OBSERVATIONS
ABOUT HAWAII’S PROPOSED DEPOSIT SYSTEM, HB 1256
Prepared by Businesses and Environmentalists Allied for Recycling,
A Project of Global Green USA
March 22, 2002
Background
Hawaii Representative Hermina Morita has proposed a bill (HB
1256) that would enact a beverage container deposit system in
Hawaii. An industry-sponsored report entitled Increasing Residential
Recycling in Hawaii was prepared by Cascadia Consulting to present
an alternative to the proposed deposit system. Representative
Morita requested Businesses and Environmentalists Allied for Recycling
(BEAR) to review these two documents and to make observations
based on the findings of the Multi-Stakeholder Recovery Project
(described below). This document presents BEAR’s conclusions,
and is limited to those areas that are specifically supported
by the findings and recommendations of the Multi-Stakeholder Recovery
Project.
BEAR, a project of Global Green USA,[1] is a unique alliance
of businesses, recyclers, environmentalists and other stakeholders
working to maximize beverage container recycling. BEAR’s
goal is to increase the national recycling rate for all beverage
containers to 80 percent. Last year BEAR launched the Multi-Stakeholder
Recovery Project (MSRP). For eight months, BEAR’s members
worked intensely with members of a task force including Coca-Cola
North America, Waste Management, Inc., Southeastern Container
and others, to evaluate beverage container generation and recycling
trends, and to compare the effectiveness, costs and benefits of
alternative recycling programs. A broader 24-member advisory committee
provided input from all types of stakeholders. To help ensure
our results would be accepted as unbiased, we engaged a consulting
team with deep experience working with industry, government and
environmental organizations, including R.W. Beck, Inc., Franklin
Associates, Ltd., the Tellus Institute, Sound Resource Management
Group, Inc. and Boisson & Associates. Stage One of the project
culminated in January 2002 with joint release of the report, Understanding
Beverage Container Recycling (available on the Internet at www.globalgreen.org/bear).
This document, referred to as the MSRP Report below, did not recommend
a particular program; however, it provides a wealth of useful
statistics and a cover letter signed by task force participants
includes recommendations to guide future efforts. We’ve attached
for your information the report’s cover letter and executive
summary, and a list of the project participants.
Since the report’s release, the beverage industry has taken
pains to distance itself from one key result – that the California
redemption system has relatively low operating costs. Privately,
these critics have agreed that the MSRP Report accurately captures
the program’s operating costs, but they argue that its problematic
funding mechanisms result in additional “costs.” The
MSRP Report acknowledges that California’s funding mechanisms
are problematic and suggests that programs be devised that use
the highly efficient recovery mechanisms proven in that state,
while avoiding its complex funding mechanisms. As discussed in
point #3 below, we feel the proposed Hawaii bottle bill is an
example of an effort to do this. However, we do encourage the
fund administrator to evaluate actual costs and compensation levels
provided to redemption centers in an effort to fairly match program
revenue with program costs.
Strengths
1. HB 1256 satisfies the need to both strengthen existing municipal
programs and support a range of new recovery mechanisms.
This is one of three recommendations that the MSRP Task Force
agreed should guide future recycling initiatives.[2] Because an
increasing percentage of beverage containers are discarded away-from-home,
programs are needed that provide recycling opportunities in a
wide range of settings. HB 1256 does this by encouraging establishment
of widespread recycling opportunities at and near retail stores.
2. HB 1256 satisfies the need for incentives to ensure the long-term
sustainability of recycling.
To varying degrees, HB 1256 succeeds in providing each of the
four types of needed incentives the MSRP Task Force identified
in its cover letter recommendations.
· First and most importantly, the proposed program would
provide a direct monetary incentive for consumers to recycle through
the returnable 5-cent deposit and through a system of convenient
recycling services at home and away.
· Second, by providing payments to certified redemption
centers, the program would encourage entrepreneurial companies
to innovate new and potentially highly efficient recovery schemes.
· Third, by involving distributors in assessing beverage
container fees (albeit collected through consumers) the program
would provide a very modest incentive for design-for-recycling.
· And fourth, by establishing a fund to be used in part
for market development, the program would encourage to some degree
incentives for encouraging reuse of recycled beverage containers
in manufacturing processes. While this later incentive is not
strong, given Hawaii’s distance to mainland markets it is
quite important and would build on past successes of the Clean
Hawaii Center and others.
3. HB 1256 includes several elements that can reduce recycling
program operating costs while still achieving significant recovery
rates.
This is the third and final area that the MSRP Task Force agreed
to include as a recommendation for future initiatives. The MSRP
Report concluded that the California Redemption System has relatively
low net operating costs (0.55 cents per container compared to
2.67 cents per container for “traditional deposit systems).
This is largely because of four elements that are also found in
Hawaii’s proposed bill.
· First, it uses a central fund that reduces administrative
costs and eliminates the need for beverage distributors to engage
in recycling activities, sort bottles according to brand or distributor
as in many other bottle bill states.
· Second, it relies largely on independent buy-back and
retailer-affiliated redemption centers to provide recycling services.
Because of their low collection and processing costs, these are
among the most efficient collection mechanisms available.
· Third, it allows retailers to use highly efficient,
automated reverse vending machines to satisfy recycling obligations.
· And fourth, it eliminates the need for some retailers
to provide relatively costly on-site recycling services (i.e.,
if they are small, in rural areas or if an existing recycler is
operating within a certain radius from their store).
4. HB 1256 avoids many of California’s most controversial
and problematic elements by relying on relatively simple funding
mechanisms.
HB 1256 adopts many of the elements that have been proven in
California to result in lower unit costs, but to its credit avoids
use of California’s highly controversial and problematic
funding mechanisms. The MSRP Report discusses these problems with
California’s so-called processing fee system in some detail.
They include: concerns over equity across package types and across
business types; the inability of the state to rapidly adjust pricing
in response to changing market conditions; controversy over how
to calculate and allocate processing fees. The simple 2-cent beverage
container fee and unredeemed deposit revenue, all managed in a
single, central fund avoids many of these problems. We understand
that the fund administrator will have the discretion to adjust
the funds paid to different types of redemption centers. This
is a useful element that will help ensure revenues are matched
with actual costs as closely as possible over time.
Implications of the Bill’s Broad Scope
Hawaii’s proposed bill is an “expanded bottle bill”
in that it covers virtually all types of beverage containers with
very limited exceptions. For many years US bottle bills covered
primarily only carbonated beverages. Maine’s bill was expanded
in the early 1990s to cover most other containers, as was California’s
in 2000. Given the broad scope of covered containers, one would
expect the following:
5. HB 1256 is likely to result in higher recovery per-capita
than traditional bottle bills, but recovery rates may be somewhat
lower, at least initially.
Projecting program effectiveness is difficult because there is
little experience with expanded bottle bills in the US. Initial
experience with California and Maine indicate collected tons will
increase, rates may drop initially, and a higher percentage of
covered containers may be returned through municipal systems than
would be the case under a more narrowly defined deposit system.
However, over time, with good education efforts the rates may
rise to those comparable with other more limited bottle bills,
as has occurred in some Canadian Provinces with broad deposit
systems.
6. All other factors being equal, net unit costs for a program
covering all beverage containers may be higher than for a program
covering a more narrow range of beverage containers.
This results for at least two reasons. First, the percentage
of aluminum in the mix of containers collected in an expanded
bottle bill is much less than in a traditional system. Since aluminum
dominates the average market value per container recovered, this
is reduced in expanded bottle bills. Second, the costs to process
and market containers of resin types other than HDPE and PET in
an expanded bill can add cost. We have not attempted to project
the actual operating costs associated with HB1256, and reiterate
the desirability of reviewing the payment structure to redemption
centers periodically.
The Cascadia Plan
The Hawaii legislature has been presented with two very different
options: 1) Attempt to maximize municipally-operated recycling
services targeting a range of materials generated in residences
(i.e., the Cascadia plan); or 2) Establishing a statewide system
to very effectively handle one particular material type, beverage
containers (i.e., the deposit system proposed in HB 1256). To
reiterate, we have not prepared a detailed critique of the plan
submitted by Cascadia Group. However, we do offer the following
observations.
Since implementing the Cascadia plan requires that dozens of
cities and counties switch to a user-fee based system and secure
sufficient resources, it is unclear whether the plan could be
successfully implemented in a timely manner. Even assuming the
Cascadia plan were fully implemented, we conclude it would result
in only a marginal increase in beverage container recovery rates.
This is because it only addresses beverage containers generated
in residences and relies on to-be-established curbside and drop-off
programs as recovery mechanisms. We do not have data to evaluate
Hawaii’s specific situation. However, based on national averages,
states relying exclusively on non-deposit approaches like curbside
and drop-off achieve overall beverage container recovery rates
of approximately about 28%, compared to states that combine curbside
and drop-off with deposit systems to achieve overall recovery
rates of about 72%. Since Hawaii’s proposed deposit system
covers far more beverage container types than traditional deposit
systems covered in the MSRP Report, the rate may potentially rise
even higher. Even the most exemplary municipal programs, such
as in Seattle and other West Coast cities, achieve beverage container
recovery rates of about 50% of residentially generated containers.
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[1] Created in 1994 as an affiliate of Mikhail Gorbachev’s
Green Cross International, Global Green USA works with individuals,
industry, and government to foster a global value shift toward
a sustainable and secure future.
[2] Although all MSRP Task Force members verbally agreed to the
report and cover letter during our November 30 meeting in Atlanta,
one member, Steve Edelson of Waste Management, Inc., was not able
to sign the cover letter.
