Removing policy failures which discourage recycling

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Another public policy area which directly impacts upon recycling rates concerns the existence of policy failures which affect the degree of substitution between primary and recyclable materials.65 Two areas seem to be particularly important:

  • The provision of subsidies for substitute primary resource extraction and exploitation.
  • The use of material standards which discourage optimal material choices.

It has often been argued that various types of subsidies for the extraction and processing of primary materials have inhibited the development of markets for some substitute recyclable materials. This can include various forms of direct financial subsidies (support for exploration and development), as well as tax preferences (percentage depreciation allowances) and in-kind public support (road construction in isolated regions), amongst others. Non-internalisation of associated public environmental goods (i.e. forest habitat, natural landscape, etc.) are also significant types of subsidies associated with primary resource exploitation. Such subsidies may result in significant negative environmental impacts generally (see, for example, Porter, 2002; OECD, 2003; and OECD, 2004b), and their impacts on recycling are just one manifestation of this.

Such programmes have the potential effect of reducing the relative price of a number of primary materials (minerals, pulpwood, and oil) which are in direct competition with recycled inputs (e.g. ferrous and non-ferrous metal scrap, used newsprint, plastic bottles, etc). This can result in reduced reuse and recycling of such materials, and thus increased solid waste generation rates. The extent to which such subsidies have implications on recycling and waste generation rates will depend upon the degree of substitutability between primary and recyclable materials.66 This differs not only by material, but also by end use for individual materials (see Enviros Services/RIS, 1999).

Another area of policy failure appears to be the use of product standards which restrict the use of recyclable materials as inputs in the manufacture of different types of goods. For instance, in many cases restrictions are placed on the use of recovered plastic in packaging or structural materials in construction waste. In some cases these restrictions are appropriate - e.g. if there are legitimate and verifiable concerns about hygiene effects associated with the use of recovered plastics in food packaging. However, as was discussed in the case study on plastics, in some instances the balance of costs and benefits between different public policy objectives (public health and environmental protection) may not be reflected appropriately in existing policy frameworks (see Ingham 2004).

  1. There is a third type of policy failure which will not be discussed - "soft budget constraints" amongst municipalities and local authorities responsible for both waste management and recycling schemes. Unless such authorities have financial incentives to optimise their waste management strategies (in strict financial terms), they may not discourage landfilling and incineration sufficiently. However, this may also work in the opposite direction, with excessive support (in financial terms) for recycling schemes (see below).
  2. It should also be noted that subsidies for recycling can also be significant. As noted above, publicly-supported programmes have been introduced in a number of OECD member countries in order to reduce the cost of both collection and processing of recycled materials. The relative importance of such subsidies in comparison with upstream subsidies for primary materials has not been examined.

In such circumstances the appropriate policy intervention is the use of standards which are targeted at the performance of the product and not its material composition (ECOTEC, 2000). In this way, unfair discrimination against the use of recyclable materials will be removed. If products made with recyclable materials are functionally identical to those made with primary materials they will meet the performance standards set. Even if they are not functionally identical, the use of performance standards will ensure that any product differentiation which does arise will not be unfairly discriminatory, but will instead reflect these differences.67

Irrespective of the degree of substitutability between primary and recyclable materials, unless policy failures such as primary resource subsidies or discriminatory product standards are removed, levels of recycling will be sub-optimal. This will be the case even if environmental policies are in place to internalise waste-related externalities and market failures associated with recyclable material markets have been addressed through complementary policies. It is to these latter set of issues - the primary focus of the project - to which we now turn.

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