Transcript Recyclable Resources: Minerals, Paper, Glass & More

Recyclable Resources:
Minerals, Paper, Glass &
More
Man is creative. But he has not been able to
use his powers to increase & multiply the
endowments, as yet. He has only destroyed.
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Once used energy resources dissipate into heat
energy – cannot be recycled
Other resources: retain their physical & chemical
properties during use – can be recycled/reused
How much recycling is efficient?
Will market mechanism decide it?
How is efficient allocation different over time
between recyclable & non-recyclable resources?
What impact does product durability has on
allocation of virgin & recyclable materials?
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Let’s find how efficient market’s work for
depletable & recyclable resources & then use
this as benchmark. Assume: finite resources.
Efficient allocation of recyclable resources:
initially reliance on virgin resources as they are
cheaper – later ↑ingly difficult to extract – then
to lower grade – then import
Technological progress - ∴ lower grade ore ≠
↑cost - difficult to extract ∴ price rises
Same time: cost of disposing product migration to urban areas
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Slowly, land scarce - burial of waste ↑ expensive
–concerns over evn effects on water supplies &
eco effects on value of surrounding land buried waste acceptable
↑ Cost of virgin material & ↑ in waste disposal
 recycling attractive – its also an alternative to
both
Virgin ore - products costly - ∴ demand for
recycled goods – “composition of demand
effect” – additional incentive to return used
product
Purity of recycled goods plays key role
Recycling
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Will ↑ as virgin ore & disposable costs ↑
Costs many: mainly transport + processing significant – labour cost – collecting, sorting &
processing scrap is labour intensive –
Scrap as input – has evn consequences –
compliance with rules adds to cost
Design products to facilitate recycling - ‘stamp’
Recycling is adding more to resource – depend
on it longer than on non-recyclable -
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If recycling rate is 100%, resource flow is infinite
If 100 units of resource are in a product with
one year of useful life. After one year 90% of
resource is recovered & reused – next year 90%
of that i.e. 81 units can be recovered & reused
If stock is A & recovery rate is α total amount
used would be = A+Aα + Aα2 + Aα3 ….. This is
= A/ (1- α)
For non-recyclable resources α = 0
Efficient economy strikes balance between
consumption of depletable & recycled material
The Strategic Material problem
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US: oil imports that of strategic importance – a
few suppliers – true social cost > market price
Policy: tariff on imports & use proceeds for
stockpile
Vulnerability of nation (importing) depends on
(1) severity of shortfall (2) its ability to cope
with shortfall (by substituting or suffering)
Larger disruptions (> 35%) can have serious
impact
Tilton: 1985: examined substitution effects of
rapid rise of tin prices during 1970s
Waste disposal & pollution damage
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Treatment of waste by producers & consumers
– biases in market balance between recycling &
use of virgin ores – disposal cost is a key in
determining efficient amount of recycling
Failure to bear full cost of disposal shows bias
towards virgin material & away from recycling
Method of financing disposal of potentially
recyclable waste affects the level of recycling
Disposal cost & efficiency:
 cost of recycling > price of recycled material
sold. Loss?
 Must understand relationship of marginal
disposal cost to efficient level of recycling.
 Example: cost of recycling $20 p t , sold for $10
per ton – inefficient?
 Town is avoiding cost of disposal = $20 p t . ∴
benefits = $20 for avoiding disposal+$10 resale
= $30 p t & cost $20 ∴ efficient recycling
venture
Recyclable Waste
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Old scrap & New scrap
Old scrap: recovered from consumers -transport
cost very imp - market works efficiently - doesn’t
count marginal social cost of disposing ∴
market away from recycling old scrap & towards
the use of virgin materials
New scrap: generated during production –
requires no transport cost - under control of
producer - design a product for scrap minimum processing - guarantee of
homogeneity - works efficiently
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No direct relation between size of trash & fee
MC to homeowners of throwing one more unit of
trash is negligible, but to society it is not.
$/unit
MCp
% recycled
disposal
0%
100%
$/unit
MCR
MCs
Qp Qs
100%
0%
Disposal Cost & Scrap Market
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How will market respond if all are to bear the
true marginal disposal cost?
Effect on supply of materials to be recycled –
consumers paid for discarded products –
material to recycling centres – ∴ supply ↑ economies of scale - ↓ AC of processing +
more recycled materials
C ↑ due to price fall & Use of virgin ore ↓
∴ Correct inclusion of disposal cost would tend
to ↑ amount of recycling & extend life of
depletable- recyclable resources
Subsidies on Raw Materials
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Are troubling source of inefficiencies – they
take bias away from recycled inputs - raw
materials are artificially cheap & can inefficiently
undermine the market for recycled inputs
Public land’s prices are low as compared to
market – people don’t receive true value for
mining services provided by public lands –
subsidy is lowering the cost of extracting the
raw materials
Corrective Public Policies
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Such inappropriate pricing creates improper
incentives  misallocation ?
Volume pricing
Refund system
Deposit refund
Disposal & recycling charges at the time of sale
Tax for using virgin material
Pollution Damage
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If environmental costs are added to virgin
material – Price rise – leftward shift of supply
curve - ∴ use more of recycled material
Disposal cost: external environmental costs –
odours, pests, contamination of water…
Govt. regulates landfills for public safety –
locating the facility is difficult
Impose host fees
Sometimes package is bigger than the product
Tax Treatment of Minerals
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Some minerals get subsidy
Severance tax
Durability of the product
Three ways of obsolescence:
 Functional
 Fashion
 Durability
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Market mechanism automatically creates
pressures for recycling & reuse in right direction
– ↑ disposal cost & ↑ scarcity  ↑ demand for
recycling