Upcoming in Class Exam #2 on Oct. 11 HW #4 due same day

• FINAL EXAM – Monday Dec. 12 Section 1 - 10am Section 2 - 3:10pm

Chapter 12 – The Economics of Recycling (p. 271-276)

Recyclable Resources• A = represents the stock of a resource

• a = represents the recovery rate

• Amount used over 4 years is A+ A*a + A*a2 +A*a3

A/(1-a) for infinity

U.S. Metals Consumption fromPrimary and Recycled Sources

Marginal Costs of Recycling vs. MC of new

material

Scrap Metal as a Percentageof Total U.S. Consumption

The Disposal Decision

• Recyclable waste comes from either new scrap or old scrap. New scrap is residual material from a production process while old scrap is recovered from used products.

• When the private marginal cost of disposal is lower than the marginal social cost, the market level of recycling is inefficient.

How Much to Recycle?

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Disposal Costs and Scrap Market If consumers bear the true marginal

disposal cost, • more materials could be integrated into

production process; price falls, and total consumption of inputs would increase as well as the use of recycled materials.

• Correct inclusion of disposal cost would increase the amount of recycling and extend the economic life for depletable and recyclable resources.

How Much to Recycle?

Recycling vs. Waste Disposal

Methods of waste disposal.• Reduction• Incineration• Recycling• Landfill Disposal

FIGURE 9.2 The Efficient Level of Recycling

U.S. has achieved higher recycling rates 32.5%• 52% of paper• 31% of plastic and soft drink bottles• 45% of aluminum cans• 63% of steel packaging• 67% of large appliances

Transport, labor and processing costs are usually significant and play a large role in overall recycling rates.

As recycling becomes more cost competitive, however, manufacturers rely more heavily on recycled inputs as well as product design.

Recycling: A Closer Look

Package Sizing

Noninternalized environmental damages from the use of virgin materials will also bias the market away from recycled materials. These might be damages from extraction or from processing.

Host fees are being used to address the issue of siting of landfills. Host fees compensate the community that agrees to house the landfill.

Pollution Damage

Public polices include volume pricing, refundable deposits and taxes. • Volume pricing are disposal charges that

reflect the true social cost of disposal. • A refundable deposit system is typically

designed to be an initial charge that reflects the cost of disposal and to provide a refund that encourages recycling and helps conserve virgin materials.

• Taxing virgin materials and subsidizing recycling activities can also promote recycling.

Corrective Public Policies