Saturday, March 24, 2007

Recycling Cliches and Expansion of the Bottle Bill

We have already commented on the comical joint mayoral-council initiative that has led to the creation of the city's first Office Of Recycling, a move that we feel confident will prove the old adage that the road to hell is paved with good intentions. What we now see, however, is the compounding of this policy silliness with the clamor, from the same set of folks that called for the recycling office to be established, for the expansion of the state's bottle law.

What we love about these self described public interest groups is their utter lack of concern for any of the economic costs of whatever policy they happen to be proposing. This lack of concern is equally distributed between tax payers and businesses alike.

On the recycling side there has never been any attempt to conduct a realistic cost-benefit analysis of the city's municipal recycling program. David Hurd, the new recycling coordinator recognizes that the city's department of sanitation's core mission is carting and dumping and this is not conducive to the different programmatic emphasis that the recyclers see as necessary if we are going to see any significant increase in diversion rates.

What will be interesting to see is how the culture clash between the new recycling office and DSNY will be played out, and how the office's educational outreach efforts work to increase recycling in "neighborhoods with low diversion rates." What is undeniable, though, is that the deposit law is successful in precisely those neighborhoods that the advocates always want to"target." It is, as the Marxists say, no accident. Deposits provide an incentive for low income New Yorkers that motivates enough entrepreneur ism to make the activity relatively profitable.

So instead of following Hurd's agenda, "enlisting community boards and local organizations as partners" (who could ever imagine a community board as a partner in anything like recycling?), why don't we enlist the folks and give them the proper motivation. Or is a monetary payback too crass?

But if we do expand the bottle bill why do so under its current structure, one that burdens retailers and discourages redemption because of the disincentives built into the system? Under the current system retailers aren't paid enough to redeem and look to avoid doing so. In fact, a relatively few stores-large supermarkets and beverage centers-do almost all of the redemption work. When was the last time you went into a drug store or a gas station convenience store to get your deposit back?

On the wholesaler/bottler side of the equation, these deposit initiators make money-lots of it-when they don't redeem the containers they initiated deposits on. This is a built-in disincentive in the deposit system. So what does Judy Enck and NYPIRG want to do in their "bigger, better bottle bill?" They want to take these nickels that are retained by the deposit initators and give them over to the ENCON crowd. The disincentive to redeem has just been escalated.

Have they thought this through? The deposit initiators will no longer get to keep the nickels and two things will happen. First, the cost of all beverages will rise significantly as wholesalers and retailers look to find a way to pay for the system. This will amount to a couple of hundred million dollars a year in a hidden tax increase to all of the state's beverage consumers. Secondly, the redemption rate will slowly approach 100% and the unredeemed will vanish. Why?

Once the initiators no longer get to keep the nickels there will be a mutuality of interest between them and various retailers and recyclers to dummy up the redemption rates so that the money stays within the distribution system and doesn't go to the state. I hope that the governor has budgeted a large sum for investigating this system if the expanded bill goes into effect.

Expanding the bottle bill is a good idea, just not under a continuation of the current redemption structure. The deposits should be placed into a deposit bank and a system of licensed collection and redemption agents should be created, along with an infrastructure of free-standing redemption centers (any number of reverse vending kiosks could be set up and function much like laundromats). Under this new structure retailers could freely opt out of the redemption system, but if the incentives are right a significant number won't want to.

What will make this system function at a high level is the setting of a profitable fee structure for both collection and redemption. This incentivizing will create the foundation for stimulating collection at both the redeemer level as well as the collection and recycling level. Once this system is set up, there is no reason that the state cannot add even more items, including paper that could be redeemed in more of a pound-for-pound buy-back fashion.

The expanded deposit system would create the new recycling business sector that the enviros are always saying that they want to see created. It would also allow for the complete dismantling of the municipal curbside program that is, and always will be, a fiscal and environmental failure.