

vii

A number of initiatives can be implemented to encourage recycling’s success:

o Adopting state initiatives to encourage development of recycling industries and markets.

___ o Establishing collection and procurement policies to require recycling and the use of

recycled goods.

o Passing uniform federal standards regarding the content of recycled products to allow recyclers to operate more consistently.

o Adopting state tax and financial incentives to encourage recyclin pro rams and elimnate the disparity between federally subsidized raw materia f ( f s an recycled materials.

o Conducting state market development studies to help identify specific strengths

o Instituting performance evaluations of specific policies and programs to allow a

and weaknesses in the recycling climate.

state to judge the effectiveness of its recycling programs.

o Encouraging interstate cooperation to allow states to develop recycling markets and industries by examining and utilizing regional markets and industries that are unavailable within their own borders.

... Vlll

I

Recycling: Understanding the Current Context

Introduction

In the last two years, recycling has become a top issue on state legislative agendas because of public concern over problems such as solid waste management, environmental pollution, energy conservation, and resource management.

Early state recycling efforts encouraged the collection of materials but largely ignored the market demand for such materials. Conse uently, state efforts were not always successful and sometimes even produced gluts o 7 recycled materials.

Within the last year, a small number of states, such as New Jersey, Washington, and Wisconsin, have taken steps toward a comprehensive strategy to establish recycling markets. In addition, almost half the states have integrated their recycling programs with their economic development efforts, a fact not widely recognized. Just as they encourage the growth and development of industries such as manufacturing, biotechnology, or microelectronics, states are nurturing the recycling industry through programs such as tax incentives, research and development, capital financing, and--mos t import ant--marke t development.

Recycling is not just the separation and collection of waste goods that have the potential for reuse. Recycling is a cycle that starts with the collection and separation of reusable materials from the waste stream. These materials must find buyers on the market who process them into new raw materials, which businesses then buy and manufacture into competitive products. Eventually, consumers buy the new goods made from recycled materials, thus completing the cycle. Comprehensive market development efforts must address each of these stages and some other key issues, such as the state policy role, research and development, transportation, and consumer consciousness to help ensure the success of recycling in today's modern economy.

The Emerging Solid Waste Crisis

A shortfall in solid waste disposal capacity has been developing in the United States over the last 20 years. This shortfall has developed mainly in the major urban areas and the industrialized states, but it is beginning to affect the entire nation. In 1986, the U.S. Environmental Protection Agency (EPA) estimated that the nation was generating 157.7 million tons of municipal solid waste per year and that this would increase 25 percent by the year 2000.1 EPA pro'ected that by 1996,33 percent of

standards of Section D of the 1976 Resource Conservation and Recovery Act (RCRA).2

Disposal costs are escalating and, in some major urban areas, disposing of MSW runs from $40 to $120 a ton? The national average has increased by more than 30 percent from 1987 ($20.36 a ton) to 1988 ($26.93 a ton)! In New Jersey alone, almost $1 billion a year is spent on solid waste management? Because of increased

existing landfills will close because they will be L 11 or will not meet the revised

1

federal, state, and local government regulations, new landfill and incinerator space is becoming harder and more costly to site. Meanwhile, older areas continue to close.

In recent years, environmental concerns such as solid waste disposal and air and water quality have also become economic development issues. Public awareness has increased about improving water quality, disposing of toxic substances safely, and slowing the depletion of nonrenewable resources.

___

In light of these mounting concerns, many states--California, Ohio, and Wisconsin, for example--have adopted a new approach: integrated solid waste management. While no fixed formula exists, this method usually includes the following components:

o Waste Reduction. Changes in marketing, manufacturing, and consumption to reduce waste generation.

o Recycling and Reuse. Recovering marketable materials from the waste stream for processing into new materials and manufacturing new products containing recycled materials (including composting).

o Resource Recovery and Incineration. High-temperature controlled combustion of waste for its energy content.

o LandfiZZs. Isolating unburnable materials and combustion ash in environmentally safe landfills.6

This comprehensive approach can be used to minimize the amount of waste that ends up in landfills, while maximizing the benefits of materials that can be extracted from the waste stream.

Recycling's Role in Integrated Waste Management

The recycling of products from the waste stream holds considerable promise as part of an integrated solid waste management approach to the solid waste crisis. In NCSL's March 1990 Recycling Industries and Market Development Survey, 43 of 72 respondents from legislatures, executive agencies, and state coordinators from the American Society of Mechanical Engineers ranked "recycling as a component of your state's future solid waste management system" highest while 18 ranked it next highest, on a scale of one to five, with "one" being the highest rating.*

About 11 percent of the solid waste stream in the United States is recycled, 6 percent is incinerated, and the remaining 83 percent is placed in landfill^.^ In comparison, other developed countries have higher recycling rates. For example, Japan's is about 42.9 percent? That country has achieved economic benefits because it has integrated recycling into the economic infrastructure. The Japanese have a saying about wastes: "Mix them and you get garbage, separate them and you get resources."9

Other nations, admittedly, have different population, resource, and land use characteristics and ener

difficult to appraise. Still, those nations have preserved some important raw materials and lowered energy costs. Steel made from scrap uses 47 to 74 percent

* Note: All survey respondents did not answer each question.

costs than those of the United States. These differences make the comparison o P recycling rates between the United States and other nations

2

less energy and causes 85 percent less air pollution and 76 ercent less water pollution. Making paper, aluminum, or glass from recycle B materials produces similar savings. (See Table 1.) Scrap metal and waste paper are the two largest export items from the port of New York. "To the Taiwanese, Koreans, Mexicans, and Japanese, our 'scrap' is a valuable raw material that permits them to make equivalent paper and steel products with lower material and energy costs."10

Table 1. Environmental Benefits Derived from Substituting Recycled Materials

for Virgin Resources (percentages)

Environmental Benefit Aluminum - Steel PaDer Glass

Reduction of Energy Use 90-97 47-74 23-74 4-32

Reduction of Air Pollution 95 85 74 20

Reduction of Water Pollution 97 76 35 --

Reduction of Mining Wastes -- 97 __ 80

Reduction of Water Use _ _ 40 58 50

Source: Robert Cowles Letcher and Mary T. Sheil, "Source Separation and Citizen Recycling," in William D. Robinson, ed., Die Solid Waste Handbook (New York: John Wiley & Sons, 1986).

West Germany generates 60 percent of the waste per capita that the United States does, while France generates 40 percent. In West Germany, about 15 percent of the solid waste stream is recycled.11 Nations that have achieved high levels of recycling and lower levels of waste generation are also able to manage their solid waste disposal problems better.

Each year, almost 160 million tons of MSW is disposed of in the United States. This waste consists of 50.1 million tons of paper and paperboard, 11.8 million tons of glass, 12.6 million tons of metals, 10.3 million tons of plastics, 28.3 million tons of yard wastes,12 and 168 million tires.13 Paper, plastics, glass, metals, and yard waste alone make up 82.3 percent of the MSW stream.14

Advantages of Recycling

Recycling materials from the solid waste stream provides advantages for states, municipalities, and industry. A steady, phased increase in the percentage of the waste stream that is recycled can help states and municipalities deal significantly with their solid waste management, air pollution, and water quality problems. Every ton of MSW that is recycled means that another ton of important nonrenewable resources has not been consumed. Manufacturers can achieve substantial cost savin s by using recyclables in the manufacturing process. Table 1 shows some

the waste stream. bene i! its that are inherent in the recycling and reuse of some common products from

3

Avoided cost is another advanta e from recycling that is important to consider.

subsidies. By contrast, solid waste disposal programs are often subsidized and the true cost of disposal is actually hidden. Policymakers should consider as offsets to the cost of recycling programs (1) the tipping fees (fees charged for each load of MSW) that have been avoided, (2) reduced traditional collection expenses, and (3) the future value of saved landfill space.15

Some state and municipal recyc f ing programs that are unprofitable receive

It is unreasonable to assume that all potential recyclables could be completely diverted from the waste stream. Although it is obvious that a vast amount of material is available for recycling and reuse, the amount of MSW that can be recycled is debatable. In 1988, the Waste Recyclers Council said that at that time 25 percent was possible. Some states, however, have achieved notable success in their

above the national average (see Figure 1).

recycling efforts. For example, Maine 17 percent , New Jersey (14 percent), Oregon (16 percent), and Washington 22 percent t have achieved recycling rates

Current Problems with Recycling

Millions of tons of postconsumer materials, materials recovered from the waste stream after consumer use, are discarded annually even though considerable financial and environmental benefits from recycling exist. The potential of recycling has as yet not been realized.

The low value of recyclables, product contamination, unfair advantages that virgin materials possess, bias against using recyclables, transportation problems, technological limits, and low consumer demand are some of the major obstacles to manufacturers’ using more recycled content in finished goods.

Many recyclables have low value and are peripheral to the network of distribution and consumption. Old newspaper (ONP), for example, is now worth $25 or less a ton16 in most areas of the country while it may cost nearly as much to transport that ton of ONP as new newsprint, which sells for about $550 a ton?

If recyclables have already entered the waste stream, they are harder to identify and sort. In-addition, it is more difficult to prevent their contamination, which can occur either from foreign materials such as food, oils, dirt, and ink or from other grades of the same material. In the case of mixed grades of recyclables, paper, for example, commands prices based on the value of the lowest grade of paper in the batch.

Most recycled goods compete with virgin primary materials and have a role only as secondary materials. The demand for secondary goods is based on fluctuations in virgin or primary materials markets and secondary materials markets. The latter are inherently cyclical and volatile, which affect the demand for recycled goods. The shutdown of a processing facility that accepts secondary materials or the output of several new recycling programs can greatly affect the price of that material even when prices for virgin materials are relatively stable. In many cases, the demand for recycled materials is also low because of inconsistent supply and variations in quality.l* Gluts in the ONP markets in the Northeast in the mid-1980s drove ONP prices from $25 a ton to next to nothing or even a charge to take it, although those markets are now experiencing a relative recovery.19

4

5

Recycled materials do not compete against virgin materials on a level playing field because the latter are often subsidized by federal and state governments through tax incentives, intrastate rail and truck transportation tariffs, timber sales, and energy subsidies. For example:

Twenty-two percent of the nation's timberlands are owned and managed by the federal government. The government builds roads to access this timber, manages timber resources, and reforests as timber is cut. Private logging operators harvest the trees from federal government land. Under an eighty-five-year-old policy called "residual value pricing," the management efforts of the federal government are not taken into account in the price charged the logging operators for the trees. It is estimated that the federal government subsidized certain private sector lo ging operations between 1975 and 1985 in the amount of two bi P lion dollars.20

Recycled materials and goods must overcome three levels of perceptual bias to gain acceptance in the market. (1) Manufacturers who traditionally use virgin materials are resistant to using recycled secondary materials. They feel that virgin materials are a "known quantity" and that they can predict their performance over time.21 (2) Processors are sometimes unaware of the quality standards that recycled materials must meet and are hesitant to supply recycled oods as raw materials.

those made from virgin materials. (3) Consumers often feel that products made from recyc f ables are not as good as

Transportation costs also have an important effect on recycling. The cost of transporting low-value, low-density material is often too prohibitive to permit the successful collection of recyclables for processing. In many states, the distance between collection points and processing facilities makes recycling uneconomical.

The limits of technology prevent the reuse of many materials from the solid waste stream. Recycling technology is in its infancy, and it is changing fast. New uses for old paper, plastics, glass, and tires and new methods for composting organic materials could reduce the volume of the waste stream. It also could make the market for recyclables even larger and more stable.

Inadequate consumer demand for and awareness about the quality and availability of recycled products also limit the market for recyclables. Yet Americans rank garbage disposal next to improved education as the major issues about which local officials should be concerned.22 Consumer awareness is an important component to help increase the demand for recycled goods.23

6

Notes

1. Promoting Source Reduction and Recyclability in the Marketplace

2. bid. 3. N S W A Annual Tip Fee Survey (Washington, D.C.: National Solid

4. Ibid., p. 1. 5. John F. Ruston, "A Level Playing Field for Recycling Finance," Resource

6. Frank Kreith, Solid Waste Management (Denver, Colorado: National

7. Promoting Source Reduction and Recyclability, p. 10. 8. "More About Recycling in Japan," C O W Newsletter (November 1988):

9. William L. Kovacs, "The Coming Era of Conservation and Industrial Utilization of Recyclable Materials," Ecology Law Quarterly 15, no. 4 (1988):

(Washington, D.C.: Environmental Protection Agency, Office of Policy, Planning, and Evaluation, 1989), p. 8.

Waste Management Association, 1989), p. 3.

Recycling (December 1989): 29.

Conference of State Legislatures, 1989), pp. 3-4.

1-3.

C O I

10. Ibid., p. 544. 11. Resource Recovery Round U p (Washington, D.C.: National Solid Waste -

Management Association, 1989), p. 3.

Office of Technology Transfer, University of Illinois, Center for Solid Waste Management and Research, 1988).

Environmental Protection Agency, 1989), section 6, p. 7.

Bureau, Science and Technology Division, 1989 5 , p. 2.

12. Martin S. Jaffe, The Recycling of Municipal Solid Waste (Chicago, Illinois:

13. State Solid Waste Management Plan (Columbus, Ohio: Ohio

14. Managing Solid Waste: Recycling (Lansin , Michigan: Legislative Service

15. Jaffe, The Recycling of Municipal Solid Waste, p .59-63, passim. 16. "The Markets Page," Recycling Times 1, no. 21 Q December 19, 1989): 5. 17. "Commodities," Recycling Today 28, no. 3 (March 15, 1990): 32-34. 18. Preliminary Report to the Legislature (Seattle, Washington: Washington

19. "The Markets Page," p. 5. 20. Kovacs, "The Coming Era of Conservation," p. 616. 21. Managing Solid Waste, pp. 10 and 15, passim. 22. Promoting Source Reduction, p. 3. 23. Ibid., p. 4.

Committee for Recycling Markets, 1990), p. 15.

7

I1

Recycling as an Economic Development Issue

In the 99Os, states will need to develop and integrate adequate solid waste c,,posal and recycling policies and programs as a part of their economic development strategies to ensure economic growth in an environmentally sound manner. State legislatures can play a significant role in this process. The growth of environmental and solid waste problems has had a substantial impact on both the U.S and state economies. In NCSL's survey, on a scale of one to five, 20 of 70 respondents ranked ''the significance of environmental problems as an economic development issue" first, while 26 ranked it second.

The availability of adequate solid and hazardous waste disposal facilities is a growing factor for the location, relocation, and retention of firms. In NCSL's survey, 11 of 71 respondents ranked "the availability of recycling industries and infrastructure as a factor in business location" first, while 16 placed it second.

It is evident that recycling is becoming an important economic development issue, with 12 of 70 respondents ranking this area first, while 15 rated it second.

Some analysts believe that in the early 1980s "the federal government abandoned the states in their efforp to address the solid waste problem and encourage the use of recovered materials. 1 The New Federalism of the 1980s resulted in the states' taking the lead on solid waste management issues.

As disposal capacity continued to shrink and incinerator siting was more of a problem, recycling has become a major component of state solid waste management plans. States are developing recycling plans and programs both individually and through cooperative interstate regional efforts such as the Northeast Recycling Council (NERC) and the Midwest Recycling Coalition.

States have a long history of economic development activities to aid individual firms as well as industries such as agriculture, manufacturing, natural resources, and high technology. This state role is justifiable because the public pu ose is being served through this action, jobs are created, tax revenues increase, an 'B personal income rises.

Water and sewage treatment services are subsidized by the taxpayers in order to enhance local growth and to protect environmental resources. Similarly, [states and] municipalities should regard local recycling programs as serving these same public functions with respect to solid waste management?

The State Role in Market Development

To promote recycling, some states have actively facilitated the development of recycling markets. When the NCSL survey asked about "the importance of market development as it relates to the success of recycling in your state," 47 of 72 respondents ranked it first, while 11 ranked it second.

9

Washington is currently the nation's leader in the percentage of materials recycled from the municipal solid waste stream (22 percent; see Figure 1). David Dougherty, director of the Business Assistance Center, a division of the Washington Department of Trade and Economic Development, attributes this leadership to market development efforts by the state and a high degree of consumer consciousness. The initiative for these successful market development efforts was a result of "the legislature recognizing the need to focus on increasing demand to keep up with the anticipated supply that would be coming from curbside collection programs initiated in the state.lI3

In a recycling context, market development means developing the demand and then the supply to match that demand for recycled materials and goods. States can break up the roadblocks that keep rivate industry from using re cled raw materials while

problems. A vast amount of potentially usable postconsumer material can be collected, infrastructure developed, markets organized, and new products and processes found that use recycled materials.

States will not develop recycling by going into that business themselves. Since private industry comprises the bulk of the economy, its consumption patterns will be the deciding factor in the increased use of recycled materials and the success of recycling in the states. There is an increasing number of publicly owned materials recovery facilities, however, and their roles need to be defined carefully as a matter of state policy to service the residential sector. Where private markets operate effectively, policymakers need not be involved?

creating jobs and growth an B dealing with increasing landfi r 1 and environmental

One role that many states have chosen is to act as a catalyst in the development of recycling markets and industries. States can help private industry fill in market gaps, encourage the use of recycled goods, and point out potential supply and demand sources. Some states, such as Pennsylvania, have established data bases that match supplies of recycled goods and materials to prospective buyers?

Legislatures can affect the development of recycling markets at many points in the cycle. For example, they can help reduce many barriers to recycling that already exit. States can implement source separation and aid in the collection process to establish a supply source that is larger and more reliable. State policies can help processors and manufacturers finance plant start-up and the purchase of capital equipment. States can stimulate demand by becoming reliable consumers of recycled goods. Demand will also increase when manufacturers begin to use significant percentages of postconsumer recyclables in their basic materials. State support for research and development to find new ways to process and use recycled materials and to design new products is another major contribution to increasing market demand. States can also encourage manufacturers to design recyclability into new products as they enter the market.

Comprehensive Market Development

Legislatures can play a critical role in developing recycling markets and industries. Policymakers should be aware that initiatives at one point in the recycling process can have an effect elsewhere. State initiatives, for instance, often stop at source separation and collection, which is only the beginning of the cycle. Unless the collected materials can be sold to processors and then to manufacturers to be made

. -

l o

into new products, the cycle is incomplete.

A comprehensive market development approach, therefore, will link processors and manufacturers to steady, high-quality supplies from collection programs. These basic materials can be bought by manufacturers of finished goods to make products with recycled content.

Pennsylvania and New York, for example, have voluntary agreements with the state newspaper publishers’ associations to implement a phased increase in the use of postconsumer fiber content into newsprint. At the same time, both states are attempting to coordinate their ONP supplies with a siting decision for a major de- inking facility to be located in the Northeast?

11

Notes

1. William L. Kovacs, "The Coming Era of Conservation and Industrial Utilization of Recyclable Materials," Ecology Law Quarterly 15, no. 4 (1988): 560.

2. Martin S. Jaffe, The Recycling of Municipal Solid Waste (Chicago, Illinois: Office of Technology Transfer, University of Illinois, Center for Solid Waste Management and Research, 1988), p. 50.

3. David Dougherty, Director, Business Assistance Center, Washington Department of Trade and Economic Development, May 25,1990: telephone conversation.

4. Thomas A. Hemphill, "Strategic Advantage Helps Climate for New Recycling," Recycling Today (February 1989): 135.

5. Six Month Progress Report: Recycling Market Development (Harrisburg, Pennsylvania: Governor's Market Development Task Force, 1989), p. 11.

6. bid., p. 6; and Press Release, Executive Chamber, State of New York, December 17, 1989.

12

Economic Development Programs: Methods to Assist the Recycling Industry

The recycling industry includes marketing, collection, transportation, processing, manufacturing, and research and development. Economic development programs can assist each component through a variety of strategies. Tax incentives, grants and loans, venture capital, enterprise zones, managerial and technical assistance, and job training programs are some of the common economic development tools that states use to assist this growing industry.

In some cases, traditional economic development programs are being accessed by the recycling industry. In other instances, new programs are targeted specifically at this group.

Tax Incentives

Most states use tax incentives to some degree to foster the relocation, start-up, or expansion of industry to enhance their economic climates. To encourage investment by private industry, a tax incentive may be a deduction, exemption, tax credit, or reduced tax rate on sales, property, or income taxes1

The goal of tax incentives for the recycling industry is to encourage private industry to install new, or retrofit existing, machinery with components that will increase the capacity to process or manufacture recycled goods. Other tax incentives are designed to encourage the production of recycled goods or goods with a certain percentage of recycled content. A state benefits both by reducing the amount of waste materials being placed in landfills and by saving on natural resources and energy consumption.

Many federal programs are designed to subsidize the production and sale of virgin raw materials. These federal programs have included tax breaks for the timber and energy industries and for the transportation of virgin raw materiak2 Similar to agricultural subsidies, these provisions allow the market for certain industries to function artificially, thus making it difficult for recycled materials to be competitive. Because of growing problems, such as solid waste management, environmental pollution, energy conservation and resource management, states have begun to provide tax incentives to the recycling industry to encourage its expansion. Tax incentives have the potential to eliminate some of the economic disparities between virgin and recycled goods.

.

NCSL's survey of legislatures and executive agencies asked whether states had enacted legislation to provide tax incentives to the recycling industry. Representatives from 48 states and territories responded to the survey. Of those respondents, 16 said that they used such tax incentives (see Appendix B). California, New Jersey, North Carolina, and Oregon have established recycling investment tax credit programs for the purchase of recycling machinery and eq~ipment .~ New Jersey provides a 50 percent business income tax credit for equipment to transport recyclables.4 Oregon provides tax credits for equipment,

13

property, or machinery necessary to collect, transport, or process reclaimed plastic?

Indiana, Kentucky, North Carolina, and Wisconsin use property tax exemptions to encourage recycling industries: Sales tax exemptions for recycling equipment are employed by Illinois, New Jersey, and Wisconsin?

At this time, it is uncertain how effective tax incentives are at encouraging private investment. The Illinois Department of Natural Resources conducted a study to determine the impact of tax credits on private investment for the recycling industry. The study, Feasibility of Tax Incentives for Purchases of Recycling Equi ment or

to provide financial incentives in Illinois." Some reasons cited for this conclusion include feedback from Illinois businesses that indicate a tax incentive of 1 percent or less of gross sales is not sufficient to influence business decisions. Furthermore, many recycling companies are nonprofit organizations and have no state tax obligations. Thus, a tax incentive provides no benefit to a nonprofit organization?

Recycled Products, concluded that "state tax incentives are not a cost-ef F ective way

Grants and Loans

States may choose to provide grants and loans to private industry or provide grants to localities that are attempting to implement comprehensive waste management programs. Grants and loans provide states with a versatile, flexible tool to encourage growth of the recycling industry.

NCSL's survey found that grants and loans are the most popular way by which states assist recycling industries with capital financing. Of the 48 states and territories that responded, 25 said that they use grants and loans as a means to promote the recycling industry (see Appendix B).

The New Jersey Office of Recycling provides business loans for recycling processors and manufacturers.9 In addition, the state Department of Environmental Protection funded the expansion of a paper mill to increase the mill's ability to process paper products returned by consumers. Minnesota offers grants and loans for tire recycling operations.10 Pennsylvania established the Environmental Technology Loan Fund for recycling processors and manufacturers to purchase or upgrade equipment or machinery.11 New York's Office of Recycling has the Secondary Materials Technology Adoption Loan Program that offers loans to businesses for equipment and facilities.12 Both Michigan and Illinois have low-interest loan funds available for recycling programs.13

In Iowa, the Landfill Alternatives Grant Program, established in 1987, provides grants to private industry and localities for feasibility studies, research and development, technical assistance, and curbside recy~1ing.l~ The funds for the Iowa program come from the Exxon oil overcharge funds and from landfill fees. Oklahoma's grant program is also funded from Exxon oil overcharge funds and provides grants for capital expenditures to start up or expand recycling activities.lS

Maine's grant program, which is funded from a $5 million bond issue, provides capital grants to municipalities for recycling business assistance. Louisiana's grant program funds parishes to develop recycling plans or hire recycling coordinators. Florida, Indiana, Pennsylvania, and Wisconsin provide grants to localities to develop re cycling programs .I6

14

Venture Capital

State venture capital programs, either directly or indirectly, increase the amount of equity or risk capital available to private firms.17 Venture capital is provided to new firms to enhance the entrepreneurial climate. Measurable goals such as job creation and an increased tax base are usually linked to successful venture capital programs.

Venture capital programs for the recycling industry can be structured to address its diverse needs. For example, small businesses that process waste materials to send to manufacturers for recycling are capital intensive but do not employ a large number of people nor pay significant taxes.18 Nonetheless, a state can assist the recycling industry as a whole by supporting such firms with venture capital. Traditional measures of success for venture capital, however, may not be applicable to this specific sector of the recycling industry.

Nine states reported on the NCSL survey that they have venture capital programs that can support the recycling industry (see Appendix B).

Enterprise Zones

Enterprise zones were created in the early 1980s to combat urban and, in some states, rural decline and encourage private investment in distressed communities.19 Enterprise zones combine a variety of tax and other incentives to make specific areas more attractive to existing or new business. These incentives include a combination of tax incentives, property tax credits, low-interest loans, and job training. Twenty-nine states have enacted legislation authorizing enterprise zones.2O Of these states, seven indicated that they use enterprise zones to promote the recycling industry (see Appendix B).

Enterprise zone programs vary in resources and scope. For example, Connecticut’s enterprise zone program includes the following incentives:

o Low-interest venture capital and small business loans; o Reduction in the state corporate business tax; o Rebates for job creation; o Exemptions from sales tax for manufacturing machinery parts; o Employment training vouchers; and o Real and personal property tax abatements for manufacturing projects.21

Research and Development

The recycling industry must continue to expand and become more efficient to comprise a larger component of solid waste management. One way of accomplishing this is by discovering and implementing new processes that allow manufacturers and processors of waste products to operate more efficiently. Research and development (R&D) is necessary to expand the recycling industry. So far, approximately half the states have supported such efforts.

States have established small business incubators to increase the number of high- tech jobs; these incubators may be affiliated with a college or university. Incubators provlde affordable working space, administrative and professional services, and a variety of unique amenities designed to assist small businesses22 Fourteen states

15

have incubator programs that can encourage recycling R&D (see Appendix B).

Small business incubators are just one mechanism states use to support R&D. High-tech centers and direct funding also promote such efforts. Twelve respondents indicated that their states have either passed legislation or allocated funding for the development or support of high-tech R&D centers for recycling. Twenty-four states and Puerto Rico provide R&D funds for recycling research (see Appendix G).

Many states draw on the resources of both higher education and the private sector to support and expand recycling technology:

The Delaware Solid Waste Authority (DSWA) has supported a national demonstration project involving a plant for the reclamation of glass and aluminum, and has invested $1 million for landfill research, which includes research such as mining landfills to recover valuable material^?^

Oklahoma has funded a recycling waste reduction project from Exxon oil overcharge funds. The project is administered and performed by the Science and Public Policy Program at the University of Oklahoma.24

Texas has appropriated funds for a waste reduction and minimization research project, which is conducted by Lamar University.25

New Jersey has helped establish the Plastic Recycling Institute at Rutgers University. This project is a public/private venture to support R&D for the plastics industry.

Massachusetts and Rhode Island have supported the American Plastics Recycling Center, which combines the ex ertise of private industry, Lowell

Department of Environmental Management?6 University, the Massachusetts Division o P Solid Waste, and the Rhode Island

The success of recycling will depend on the ability of the public and private sectors to coordinate research and development efforts. Expansion and innovation in the area of recycling will be linked to successful R&D programs.

Job Training Programs and Technical/Managerial Assistance

Twenty states have job training programs that are targeted to workers in the recycling industry (see Appendix B). Such assistance is important because of the technical nature of recycling and because development of the recycling industry as a whole should be coordinated. In addition to training programs for employees and managers, some states offer technical assistance to those working to create or expand recycling industries. Several states have technical assistance programs that assist the recycling industry:

o California’s Waste Management Board offers technical assistance to users of recycled goods. In addition, California sponsors numerous conferences designed to disseminate recycling information to local g0vernments.2~

Maine’s WASTECAP program provides technical assistance on a voluntary basis to businesses and industries interested in minimizing the amount of waste products they produce?*

o

16

o Nebraska’s Department of Environmental Control includes technical assistance as part of the Litter Reduction and Recycling Program.29

Ohio’s Division of Litter Prevention and Recycling offers technical assistance for local recycling programs.%

o Pennsylvania’s Technical Assistance Program (PENNTAP) is administered by the Ben Franklin Partnership to promote technology transfer.31

o Mississippi offers technical assistance in recycling and waste minimization through Mississippi State University’s MISSTAP program22

o

17

Notes

1. Franklin Associates Ltd., Pennsylvania Recyclable Materials Market Development Study (Harrisburg, Pennsylvania: Department of Environmental Resources, Bureau of Waste Management, 1988), p. 6-6.

2. John F. Ruston, Developing Markets for Recycled Materials (New York, New York: Environmental Defense Fund, 1988), p. 2.

3. Thomas A. Hemphill, "State Incentives for Private Sector Recycling," BioCycle (May/June 1988): 57.

4. Ruston, Developing Markets, p. 24. 5. Oregon Senate Bill 1083, 1989. 6. Franklin Associates Ltd., Pennsylvania Recyclable Materials Market,

7. Ibid. 8. Feasibility of Tax Incentives for Purchases of Recycling Equipment or

9. Hemphill, "State Incentives," p. 57.

p. 6-7.

Recycled Products (Springfield, Illinois: Department of Energy and Natural Resources), pp. 1-4.

10. Franklin Associates Ltd., Pennsylvania Recyclable Materials Market,

11. Thomas A. Hemphill, "Recycling Capital: From Public Sources to

12. Ibid. 13. Ibid. 14. Landfill Altematives Grant Program (Des Moines, Iowa: Grant

15. NCSL Recycling Markets and Industry Development Survey, 1990. 16. Ibid. 17. Gary Bettger, "State Venture Capital Initiatives," State Legislative Report

11, no. 2 (February 1986): 3. 18. Recycling Today (December 1988): 58. 19. Julian Weiss, "Enterprise Zones Are Just Part of the Answer for

Reviving an Urban Economy," Governing (August 1988): 57. 20. Ibid. 21. Enterprise Zone Update (Washin ton, D.C.: U.S. Department of Housing

and Urban Development, May 27,1986 'i . 22. David N. Allen, Jonathan Gorham, and Tripp Peake, "Small Business

Incubators," Economic Development Commentary 11, no. 2 (Summer 1987): 6-8. 23. NSCL Survey, 1990. 24. Ibid. 25. Ibid.; Mark Smith, Chief Clerk, Texas Committee on Environmental

26. John F. Ruston, Developing Markets , p. 17. 27. Franklin Associates Ltd., Pennsylvania Recyclable Materials Market,

28. NCSL Survey, 1990. 29. Franklin Associates Ltd., Pennsylvania Recyclable Materials Market,

30. NCSL Survey, 1990. 3 1. Franklin Associates Ltd., Pennsylvania Recyclable Materials Market,

32. NCSL Survey, 1990.

p. 6-2.

Private Innovators," In Business (in press).

Recipients, 1987- 1990).

Affairs, NCSL Recycling Survey response.

p. 6-42.

p. 6-42.

p. 6-43.

18

IV

State Market Development Initiatives

States have a broad range of economic development programs to encourage markets for recycled materials and goods. Although market forces are the primary motivator in developing supply and demand, such tools can be useful in particular situations. State policy initiatives can encourage or discourage specific behaviors or outcomes.

Steps that enhance the climate for recycled goods include mandates to require source separation, re lations to require encoding of plastics, goals to recycle a

goods, market studies to assess recycling potential, interstate cooperation programs to develop and coordinate regional markets, and tax incentives to promote affordable transportation of recycled goods.

Some initiatives that discourage specific business and individual consumption include taxes on goods or packaging to finance recycling, taxes on basic materials that lack a specified percentage of recycled content, and bans on certain types of packaging and nonrecyclable materials.

certain percentage o i? MSW, incentives to encourage private users to buy recycled

Source Separation

Mandates to require source separation are important in the beginning of the recycling process to he1 develop reliable supplies of materials. Source separation

prevents the contamination and preserves the value of recycled materials. keeps recyclables out o P the waste stream and reduces the volume of MSW. It also

Such mandates can produce a lut of recyclables and can lead to poor quality in the

markets are unavailable for those new materials. Collection systems must be sensitive to market conditions. Mandatory source separation systems can be ineffective unless they are enforced and there is a place in the market for the pr0ducts.l

materials collected, however, i B implementation plans occur too quickly and if

New Jersey and Rhode Island were the first states to introduce mandatory source separation and recycling.2 According to NCSL’s survey, 14 states have mandated some form of source separation, which may include rules for communities and counties of certain sizes to follow this practice. Some states accomplish this by banning recyclables from landfills. New Mexico requires only state agencies and educational institutions to separate recyclables.

Encoding of Plastics

Replations to require the encoding of plastics are helpful because of the many varieties of plastics (see the Glossary). Encoding symbols have been established for major plastic resin groups such as PET, HDPE, LDPE, and others, by the Socicty of the Plastics Industry (SPI) (see Appendix D). Recycled plastics, when separated by

19

resin group, command better markets, prices, and a wider range of uses.

State legislatures can mandate this coding system for plastic containers to promote uniform markets. Twenty-two states, almost half of those answerin the survey, indicated that they had adopted plastics encoding regulations. Mic a igan and Oklahoma are two states that have passed such encoding laws.3

Goals or Mandates to Recycle a Percentage of MSW

By establishing goals or mandates to recycle a certain percentage of the solid waste stream, states can help ensure a steadily increasing supply of recyclables while potentially decreasing the total volume of the munici a1 solid waste stream.

"in the long run, market demand will control the amount and type of materials which can be recycled."4

Twenty-three states and Puerto Rico indicated in the survey that they have established goals or mandates to recycle a certain percenta e of the solid waste

generated each year, to be reached by January 1,1994, and an interim goal of 25 percent to be reached by January 1, 1992.5 Minnesota has mandated that "non- metro counties must re cle 25 percent of their solid waste stream; and metro counties must recycle 3 7 percent. If they fail to meet these goals, mandatory standards may be recommended for legislation."6 Currently, Ohio recycles only 5 percent or less of its solid waste. H.B. 592 established the Ohio state solid waste management plan, which aims to reduce, reuse, and recycle 25 percent of the state's per capita waste by 1994.7

Percentage recycling goals can be deceptive and har dp to achieve, however, because

stream. Some of these recycling percenta es are also man c f ated to increase over time. Maine has established a state recyc B ing goal of 50 percent of the MSW

Incentives for Private Users

Incentives to encourage private users--businesses and individuals--to buy recycled goods can help increase demand. Such incentives are a useful means to introduce recycled oods to consumers, which can help overcome traditional resistance to

niche if they exhibit favorable price and quality.

NCSL's survey showed that these incentives are as yet not widely used, with only eight states indicating that they had such provisions. Wisconsin's broad new recycling law, S.B. 300, created a rebate program to increase recycling of waste primarily generated in the state. It provides for one-time rebates on machinery used exclusively in recycling and up to five annual rebates to offset the increased costs of making products comprised of postconsumer waste?

using suc !t products. These products may eventually establish their own market

Market Development Studies

Without some basic knowledge of a state's waste stream characteristics and the condition of recycling markets, state policymakers can not begin to develop comprehensive recycling programs. Thirty states and Puerto Rico have initiated market development studies to examine the potential for recycling, according to NCSL's survey. These studies also recommend strategies to develop recycling

20

markets. Such studies also assess existing recycling programs, strategic planning and policy options, lon -term market trends, recycling prospects for specific commodities, and % arriers to market development.

Interstate Cooperation

Interstate cooperation on developing regional markets to pool supplies of recycled materials is an important state policy. In many regions of the United States, there are few if any markets that bu recycled materials. By working together, states can

to a multistate market and that can use the region's available recyclables. Previous lack of interstate cooperation on solid and hazardous waste disposal issues may have an adverse effect on developing the consensus necessary for this type of market development.

Twenty-two states are engaged in some form of interstate cooperation as part of their recycling market development efforts (see Appendix C). The Northeast Recycling Council and the Midwest Recycling Coalition are currently the largest regional cooperation efforts of this type.

locate or site recycling firms t li at possess the necessary economies of scale relative

Transportation Tax Incentives

Trans ortation is a key issue for the recycling industry. Collection, processing,

the point of collection to rocessing sites, manufacturing firms (both of which may

Ruston, staff economist with the Environmental Defense Fund (EDF), "Seconda materials [waste products collected for recycling] often exhibit both low value an low density, which makes transportation costs and distance to markets critical to the profitability of the recycling industry.'9

Therefore, intrastate transportation of secondary materials is an issue that can assist or hinder the success of state recycling programs. States have the power to regulate intrastate trucking through public utility or public service commissions. These regulatory agencies set rates for the transportation of secondary materials and thus can influence the cost and management of state recycling programs.1°

manu P acturing, and resale of recycled products involve transporting materials from

be in another state), and P inally wholesale and retail outlets. According to John

7

Three states--Florida, Maine, and Washington--have tax incentives to encourage affordable transportation of recycled goods from collection points to sites for processing and manufacturing (see Appendix C). Washington's legislation exempts motor vehicles from rate regulation when transporting recovered materials from collection to reprocessing facilities and end-use manufacturing sites."

In the late 1970s, Oregon exempted certified recycling programs from intrastate tariffs approved by the state Public Utilities Commission. For a program to be eligible, it must be certified by the Department of Environmental Quality. Once this status has been obtained, any company transporting recycled goods is exem t

newspaper de-inking facilities, glass manufacturers, steel mills using 100 percent scrap metal, and plastic recycling firms as well as community recycling projects.12

Texas provides reduced tariff rates for the transportation of secondary materials to

from normal tariffs. Certified recycling programs include private industries suc E as

21

be recycled. These rates apply to residential and commercial waste materials taken to processing and manufacturing facilities. Transporters are eligible for such rates when hauling batteries, glass, and other commercial wastes exclusive of iron or steel scrap.13

Taxes on Goods or Packaging for Recycling

According to Appendix C, taxes on goods or packaging to finance recycling programs have been adopted by 12 states. In some states, policymakers believe that certain products and packaging have an abnormally high impact on the waste stream. Such taxes are used either to help alleviate these products' impact on landfills or the environment or to finance programs to recycle those materials. Such taxes also may discourage the use of products or packaging of this type.

States have developed a variety of ways to finance their individual and general recycling programs. Florida imposes a fee of 50 cents on each new motor vehicle tire at the retail level. The revenue is deposited in the Solid Waste Management Trust Fund.14 Minnesota places a surcharge on automotive batteries sold at the retail level; the deposit is repaid if the customer returns a used battery.15

Oregon reported that its 1971 bottle bilP "has resulted in a 90 percent rate of return of aluminum and glass beverage container^."^^ Maine reported that its beverage container deposit law1* has produced a 94 percent return rate on those containers covered by the law and a 100 percent recycling rate for them.19

Wisconsin's new recycling law, S.B. 300, imposes an annual recycling fee on corporations with gross receipts over $1 million per year. By 1991-92, this fee will fund the programs created by that bi11.2O

Taxes on Virgin Materials

Connecticut, Florida, and Wisconsin indicated that they tax the use of virgin materials or materials that lack a specified percentage of recycled content. These taxes are intended to stimulate demand for recycled goods and basic materials that contain a specified amount of recycled content. Some of these tax revenues are earmarked to finance recycling programs.

Florida passed a 10 cent per ton tax on virgin newsprint with the same amount in credit for each ton of recycled news rint used. If new newsprint sold in the state

raised to 50 cents per ton.21 Wisconsin established targets for the use of recycled newsprint: starting with 10 percent by 1991 and reaching 45 percent by 2001. A fee will be assessed against publishers that fail to meet a target unless sufficient quantities of recycled newsprint were not available in the previous 12 months.22

does not achieve a 50 percent recyc P ing rate by October 1,1992, the tax may be

Bans on Products or Packaging

Thirteen states said that they have banned certain types of packaging, hard-to-recyle materials, and nonrecyclable materials. These initiatives usually prohibit the disposal of specific materials in landfills although some states have gone so far as to ban the sale of particular products. Tires, lead acid batteries, major appliances,

22

waste oil, aluminum and steel beverage containers, polystyrene foam, plastic or glass containers, a wide range of pa er products,23 and household batteries are among the

designed to eliminate some products from the waste stream and reduce the overall volume of MSW.

waste products that states are g anning from landfills. These prohibitions are

Florida, Iowa, Minnesota, and Wisconsin are among the states that have banned the disposal of yard wastes. California, Florida, Illinois, Iowa, Maine, Minnesota, Pennsylvania, and Wyoming have prohibited the disposal of lead acid storage batteries. Illinois, Iowa, Minnesota, Rhode Island, and Texas are among the states that have proscribed the disposal of unprocessed tires in landfills. (Texas provides a price incentive for the use of rubberized asphalt.)%

Some states have forbidden the use of plastics that are not biodegradable in applications such as six-pack beverage container rings. The question of whether such bans can reduce MSW significantly is debatable.= Current research into landfill degradation shows that most biodegradable products break down slowly if at all because landfills isolate wastes from the air, light, and/or

Wisconsin prohibits "the sale of beverage containers which have a plastic body and aluminum ends ."27

23

Notes

1. N. E. Vasuki, General Manager, Delaware Solid Waste Authority, NCSL

2. N.J. Stat. Ann. Ch.13:E-99.13(b)(2) (West Supp. 1988); and R.I. Gen.

3. Oklahoma House Bill 1841(1990); and Michigan P.A. 414 (1988). 4. Vasuki, NCSL Recycling Survey response. 5. Me. Rev. Stat. Ann. Ch. 24 Sec. 2132. 6. Bill Summary of H. F. 41 7 (St. Paul, Minnesota: House of

Representatives, Research Department, May 30, 1989), p. 2. 7. State Solid Waste Management Plan: Executive Summary (Columbus,

Ohio: Ohio Environmental Protection Agency, 1989), p. E-2. 8. John Stolzenberg and David L. Lovell, Summary Table of the Recycling

Bill as Passed by the Legislature, Enrolled 1989 S.B. 300 (Madison, Wisconsin: Legislative Council, March 28, 1990), p. 8.

9. John F. Ruston, Developing Markets for Recycled Materials (New York, New York: Environmental Defense Fund, 1988), p. 44.

Recycling Survey response. ~

Laws, Ch. 23-18.9-1 (SUPP. 1987). ~

10. Ibid., p. 45. 11. Washington: Substitute Senate Bill 6700. 12. Oregon Senate Bill 289, 1979; William Bree, Recycling Specialist,

Department of Environmental Quality, May 10, 1990: telephone conversation. 13. Franklin Associates Ltd., Pennsylvania Recyclable Materials Market

Development Study (Harrisburg, Pennsylvania: Department of Environmental Resources, Bureau of Waste Management, 1988), p. 6-56.

14. Senate StaffAnalysis and Economic Impact Statement (Tallahassee, Florida: S.B. 1192, 1988), p. 9.

15. Bill Summary of H.F. 41 7, p. 6. 16. Codified as Or. Rev. Stat. 459.810-890. 17. Peter F. Green, Committee Administrator, Ore on, Environment,

18. Me. Rev. Stat. Ann. tit. 32 Sec. 1861-1870. 19. Senator Judy Kany, Senate Chair, Maine, Joint Standing Committee on

20. Stolzenberg and Lovell, Summary Table of the Recycling Bill, p. 21. 21. Senate StaffAnalysis, p. 12. 22. Stolzenberg and Lovell, Summary Table of the Recycling Bill, p. 10. 23. Ibid., pp. 1-2. 24. Pete Rathburn, "And the Ban Plays On," State Report on the Environment

(Washington, D.C.: National Center for Policy Alternatives, January 1990),

25. ibid., p. 3. 26. William L. Rathje, "Rubbish!," The Atlantic Monthly (December 1989):

27. Stolzenberg and Lovell, Summary Table of the Recycling Bill, p. 14.

Energy, and Hazardous Materials Committee, NCSL w ecycling Survey response.

Energy and Natural Resources, NCSL Recycling Survey response.

pp. 2-3

102- 103.

24

V

State Recycling Policy

States can influence local and regional recycling markets through their policies. For example, procurement programs can affect the demand for recycled goods. In addition, a state government's commitment to recycling its waste ma provide a steady stream of

sought to assess the extent to which state governments attempt to collect waste products and buy recycled goods.

products to be recycled as well as set a positive example r or its residents. NCSL's survey

State Recycling Mandates

Most states have either enacted legislation or mandated by executive order that their agencies recycle waste products. Such mandates may be limited to a small number of departments within state government or may encompass every legislative, judicial, and executive agency.

Of the 47 states that responded to NCSL's survey, 32 have mandates that state agencies recycle (see Appendix E). The supply of waste materials to be recycled increases as more programs are established to collect them. For instance, Kentucky has a paper recycling program that recovers 1,200 tons of waste paper annually from state government offices.1

In addition, some states require cclmmunity recycling as a way to alleviate some of the waste generation problems at the local level. According to the survey, 18 states mandate community recycling (see Appendix E).

If supply is increased without subsequent growth in the capability of the re cling industry

example, because of increased collections of paper and newsprint, paper mills and the recycled paper export market in the Northeast were flooded with an excess to be processed and manufactured. Minnesota had a similar problem when regional governments in the state underestimated the supply of certain waste products with the highest market potential for recycling after instituting an aggressive collection program?

to process and use the waste materials, however, recycling markets may suf r er a glut. For

Mandates to recycle appear to be more effective when accompanied by government procurement olicies that require the purchase of recycled goods. In this way, both supply and demand P or such products are created.

Procurement of Recycled Goods

According to EDF's Ruston, procurement laws are in place at federal, state, and local levels of government. Eighteen states have passed legislation requiring procurement offices to buy products made from recycled materials? Some legislatures have mandated that state purchasing officials give preference to these products. In addition, some legislatures have ordered that certain agencies use them.

Procurement of recycled goods programs or price preferences.

by state government can be supported by set-aside A set-aside program requires that a certain percentage of

25

government purchases consists of recycled products. For example, some states require that a certain portion of paper purchases contain a specified percentage of re cled fiber.4 Price preferences allow a procurement office to pay more than the lowest price 7 or any given purchase, provided that the goods are recycled or contain a percentage of recycled content. Price preferences differ from set-aside programs in that they do not necessarily require a specific percentage of purchases to be recycled goods.

Although only 18 states have passed legislation instituting a recycled goods procurement program, 33 have purchasing preferences for recycled goods (see Appendix E). According to the survey, a number of legislative agencies and executive departments have supported recycling initiatives by establishing such procurement programs.

During the 1990 legislative sessions, at least 34 bills in 21 states were introduced concerning procurement of recycled products (see Appendix F)? In addition, legislation introduced in Connecticut and New Jersey would include local governments in their state plans for the procurement of recycled paper?

States provide a perfect test market, for example, for mixed-grade plastic goods such as parking lot bumpers, plastic fencing, and other recycled plastic products. The DuPont Corporation, Waste Management, Inc., and the state of Illinois have agreed to recycle plastic waste products into highway construction and maintenance materials. The Delaware General Assembly has urged that Dupont, which has its headquarters in the state, extend this project there as well?

Although most state procurement programs focus on setting standards for the purchase of paper and paper products, such proBrams can be adapted for other materials as well. A bill in the 1990 session of the Utah Legislature, for example, would have created a bid preference for recycled plastic products.8

The Missouri General Assembly enacted H.B. 438 of 1989 to mandate purchasing preferences for recycled paper. The result is that the procurement office provides high- grade paper, printing stock, and business card stock with recycled fiber content? In addition to the paper procurement olicies, the state Division of Purchasing and Materials

pens. Management is examining options P or refillable laser cartridges and refillable ball point

Under Maryland’s set-aside program for recycled paper procurement, which began in 1977, more than 40 percent of the state’s paper purchases contain re cled fiber.l0 In addition,

which saves localities purchasing and storage costs. The Maryland example illustrates how states can provide a favorable environment in which municipalities can use recycled products.

local governments are encouraged to buy recycled paper stock B rom state warehouses,

Interagency Cooperation

As discussed in chapter three, states have a variety of economic development programs that may be used to expand recycling industries and markets. Since the growth of this industry concerns both solid waste management and economic development departments, 21 states have chosen to integrate recycling and economic development (see Appendix E).

Including a recycling program within the economic development department can provide additional emphasis on the recycling industry and increase access to other economic development programs. In Washington, House Bill 1671, which was enacted during the

26

1990 session, integrates the development of recyclin markets into the Department of Trade and Economic Development’s programs.ll d e department established the Committee for Recycling Markets to make recommendations to develop new and expand existing recycling markets. The committee includes representatives from recycling businesses, waste collectors, citizen groups, manufacturers, local government, higher education, state agencies, and the legislature.

Missouri established an interagency forum to discuss the development and expansion of the recyclin industry by having regular, informal meetings between several state agencies.

Improvement, Energy Resources Authority, and the Department of Economic Development are represented at these meetings.12

The Of f! ce of Admnistration, Department of Natural Resources, Environmental

Interdepartmental cooperation should assist state efforts in carrying out re cling policies

recycling policy. and programs. As shown by the Missouri example, different state agencies x ave a stake in

27

Notes

1. NCSL Recycling Markets and Industry Development Survey, 1990. 2. Ibid. 3. John F. Ruston, Developing Markets for Recycled Materid (New York:

4. bid. 5. State Index--Selected Solid Waste Bills (New York, New York: Prepared by the

6. Ibid. 7. Delaware Senate Concurrent Resolution 40, 1989. 8. State Index, p. 115. 9. Annual Report on Recycling and Waste Reduction Activities of Executive Branch

Environmental Defense Fund, 1988), p. 8.

American Paper Institute, March 30 1990), pp. 107-118.

Departments (Jefferson City, Missouri: State of Missouri, 1989).

Committee for Re

10. Ruston, Developing Markets, p. 8. 11. Preliminary Report to the Legslature (State of Washington: Washington

12. Annual Report on Recycling. Committee for Recycling Markets, January 1990), pp. ii, 11.

28

VI

Conclusion

In the last two years, recycling has become a leading issue for legislatures. An increasing number of states are turning to their economic development programs to assist recycling, particularly with market development. The ultimate success of such initiatives, however, depends on the demand for recyclables by private industry.

Several actions will help recycling succeed:

o Encouraging Comprehensive Market Development. By using a strategic planning approach, states can help match supplies to existing demand and encourage greater demand for recycled materials.

o Establishing Federal Standards. Recycling markets would be enhanced by federal standards such as recycled content, packa ing, and plastic container encoding. For example, uniform federal standar B s regarding the content of recycled products would provide a climate in which private recyclin manufacturers could operate more consistently. Current1 , recycle f content

were adopted, manufacturers could produce a product knowing that states and private companies would be able to procure that product without violating specific policies.

o Adopting State Policies. States can provide tax and financial incentives to encourage recycling programs and eliminate some of the disparity that exists between federally subsidized raw materials and recycled materials.

o Initiating Market Studies. Since recycling is in its infancy, states that conduct market studies will identify specific regional strengths and weaknesses in recycling markets. States can then facilitate the creation or expansion of various components of a recycling market.

o Conducting Performance Audits. Although more than 20 states have placed recycling programs in the state economic development agency, apparently no evaluations of the programs have been done. Regular legislative performance evaluations of specific olicies and programs would allow a

ones.

requirements vary greatly from state to state. If uniform r ederal standards

state to continue supporting success P ul programs and modify less successful

o Promoting Interstate Cooperation. States can assist the growth of recycling markets and industries by tapping regional industries and markets that are available. Many states will be unable to establish markets for recycled products within their own borders. Almost half the states are engaged in interstate cooperation to expand recycling markets.

o Supporting Markets. Almost two-thirds of the states have adopted policies for state and local governments to encourage the collection of recyclable materials and to require the purchase of recycled products. In this way, state government also sets a positive example for the private sector.

29

Appendix A

State Responses to NCSL’s Recycling Industries and Market Development Survey

31

Appendix B Business Development Tools to Encourage Recycling

I A llncubator R&D

I C IGrantdLoans !

I E IEnteroriseZones 1-

I G (Other I

32

Appendix C

State Tools for Market Development

I C IPercentaae Recvcllna I

I E ITaxes to Finance Recvclina I

33

Appendix D

SPI Plastic Container Code System

To assist in separating plastic bottles by resin type, thereby creating a higher value recycled material, a nationally recognized s stem has been established to mark bottles, jars, and other rigid containers by t E e six most widely used resin materials.

SIZE OF SYMBOL: MINIMUM 1/2 IN. - MAXIMUM 1 IN.

CODE YArrRUL

- - - - Poly-Ethylene Terephthalate (PET)+ a PETE

a V

6 PP

6 OTHER

- - - - High Dendty Polyethylene

HOPE - - - Vinyl / Polyvinyl Chlorlde (PVCY

- - -. --.- Low Denslty Polyethylene

LOPE

- - - - Polypropylene

&J --,,Polystyrene

PS --.-- All Other Resins and Layered Multi-Material

% OF TOTAL SdTnES 2Q.m

50.160%

5-1-

5110%

510%

5.10%

5-1096

The Society of the Plastics Industry, Inc. 1275 K Street, N.W. Ste.400

Washington, D.C. 20005 (202)37 1-5200

34

Appendix E State Recycling Policy

35

Appendix F 1990 State Legislation Regarding Procurement of Recycled Goods

36

Appendix G

State Action Regarding Recycling R&D

37

Glossary

Aluminum Scrap: Aluminum in scrap form, such as window and door frames, lawn furniture frames, and drain pipes.

Avoided Cost of Disposal: The total costs saved by diverting recyclable materials from a landfill or waste-to-energy plant. This factor is used to determine the cost-effectiveness of recycling programs.

Batteries include the following: Common Lead Acid Batteries: From cars, motorcycles, trucks, tractors, and snowmobiles. Dry Cells: Common household, alkaline, and rechargeable ni-cad (nickel cadmium). Mercury Cells: Found in calculators, hearing aids, and watches.

Buy-Back Center: A location where recyclable materials are purchased from citizens.

Commercial Waste: Waste that originates in wholesale, retail, or service establishments.

Composting: A biological process that transforms organic waste materials into usable products such as humus or mulch.

Curbside Collection or Curbside Recycling: Collection of recyclable materials that have been set at the curb by residents. It can involve several recyclable materials and is only a first step in the recycling process.

Drop-off Center: A location where citizens can leave recyclable materials, for example, a drop box at a school for old newspapers.

Garbage: Food waste.

Glass includes the following: Color Sorted: Glass containers separated by color (Le., clear/fling, green, or amber/brown). Color Mixed: Glass containers of different colors mixed together.

Industrial Waste: Waste resulting from manufacturing, industrial, and research and development processes; outputs that are not hazardous waste under the Resource Conservation and Recovery Act (RCRA).

Institutional Waste: Waste originating in schools, hospitals, research institutions, and public buildings.

Integrated Waste Management: Waste management system or strategy that combines a variety of complementary waste management methods including: reduction, recycling (including composting), incineration (with or without energy recovery), and landfilling to handle the solid waste stream safely and effectively and with the least adverse impact on human health and the environment.

Mandatory Recycling: A statute or ordinance mandating that certain materials be separated from solid waste for recycling, composting, or reuse.

39

Material Recovery Facilities, Small Material Recove ry Facilities (MRFs a d SMRFs): Facilities that transform recyclable solid waste materials into marketable feedstocks, usually by means of a highly automated sorting system (murfs and smurfs).

Municipal Solid Waste: Any solid waste, except sludge, resulting from the operation of residential, commercial, governmental, or institutional establishments that would normally be collected, processed, and disposed of through a public or private solid waste management service.

Paper (secondary waste paper) includes the following: ONP Old newspaper. OCC: Old corrugated cardboard. High-Grade Paper: White or colored ledger (office paper) or computer paper. Mixed Waste Paper: Low- and hi h-grade paper mixed together; the lowest common denominator grade of all types o f clean, dry, scrap paper.

Plastics include the following: HDPE: High-density polyethylene, used in milk and water jugs and many other products. LDPE: Low-density polyethylene, a plastic film used for food packaging wrap and garbage bags. PET: Polyethylene terephthalate, used in beverage bottles and other food and household products. PS: Polystyrene, used in cups and bowls, fast food foam containers, cassette tapes, and plastic cutlery. Biodegradable Plastics: Plastic resin in an organic binder; only the binder decomposes in the presence of light, oxygen, and water, leaving loose plastic resin. Other Plastics: Including polypropylene (used in housewares, containers, and battery cases), PVC or polyvinyl chloride (used in pipes, drains, and furniture), and ABS or acrylonitrile butadiene styrene (used in automobile trim, grills, and telephone bodies). Mixed Plastics: A mixture of different plastic types of multiresin containers; the lowest common denominator grade of all types of clean, dry, scrap plastics.

Postconsumer Waste: Materials in the waste stream as a result of consumer use.

Recovered Material: Those materials that have known recycling potential; that can be feasibly recycled; and that have been diverted or removed from the solid waste stream for sale, use, or reuse, by separation, collection, or processing.

Recyclable Material: Those materials capable of being recycled that would otherwise be disposed of as solid waste.

Recycled Content: The amount of postconsumer recycled material in a product usually expressed as a percentage.

Recycled Goods: Products made all or in part from recycled materials.

Recycled Materials: Recyclable materials diverted from the waste stream that are collected and processed to become raw materials for recycled goods.

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Recycling: Any process by which solid waste is separated, collected, or processed and reused or returned to use in the form of raw materials or products.

Resource Recovery: A process of recovering materials or energy from solid waste.

Rubber: Primarily tires, but also other rubber items.

Solid Waste Management Facility: Any solid waste disposal area, volume reduction plant, transfer station, or other facility. The purpose of such a facility is resource recovery or the disposal, recycling, processing, or storage of solid waste. The term does not include facilities that use or ship recovered materials unless such facilities are managing solid waste.

Source Reduction: Any action that avoids the creation of waste at the source, including redesigning products or packaging so that less material is used, encouraging voluntary or imposing behavioral changes in the use of materials (bans), or increasing durability or reusability of materials.

Source Separation: Separation of designated recyclable, reusable, or compostable materials by the waste generator for separate collection or disposition.

"Tinned"Food Cans: Tin-plated steel cans, such as soup, vegetable, and pet food cans.

Tipping Fees: The fee charged to dispose of a load of waste at a landfill or incinerator.

Transfer Station: A site whose primary purpose is to store or hold solid waste for transport to a processing or disposal facility.

UBCs: Used aluminum beverage cans, usually 12-ounce pop and beer cans.

Waste Reduction: Source reduction and recycling.

Yard Waste: Vegetative matter resulting from landscaping, maintenance, and land- clearing operations.

Waste Oil: Used motor oil from automobiles, trucks, and other internal combustion engines.

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