Recycling 2Recycling 2Recycling 2Recycling 2Recycling 2Recycling 2Recycling 2Recycling 2The Economics of RecyclingThe Economics of RecyclingThe Economics of RecyclingThe Economics of RecyclingThe Economics of RecyclingThe Economics of RecyclingThe Economics of RecyclingThe Economics of RecyclingTimothy G. GutowskiCadillac Ranch, Amarillo, TXReferences1. Richard Porter, “Economics of Recycling,” Ch. 9, in The Economics of Waste, 2002. (handout)2. Craighill et al, “Lifecycle assessment and economic evaluation of recycling: a case study” Resources, Conservation and Recycling, 17 (1996 pp 75 – 96).3. Thomas, “Demand and dematerialization impacts of second hand markets”, J. Ind. Ecology, Vol 7, No. 2, (2003) pp 65 – 76. 4. Dahmus, J. and T. Gutowski. “Material Recycling at Product End-of-Life," IEEE International Symposium on Electronics and the Environment, San Francisco, California, USA, May 8-11, 2006.5. Isaacs and Gupta, Economic Consequences of increasing polymer content for the U.S. automobile recycling infrastructure, J. Industrial Ecology, Vol 1, No 4, pp 19-33, 1998Outline1. Cost Models• curbside recycling Vs. disposal• costs for the recycler• costs for the end-of-life for a product2. The Recycling of Complex Products• cost scaling for mined materials• cost scaling for complex products (diseconomies of scope)1. Cost Models1. Cost Models1. Cost Models1. Cost Modelspre-mfg mfguse collectendoflifereprocesspre-mfg mfguse collectendoflifereprocessMSCMSCMSCMSCrrrr< < < < MSCMSCMSCMSCvvvv+ + + + MSCMSCMSCMSCddddr = recycling, v = mining and logging, d = disposalAverage and Marginal Costs•MSCMSCMSCMSCis the marginal social cost, it includes all cost to society to produce one more unit•MPCMPCMPCMPCis the marginal private cost, it is the cost for the producer to produce one more unit•MEC = MSC MEC = MSC MEC = MSC MEC = MSC –––– MPC , MPC , MPC , MPC , the difference is the marginal external cost, i.e. noise, smell, pollution etc.Cost, CQuantity, qC = F + C = F + C = F + C = F + VVVV····qqqqC/q = F/q + VC/q = F/q + VC/q = F/q + VC/q = F/q + VdC/dqdC/dqdC/dqdC/dq = V= V= V= VAt a local level, you should recycle when:MPCMPCMPCMPCrrrr< < < < MPCMPCMPCMPCdddd“The Bloomberg administration suspended the recycling of glass and plastic last July, arguing that the program cost too much money - and yielded too little environmental benefit - to justify its existence in the current fiscal crisis.” NY Times Tue, 14 Jan 2003Curbside Recyclingassume each house produces one unit of waste•Cost = Fixed + Variable– Fixed = # houses, (F)– Variable = # trips · rate, (N · Z)•Cost = F + NCost = F + NCost = F + NCost = F + N····ZZZZ– N, # trips = F /Capacity = FW/C•Cost per house = 1 + Z/CCost per house = 1 + Z/CCost per house = 1 + Z/CCost per house = 1 + Z/CCCCCWWWWCurbside Recycling•Cost per house = 1 + Z/CCost per house = 1 + Z/CCost per house = 1 + Z/CCost per house = 1 + Z/C•Now introduce recycling, r & (1Now introduce recycling, r & (1Now introduce recycling, r & (1Now introduce recycling, r & (1----r) with r) with r) with r) with Capacity Capacity Capacity Capacity ααααCCCC and C; and C; and C; and C; 0 < 0 < 0 < 0 < αααα < 1< 1< 1< 1•1 + (11 + (11 + (11 + (1----r)Z/C + 1 + r)Z/C + 1 + r)Z/C + 1 + r)Z/C + 1 + rZ/rZ/rZ/rZ/ααααCCCC•let a = 1/3, and Z the same for both i.e. let a = 1/3, and Z the same for both i.e. let a = 1/3, and Z the same for both i.e. let a = 1/3, and Z the same for both i.e. same equipment and distancesame equipment and distancesame equipment and distancesame equipment and distance•Cost per house = 2 + (1+2r)Z/CCost per house = 2 + (1+2r)Z/CCost per house = 2 + (1+2r)Z/CCost per house = 2 + (1+2r)Z/CSee Porter p 146-147Curbside Recycling•Waste pickup only:Waste pickup only:Waste pickup only:Waste pickup only:Cost per house = 1 + Z/CCost per house = 1 + Z/CCost per house = 1 + Z/CCost per house = 1 + Z/C•Recycling and Waste Pickup:Recycling and Waste Pickup:Recycling and Waste Pickup:Recycling and Waste Pickup:Cost per house = 2 + (1+2r)Z/CCost per house = 2 + (1+2r)Z/CCost per house = 2 + (1+2r)Z/CCost per house = 2 + (1+2r)Z/CIt looks like the costs only get worse with It looks like the costs only get worse with It looks like the costs only get worse with It looks like the costs only get worse with recycling?recycling?recycling?recycling?marginal costsmarginal costsmarginal costsmarginal costs• Note that the amount of waste at each house “W” does not show up in our equations, so the marginal cost per unit of waste i.e. d Cost / d Cost / d Cost / d Cost / dWdWdWdW =0=0=0=0. This is true for most communities and results in a market failure.• The marginal cost per unit of recycling “r” is 2Z/C2Z/C2Z/C2Z/C. That is, it increases!Recycling Homework #1Review this calculation and Porter’s Ch 9, then answer the following questions:1. Is this right?2. Explore options on how to improve on this situation. Express them as cost equations. The basic issues here are: a) scaling the costs with the amount, b) two pick-ups instead of one, and c) compacting and sorting.3. What does this development leave out?Estimating Costs at the RecyclerEstimating Costs at the RecyclerEstimating Costs at the RecyclerEstimating Costs at the Recycler• Recycling Profits = Revenues – Costs= Rfees+ Rmaterials+ Rcomponents- Ccollection– C processing– Cdisposal• Some illustrative for recycling cost and materials values are given on the next three slidesMarket Values for Recovered Materials (~2004)Paper (clean) $100/ton = 10¢/kg Other paper 0 Glass 0 PET, HDPE $300/ton = 30¢/kg PP, PS, PVC, HIPS $100/ton = 10¢/kg ABS, PC Other engineering thermoplastics $500/ton = 50¢/kg Steel $100/ton = 10¢/kg A1 $800/ton = 80¢/kg Cu $600/ton = 60¢/kg Mixed non-ferrous metals $700/ton = 70¢/kgIllustrative Numbers for Illustrative Numbers for Illustrative Numbers for Illustrative Numbers for RecylingRecylingRecylingRecyling Cost Estimates Cost Estimates Cost Estimates Cost Estimates (U.S. East Coast)(U.S. East Coast)(U.S. East Coast)(U.S. East Coast)Landfill costs $ 60 to 125/ton = 6 to 12.5 cents/kgHazardous disposal costs $1000 to 2,200/ton = $1 to 2.2/kgDisassembly labor costs some skills $12/hr = 20 cents/min = .33 cents/sec.Disassembly labor costs semiskilled $16/hr = 26.7cents/min = .44 cents/sec.Disassembly operator labor skilled $20/hr = 33.3 cents/min = .55 cents/sec.Material